THE PROBLEM:
Savvier is a vice-president of network services who’s trying to lead her company’s charge into electronic business. Idealwares is a multibillion-dollar maker of store and restaurant fixtures, and it faces some difficult questions about what direction to take in the sometimes scary new world of e-commerce.
Savvier has been with the company for just six months. The CEO hired her because of her Internet savvy, and he’s hoping she can pull together Idealwares’ strategy for taking its business on-line. His goal is to increase profits, which have been weakening steadily because of increased competition from niche manufacturers.
Upon joining Idealwares, Savvier began tracking the Web activities of the company’s traditional competitors and the new niche players. The good news? None of the firms are very active on the Internet. Savvier is certain Idealwares can capitalize on that if the company moves quickly in establishing a dynamic Web site that would serve as a customer’s primary information source.
She envisions giving customers the ability to build virtual restaurants or stores using products from Idealwares’ on-line catalogue. That would enable customers to visualize what the addition of a new product would do for their businesses. Then customers would be able to place orders, check the status of those orders and submit payment.
What’s more, Savvier believes the Web presents Idealwares with the opportunity to expand beyond its traditional customer base of retailers and restaurant owners. She thinks Idealwares could generate new business by targeting homeowners looking for upscale fixtures.
Savvier faces resistance from some top managers, however. For example, the vice-president of sales and marketing is concerned that the company wouldn’t be able to uphold its standards for customer service. The CFO argues that the consumer market is unpredictable and too risky to pursue. The corporate counsel worries about copyright and quality assurance issues. The CIO applauds Savvier’s e-commerce plan but is concerned about the strain it will put on IT.
Idealwares’ CEO wants Savvier to consider these and other concerns and come up with a plan for moving ahead.
Here are the questions with which she’s grappling:
- How valid are the executives’ concerns, and how should she address them?Is it too ambitious to target existing and new customers?Will the on-line effort really increase revenue or just shift it around?What resources (people and money) would she need to launch the Web site?How does she get the e-commerce ball rolling?
DON’T LOSE HEART
An e-commerce pioneer’s job is to generate business. If Savvier listens to all the objections from those around her, she may lose heart. Idealwares will stagnate while a competitor moves forward. Worse, someone from outside the market may move into the restaurant fixture space and change the industry altogether.
For example, a consolidator could move in and distribute a range of products electronically to Idealwares’ current buyers. The company may be funded by a competitor or may have an offshore partner that can produce goods to specification.
Savvier’s first step should be to work through some possible future scenarios with the key stakeholders: the CEO, the vice-president of sales and marketing, and the CFO. She should avoid the corporate counsel until she has a stronger business plan.
Savvier has to get her company thinking about future competition on-line, perhaps by running a strategy session for the Idealwares executives. What possible scenarios could unfold, from the probable to the extraordinary? How would Idealwares deal with them? During the session, it will probably become clear that one or two alternate strategies will prepare Idealwares to handle most possible future events.
With a common understanding of the threats and possibilities of the future, Idealwares can turn to tactics. It’s here that Savvier can expect her colleagues to raise objections. She needs to understand and overcome these objections. Often the objections are emotional, and their sources may not be obvious.
Concerns from sales and marketing may stem from a fear that sales commissions will be lost when customers buy directly over the Internet. Once Savvier discovers the root of an objection, she’s most of the way to a solution. In this case, she could suggest to the CEO that he change the sales plan to compensate salespeople for accounts that order over the Internet.
Savvier should fight for a budget immediately. She’ll need to build a prototype site and coordinate development of a marketing program to get the word out to existing and prospective customers. Her first battle will be to get as much money as she can directly from the CEO or the board of directors, depending on the size of the opportunity. Bigger investments make more sense: Without marketing and technology, the effort will flop.
How much money does Savvier need? She’ll have to make an estimate by looking at similar efforts in other industries. Millions would not surprise me. Should she undertake this project alone? Probably not. She needs to hire staff or find experienced consultants who can help with the business and technology issues.
Should Savvier go directly to the consumer? It may be a moot point. She probably won’t be able to get a big enough budget to establish a brand identity with consumers, so she should focus on business-to-business sales. However, Savvier should understand that it may not be existing business customers who do the bulk of the ordering on-line. There is a demographic profile of corporate buyers actively purchasing over the Internet, and part of Savvier’s job is to determine who these people are and seek them out.
Savvier and other Idealwares executives have to decide whether to sell existing products over the Internet or create a new Internet-specific line. The advantage of selling the old line is that the company already knows how to fulfill orders. By selling the old line, Savvier is making only one major change to the company’s core processes.
However, if she finds that channel conflict issues run too deep, she’ll run into the least resistance with a separate product line.
Closing advice: Understand that you are the best hope for the company’s future. Move quickly to establish a presence on the Internet and build the business. Be flexible, as you may end up selling to a new kind of customer.
Jeff Nickerson
Director, PricewaterhouseCoopers Internet Practice
