The E-Business Software Weekly is a series profiling trends and developments in software and applications that support e-business, the Internet, and other electronic communication channels. Look for a new story each week in this space.
Thinking About E-Business
Previous columns in this series have probed a variety of tools and topics associated with e-business. So now perhaps it's time to pose a more basic question: what is this thing called e-business anyway?
That may seem like an odd question to ask this far into the emergence of the Internet economy. But it was recently raised by no less a seminal figure than Thomas M. Siebel, chairman and CEO of Siebel Systems, the world's leading provider of e-business applications software. Siebel begins his just-released book, "Taking Care of eBusiness," with a chapter entitled, "What Is eBusiness?" In asserting that the concept of e-business is less well-established than it might appear, Siebel argues that much of the current discussion surrounding the subject actually "creates more confusion than clarity." Indeed, "a large part of this confusion," he insists, "stems from the widespread misconception that e-business simply means buying and selling products over the Internet."
A concept born of the Internet era, not a product of the Internet? An unexpected notion, perhaps, but Siebel confirms it. In reality, he says, "the practice of e-business is not limited to the Internet, nor does it simply involve online commerce." Although e-commerce is an important component of e-business, "it is just one element, and not necessarily the most important..." He points out, for example, that in the United States-one of the earliest among all nations to make the move to e-commerce-"online sales of retail goods to consumers in the first quarter of 2000 amounted to $5.3 billion, less than 1% of the total consumer retail sales of $748 billion during the quarter."
E-business, by Siebel's reckoning, is a much broader enterprise. E-business, he says, "entails the strategic use of information and communications technology-including, but not limited to, the Internet-to interact with customers, prospects, and partners through multiple communication and distribution channels." In other words, rather than being a single, albeit robust, sales channel (as e-commerce is), e-business is the foundational infrastructure upon which all business operations take place. To be precise, e-business connects all parts of an enterprise, internal as well as external, to a single electronic network, allowing communications and transactions to flow freely, even instantaneously, among them. As a result, e-business "enables organizations to derive maximum value from every interaction and to continuously improve the quality of the customer experience."
The Confusion Surrounding E-Business
While the distinction Siebel makes may seem at first glance like a mere technical quibble, the lack of understanding of what it means to be an "e-business" could well turn out to be the greatest stumbling block to companies seeking to succeed in this space. Company executives striving to transform their organizations-whether via total quality management, customer relationship management, or e-business-occasionally base their desires to do so largely on industry "buzz" about the supposed benefits of a management concept without always knowing in detail what the concept involves or what specifically it is expected to achieve.
And therein lies the danger: being unclear about their ultimate destination, companies often find it exceedingly difficult-and expensive-to get there. In fact, in a classic 1999 study entitled "Migrate Headaches," the Standish Group, a Massachusetts based technology research firm, found that only 17% of e-business initiatives requiring corporate systems integration were wholly successful. Some 49% overran their budgets, and a full 34% failed, meaning that such projects were twice as likely to fail as to succeed. A key reason for these failures and cost overruns: a lack of understanding of the projects' intricacies, dependencies, and ultimate goals.
As it happens, would-be e-businesses are not alone in their confusion. A random sampling of the profusion of e-business "solution provider" Web sites reveals a similar lack of clarity. The common refrain among these firms goes something like this: "we build e-businesses." But pierce through the bold type and flashy graphics of these sites, and all too often the definition of what the consulting firms are actually seeking to build is left unspoken. A charitable conclusion is that the consultants assume that everyone knows what e-business is, so why define it? A less charitable but probably more accurate explanation, at least in some cases, is that the emphasis on e-business is primarily "spin," and is being used as an umbrella concept for the same IT and business solutions the companies were previously supplying. E-business thus becomes a marketing concept, rather than a business or technical one.
A Modest Change in Perspective
The lack of clarity notwithstanding, the impetus to transform their companies into e-businesses has taken on an urgency in corporate boardrooms usually reserved for matters of corporate life and death. In a recent report entitled "E-Business: Opportunities, Threats, and Paper Tigers," the technology research firm The Gartner Group writes that, "around the globe, managing directors, CEOs, CIOs, and vice presidents of strategic planning are asking serious e-business questionsÖ These are deadly serious questions showing concern over enterprise survival. What our clients have been telling us is that the pressure is on, and it enormous."
Tom Siebel concurs. The cumulative effect of recent economic and technological developments, he says, is a new economic reality "characterized by heightened competition, an enormous increase in the speed and complexity with which business must be done, and rising pressure on organizational leaders to find solutions to these key challenges." Reflecting on this new reality, "boardrooms and executive offices everywhere are filled with debates at the highest levels, centered on one question: How can we transform our organization into an e-business?"
As vital as this and related questions are, says Siebel, few organizations are able to answer them. Yet the stakes for doing so have risen dramatically as the ongoing dot-com implosion of the past year has increased the perceived costs of a misstep. As a result, too many companies are left uncertain what to do. Warned off by the risks of doing the wrong thing, they remain frozen in place, paralyzed by the fear that their initiatives could drive them into the same Internet dead pile that has become the final resting place for so many dot-com dreams.
Siebel thinks the solution to this dilemma is much less elusive than it seems, that all corporate leaders must do is adopt a modest change in perspective. The first wave of e-business, coming to fruition in the late 1990s, "really had more to do with e-commerce than e-business... and a frenzied search for e-commerce richesÖ," he avers. "While a handful of notable exceptions emerged with sustainable e-commerce business models, today the landscape is littered with dot-com failures" whose business models proved too fanciful or too impractical to survive.
Now, says Siebel, "the second wave of e-business is upon us," and it offers its participants a much richer value proposition. As just suggested, the first wave of e-business, at its core, focused on the invention of new business models-whether the creation of new businesses out of whole cloth or the porting of traditional business models to the Internet. This was a much greater challenge than the era's optimistic analysts and entrepreneurs imagined, but in hindsight the complications should have been obvious. Building a new business, whether on the Internet or off, is always a risky proposition, and the fact that some of these firms have succeeded beyond their founders' wildest dreams is a testament to the innate power of the Internet. Indeed, given the typical fragility of new enterprises, perhaps we should be wondering how so many dot-com companies have survived, rather than so few.
In any event, the second wave of e-business offers much more constrained if no less exciting potential. In contrast to the first wave, with its brave new businesses and daring new business models, Siebel argues that the second wave of e-business proposes primarily to streamline and improve the operation of existing business models. "Attention is shifting from Internet-centric e-commerce," he says, "to customer-centric, multichannel e-business. The second wave is being led by organizations such as Chase Manhattan, The Dow Chemical Company, IBM, Marriott International, and WorldCom-organizations that have been busy mastering the challenges of a world increasingly defined by one dominant fact: customers are in control."
And that, says Siebel, is the secret of e-business. "Organizations that excel at e-business never lose sight of one basic fact: the fundamental objective of every organization is to profitably acquire and retain customers. Nothing about e-business changes that essential truth. Business begins and ends with customers. Without them, an organization simply has no business-with or without the 'e'."
Becoming Customer Focused
Few individuals would seem to be more qualified than Tom Siebel to advise organizations on the subject of e-business. After founding Siebel Systems in 1993, Tom Siebel led his company to an annual revenue of $1.7 billion just seven years later, making it the fastest growing software company in history. As Henry M. Paulson, Jr., chairman and CEO of Goldman Sachs, remarks, Siebel Systems' roster of more than 2,000 corporate customers "reads like a who's who of the world's best-known brands, and Siebel Systems now holds a commanding market share in virtually every segment in which it competes." These companies have apparently benefited enormously from Siebel's counsel. One recent independent survey of the company's customers revealed average increases in productivity of 21%, in customer satisfaction of 21%, and in revenues of 16%-all achieved within a period of less than ten months.
The promise of such gains is one of the main drivers behind corporate interest in e-business. And the path to realizing these benefits, insists Siebel, is amazingly straightforward. Doing so requires less emphasis on creating speculative new business models and more on improving upon what has worked in the past. "Successful organizations," he notes, "have always tended to be more customer-centric than their less successful competitors." Not only is this key element of the traditional competitiveness equation just as important in the e-business era as it was before the advent of the Internet, but it is an area in which e-business offers numerous unique benefits. In fact, says Siebel, with the Internet, companies for the first time have the ability to:
Record, measure, and analyze in real-time large amounts of finely detailed, customer-specific information.
Coordinate and personalize all interactions with customers, prospects, and partners-over time, across communication channels, and across all functional areas and lines of business within the organization.
Program "intelligence" into every customer-facing process and optimize these processes.
"Practice intimate, one-to-one, relationship-based marketing, sales, and service.
Execute an optimized, integrated, ROI-based system of multichannel marketing, sales, and service.
The E-Business Promise
Before the appearance of a relatively complete suite of e-business technologies in the late 1990s, Siebel says, "organizations were limited in their ability to operate with such customer-focused precision." Yet today, the infrastructure, applications, and knowledge are available for organizations "to concentrate the full range of their resources on their most critical objective: to identify, acquire, and retain profitable, loyal customers."
Specifically, he goes on, "unlike conventional organizations, an e-business enabled organization can maintain a continuous dialogue with its customersÖ As the dialogue progresses over time, and even as the customers bounce from channel to channel-from the Web, to the call center, to the store, and back to the Web, for instance-each channel picks up the communication where it left off. From the customer's perspective, the experience is easy, pleasant, seamless-and effective."
Achieving this goal-the ultimate endpoint of nearly every corporate organization-is the true promise of e-business. How to go about building an enterprise that can deliver on this promise will be the subject of columns to come.
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