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
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
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
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
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
"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
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.