Beating the E-Biz Odds

By eweek  |  Posted 2001-11-12

Beating the E-Biz Odds

Jaws dropped when, earlier this year, a division of health care giant Kaiser Permanente submitted a winning $4.05 million bid to buy the software, automated conveyers and Oakland, Calif., warehouse once used by failed dot-com Webvan Group Inc. to speed groceries to online buyers. Huge, ponderous Kaiser jumping into the discredited business-to-consumer e-commerce space?

Well, not quite. Take a second look, and the deal starts to make pretty good sense. Kaiser officials, whose bid reportedly beat out that of Webvan founder Louis Borders, explained that the integrated health care provider would use the software and automated warehouse equipment to streamline the process of moving vast quantities of medical and other supplies to its 27 hospitals in California.

"The decision was consistent with our long-term strategy of using Web technologies to improve quality and processes like our supply chain," said Eva Eagle, managing director of special projects at Kaiser, in Oakland. "Having a state-of-the-art, Web-enabled warehouse and distribution system will fit nicely with our e-procurement efforts. Were deploying Ariba now. Despite the dot-com fizzle, e-business is clearly where business is going."

Indeed. Despite sluggish economic conditions, troubling international affairs and the ongoing dot-com carnage, a great many enterprises, like Kaiser, have not budged from the belief that the best way to improve operational efficiencies, cut costs and solidify relationships with key customers and suppliers is to innovate with new business processes and Internet-based technologies. Youll find the most committed and innovative of those profiled and listed in this eWeek FastTrack 500 report for 2001.

The organizations on this annual list have consistently demonstrated a willingness to deploy cutting-edge information technologies in every phase of their operations. Whats more, those investments have resulted in clear, bankable benefits for customers, suppliers and, of course, the FastTrack companies themselves.

Take a look at the companies on the FastTrack 500 list, and two things become clear: First, e-business innovators are not limited to online retailers or consumer Web portal companies. In fact, theres hardly a pure dot-com on the list. Instead, these are established enterprises from a wide spectrum of industries. Of the top 100 companies on this years list, the largest percentage—28 companies—are services companies. The next-largest group—24 enterprises—are manufacturers, followed by financial services providers—19.

The second thing that jumps out is how deeply Internet technologies and e-business initiatives are permeating these enterprises. Once thought of as merely an alternative channel for distributing product information and taking orders, the Web and Internet technologies are being used by these innovators to transform just about every key process you can think of. The procurement and internal supply chain efforts at Kaiser (No. 183 on the FastTrack list) are good examples.

Another is whats going on at Snap-on Inc., the Kenosha, Wis., tool manufacturer and No. 71 on the FastTrack list. Like many others, Snap-on is using the Web to strengthen its relationships with dealers by rolling out extranets that offer everything from training tips to ordering and shipment tracking. The company is also mounting a CRM (customer relationship management) effort focused on Web advertising campaign management using services from Inc. But at Snap-on, e-business is going even deeper, transforming the companys products themselves. Snap-on is now, for example, in beta tests with customers on an online version of its Mitchell automotive repair and diagnostic information product line. Essentially, said Alan Biland, Snap-ons CIO and president of its Diagnostics and Information Business, Snap-on will become an application service provider, offering hosted diagnostic applications and content to repair shops.

Closer Look at Spending

Closer Look at Spending

Not that fasttrack companies are ignoring the realities of the economic slowdown and remarkable global uncertainties facing all enterprises. Although most—56.5 percent, according to an exclusive survey of FastTrack companies—said theyre spending more this year on the IT infrastructure needed to execute on their ambitious e-business strategies, an even larger group—68.8 percent—said they attempted in some way to moderate IT spending during the year. Among companies attempting to keep a lid on spending, wireless infrastructure initiatives were, by a wide margin, the most likely to be cut. Server and network infrastructure were the least likely to be cut.

For many FastTrack companies, the shaky economy has forced an increased focus on initiatives that hold the promise of quick returns on investment and tangible, measurable efficiency gains. "This is work that is going on in the trenches. Its about fixing companies from the ground up," said Raffi Amit, director of the e-business initiative at the University of Pennsylvanias Wharton School of Business, in Philadelphia.

Consider the case of Gates Rubber Co., a Denver-based manufacturer of automotive parts and No. 23 on this years FastTrack 500. A year ago, responsibility for e-business initiatives was split among IT and various business units. Earlier this year, however, the company formed an e-business unit under Bob Jack, director of e-business. His job: rigorously cost-justify every e-business initiative, something that didnt always happen before.

"Its got to either add value to the customer, improve productivity and efficiency, or contribute to added revenue," said Jack, who reports directly to the companys CEO.

While the focus is becoming more pragmatic, e-business is no less important to most FastTrack companies. Not only do the overwhelming majority say both business-to-business and business-to-consumer e-business is more important to their companies now than it was a year ago, most report a slow but clear increase in revenues from e-commerce.

Customer Is King

Customer Is King

What are fasttrack companies trying to achieve with all this investment in Internet technologies? Besides continuing to reduce operational costs, FastTrack companies most want to improve online customer service and support to develop closer ties with customers and, ultimately, increase revenues. By far, the highest percentage of FastTrack companies (63 percent) said improving online customer service and support is important or very important to their enterprises this year.

Not all FastTrack companies equate improving online customer service and support with deploying packaged CRM applications, however. Asked to rate technologies according to their expected enterprise impact over the next 12 months, FastTrack companies placed CRM software well down on the list.

So what are FastTrack companies doing to make customers happier if theyre not all deploying CRM packages? In many cases, theyre focusing instead on deploying collaborative Web-based applications that allow them to streamline business processes that currently cost customers too much time and money. Take automotive parts maker ArvinMeritor Inc., for example. The Troy, Mich., Tier 1 OEM has deployed LiveLink, an online collaboration and workflow application from Open Text Corp., of Waterloo, Ontario, to allow customers to more easily collaborate with ArvinMeritors engineers on parts specifications. The next step, said Senior Vice President and CIO Perry Lipe, is to extend LiveLink to enable collaboration between ArvinMeritor—No. 117 on the FastTrack list—and customers in the upfront conceptual parts of the design phase. That should happen in four months, Lipe said.

While FastTrack companies such as ArvinMeritor still see B2B exchanges as another promising way to reach out to customers and suppliers, they havent yet bought in to either consortia-led exchanges or independent e-marketplaces. Half, for example, said theyre either launching their own private exchange or using a combination of their own exchange and either an independent or a consortia-led exchange.

While FastTrack companies are somewhat torn over what B2B exchange path to take, theyre unequivocal about the issue that concerns them most: security. FastTrack companies rated security the most challenging aspect of deploying both B2B and B2C e-commerce systems, even though the vast majority—79.6 percent—said their e-business architecture is more secure today than it was a year ago.

In the wake of the recent terror attacks and ongoing virus proliferation, IT managers—perhaps for the first time—have a receptive audience in top management when it comes to the importance of security. Ninety-eight percent of FastTrack companies reported that top management now considers security an important business issue.

For the most part, the tools that FastTrack companies are using to shore up security are not surprising: Firewalls and virus scans were the security technologies scored highest by FastTrack companies. A close third, however, was not a technology. Eighty-four percent of FastTrack companies said they now consider user training a critical tool in securing the enterprise.

Besides security software, other technologies expected to have a high impact on FastTrack companies over the next 12 months included Windows 2000, Extensible Markup Language, virtual private networks, and both storage area networks and network- attached storage.

While the vast majority of FastTrack companies said they remain committed to investing pragmatically in e-business, most clearly see their efforts as works in progress. In fact, many FastTrack companies report theyre less than satisfied with the return on investment theyve seen so far from many e-business initiatives. More companies—32 percent—said theyve been dissatisfied or strongly dissatisfied with the return on their investments in B2B e-commerce than have been satisfied or strongly satisfied (25 percent). FastTrack companies were even harsher in their opinions about returns from B2C e-commerce (69 percent dissatisfied or strongly dissatisfied vs. 21 percent satisfied or strongly satisfied) and wireless (51 percent vs. 11 percent). Only investments in CRM seem to be living up to expectations. Thirty-three percent of FastTrack companies said they have been satisfied or strongly satisfied in CRM ROI vs. 27 percent reporting dissatisfaction or strong dissatisfaction.

Those judgments may, however, reflect FastTrack companies high expectations of e-business as much as technology deployment problems. Leading innovators like Kaiser expect nothing less than that e-business will produce for them tangible advantages over competitors. So, even in a down economy, theyre forging ahead.

"Were not re-examining or backing away from anything," Kaisers Eagle said. "Well be careful about our investments, but in the long run, we intend to outpace what our competitors are able to do."

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