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Three Action Strategies for Using Net Technology in YOUR Business
By Jeff Senne   Printer Friendly Version

Does your business need to be on the Web? A group of successful owners and managers of fruit growing and packing companies didn't think so. They were doing quite well, thank you, without the Web.

One manager remarked, "All I'm going to get from this Net and Web thing is a bunch of people who want to buy a couple of peaches at a time. I'm not interested in that. I'm not even interested in selling a case of peaches. I want to sell truckloads of peaches. And I know how to do that using my sales people and the relationships we've built up over a couple of generations."

That business owner was right ... as far as it went. He knew his business well; he knew it was based on sales, transactions, and service relationships nurtured over the years. Now he was looking for a way to make more profit.

But he had forgotten to apply the basic equation from Business 101. Profit = Revenue - Expenses. Traditional business basics hold the key to how you can increase profits by using Net technology. With an equation like that, two actions make profit go up: increase revenue or decrease expenses.

That's Net economics: the possibility of increased sales and, more importantly, the increased profit on all those sales. That combines with the promise of cost reductions on administrative services that go directly to the bottom line.

What if this business owner had asked, "Could it help my business to save money on orders by saving money on the order-processing cost? Could it help sales reps to have certain kinds of information immediately available? Or could it help to give customers information about special situations or offers without tying up customer service people on the phone?"

Using the Web to provide answers to each of these three questions could save money and increase revenues for you and your business.

While writing our book Net Income: Cut Costs, Boost Profits and Enhance Operations Online, my co-author Wally Bock and I researched hundreds of businesses optimizing their everyday activities with Net/Web technology. Our research showed them using three Net technology action strategies businesses to earn more revenue and cut expenses. These three strategies for business are:

ACTION STRATEGY ONE: BUILD A PUBLIC WEB SITE FOR MARKETING, SALES, AND ADVERTISING

The Web provides a way for a business to extend its reach. That's what a small hot sauce retailer in Pasadena is doing. The store, is appropriately called Hot, Hot, Hot, uses its Web site at http://www.hothothot.com to sell hot sauce to customers who live far beyond easy driving distance. The marketing cost for Hot, Hot, Hot's Web sales is 5% of sales, compared to with 22% for catalog sales. Web sales, now account for a third of the store's business, are growing at a rate more than double walk-in and catalog sales. That's direct bottom-line impact.

The Web can provide more detailed information about products than would be feasible in a print catalog and, at the same time, make it possible for customers to easily order items as they move through the site.

The order-processing cost for an order placed on the Web is about 70% less than handling an 800 number order. Taking orders on the Web also frees up order takers to do other work for your business, and eliminates printing and postage costs.

ACTION STRATEGY TWO: BUILD AN INTRANET TO ENHANCE INTERNAL BUSINESS OPERATIONS

An intranet, which is the private face of the Web, is created by setting up a miniature Web site inside your company. It's protected from outsiders by what's called a "firewall." An intranet enhances the efficiency of your internal business operations.

Basic administrative information like the employee phone directory can be totally current without the cost of printing updates. The same is true for product spec. sheets, production and shipping schedules, benefits information, company calendars, and a host of other information that needs frequently updates.

Any company process (large or small) where forms need to be filled in becomes a natural fit for an intranet: expense reports, travel advance requests, simple purchase order processes, and order tracking requests. Consider also the documentation that needs to be maintained on quality assurance, emergency procedures, and non-routine administration functions such as bringing in temporary help. Having those items available on the intranet makes everyone more productive.

International Data Corporation, a consulting and research firm based in Framingham, Massachusetts, has studied the return on investment to companies who have implemented an intranet. The result: the average ROI exceeds 1,000% a year, and payback periods range from 6 to 12 weeks.

Productivity gains have proven to be enormous. The tangible benefit of turning labor-intensive work over to an automated process quickly and easily brings immediate and powerful benefits.

OK, who's doing this? Research by several different companies indicates that by the end of 1997, better than 90% of the Fortune 1000 is likely to have an intranet in place.

They're doing it for all the reasons cited above: high return on investment, easy setup, low cost, quick payback, powerful results to the bottom line. But you don't have to be a Fortune 1000 company to use this technology.

ACTION STRATEGY THREE: CONNECT WITH BUSINESS PARTNERS, CUSTOMERS, AND SUPPLIERS BEYOND THE FIREWALL WITH AN EXTRANET

An extranet is where the Internet and your intranet come together in an external network. It can only be accessed by permission with a user ID and a special password. This lets your company reach out to people who don't work for you, but who are key players as business partners, strategic networks, external sales force, and suppliers.

It's also a way to provide added service to your customers. You can, for example, give key customers a way to check on their orders already in your order-processing system and available through the intranet. By letting your key customers access information, they can check on orders without you incurring any labor costs.

In his regular Web site column "The Main Thing," Jim Barksdale, President and CEO of Netscape on December 3, 1996, laid out the reasons why businesses are turning to extranets now. He wrote:

"Companies used to create systems with the idea that they were building them for inside the business, for whatever use the application had - improving employee productivity, sharing data while updating Human Resources information, for example. Then they would build other applications for use outside the business - either products for their customers, or products to let the company communicate better with their vendors. Open Internet Software changes that whole communications paradigm.

Look at the systems you're building and ask, "What if partners, customers, or prospects outside the firewall could tap into this?" You might find that people want to get more information and buy more of your products. I'm seeing these kinds of discoveries in every industry: from software to financial services, from transportation to insurance to pharmaceuticals."

Barksdale sums up why this technology is so powerful. It works on just about any platform, it uses software that people are used to, it provides tools that are easy to learn and to use, and it lets people do business in ways that are comfortable for them and profitable for their companies.

All this sharing of information fits with the major trends in corporate strategy over the last 15 years. Terms like "outsourcing," "partnering," "strategic alliances," "demand-driven," "lean," and "agile" have a familiar ring. As companies become leaner, more agile, and more demand-driven, they've begun to create strategic alliances, channel partners, and value chains.

Extranets link these so businesses can communicate effectively from either side of a relationship. This is one of the most powerful business ideas of the century.

The Web, intranets, and extranets are simple, cost-effective ways of improving your profits. They let your business take advantage of technologies that will lead you into the 21st century ... and boost your Net Income.


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