Effectiveness Means E-business Success

Software Magazine, Sept, 1999 by Dave Kelly

Focus on opportunity when weighing the bottom line

In today's e-business environment, keeping up with the competition just isn't good enough. In a world where every company has established a presence through its Web site, and many companies offer the same basic goods and services, being "just like the other guy" is a recipe for failure.

By next year, business success will be predicated on "effectiveness" -- how quickly and successfully companies can customize their applications and IT infrastructure to provide higher-value interactions with customers and prospects. To measure and evaluate that effectiveness, and the IT investments required to achieve it, companies must also shift from a traditional "carbon world" focus on return on investment, to a "wired world" focus on return on opportunity.

Competitive "Click"

Traditionally, companies such as McDonald's gained competitive advantage by focusing on efficiency and location. But neither of these historic best practices holds up in today's e-business world. Today, competitors selling the same products are just a click away in customers' Web browsers. Companies must now balance the traditional drive toward efficiency with the new requirement for increased effectiveness, simply said, efficiency provides competitive parity while effectiveness delivers competitive advantage.

Although increasing efficiency through integration, consolidation, and automation is critical to a company's success, most companies will achieve competitive advantage through customized, adaptable, intelligent applications and IT infrastructure. As a "brick-and-mortar" company moves to a Web-based business, customization and intelligence capabilities will play a critical role in enabling increased effectiveness as measured by revenues, profitability, market capitalization, and customer loyalty.

For example, many financial institutions give customers the ability to trade stocks and follow the market online. The capabilities for account management and basic transactional functionality (buying and selling stocks, mutual funds, or options) is basically the same across different competing financial institutions. How will these businesses define and differentiate themselves moving forward? Hurwitz Group believes that the ability to offer differentiation on top of basic transactional capabilities -- providing, say, the capability to set up complex, programmed trading -- will be key to success, creating a stronger customer base that is less likely to switch to a competitor.

To create these customized, adaptable applications, companies must balance traditional, IT-oriented efficiency with new, Internet-style effectiveness.

The Flip Side

This is a clear change in metric. For the past 10 years, IT and business management have focused primarily on efficiency when evaluating technology investments. Efficiency achieved through streamlining business processes, automating tasks, and reducing headcount was a critical focus of IT investment in the late 1970s, 1980s, and early 1990s. In the mid-1990s, the epitome of efficient IT investments became large, enterprise-oriented packaged

applications like SAP, PeopleSoft, and Oracle Financials. Such investments were critical for keeping up with competitors and being able to run complex and distributed operations. Increasing efficiency and its associated benefits--decreasing costs, reducing time-to-market, integrating resources, and standardizing procedures--continues to be critical.

Effectiveness, the flip side of the efficiency coin, means increasing the potential value or value delivered to existing and potential customers and prospects. Amazon.com is a good example of a company that delivers a high level of effectiveness through the use of customization and personalization. Its ability to deliver appropriate, user-specific recommendations for other potential book choices (through its "Instant Recommendations" section) is one of the keys to its success in hooking and keeping the interest of customers.

Today, there are several ways to increase effectiveness, including:

* Investing in infrastructure. The ability to adapt a technical infrastructure to changing business processes will enable organizations to meet more new customer demands.

* Deploying advanced application features. These features include techniques such as visualization for quicker, more effective use of data; artificial intelligence capabilities to automatically identify potential opportunities; and complex algorithms for specific vertical markets.

* Integration of business process and systems. MCI's ability to roll out its Friends and Family promotion was a result of leveraging multiple core systems and creating new packaging and billing processes.

When Opportunity Knocks

How can companies measure their effectiveness in this new e-world? Hurwitz Group has developed a Return on [Opportunity.sup.TM] (ROO) Assessment model to help organizations focus on top-line opportunities, including increasing revenue and market capitalization, expanding the customer base, and encouraging customer loyalty.