Lots of "techies" have great ideas about what can be done with Web technologies. Lots of business experts have great ideas about the ways in which these technologies can be used to enhance customer/partner relationships, increase market share, enhance competitive advantage, etc. However, many of these e-business ideas never take shape simply because it was so difficult to "sell" the idea to the key business decision-makers.
So what is the key to selling an e-business idea to the holders of the purse strings? The key is to try to understand the decision that the purse-string holder is trying to make from their perspective.
They need to know the following:
- Whether or not there will be a tangible payback
- How much it will cost to do it
- How much it would cost the business NOT to do it
- Why this idea should take priority over other ideas
Unfortunately, some of these questions are not so simple to answer for e-business systems.
There are some e-business systems that have very tangible benefits. For example, it is often easy to prove that an e-procurement system will save the company money by enabling bulk ordering of goods so that the company can take advantage of bulk ordering discounts. Similarly, it is easy to show that by signing up to an e-marketplace, a company will save money by being able to take advantage of the "perfect market" by buying goods at the cheapest price on offer at the time.
In these cases, justifying the cost of building an e-business system is simply a case of working out the estimated savings over time and indicating when those savings made add up to the same amount as the system cost (that is, when the system has paid for itself).
However, some e-business systems, by their very nature, can have paybacks that appear on the surface to be "intangible." At first sight, it would seem to be very difficult to measure the value to the company of typical paybacks from e-business systems such as the following:
- Increased customer satisfaction
- Increased customer retention
- Increased synergy between departments or between partner companies
- Improved availability of accurate, up-to-date information
- Competitive advantage
However, there are ways of putting monetary values behind some of these "intangibles."
Marketing departments in many companies, for example, do have historical data indicating how increases/decreases in customer satisfaction have affected the amount of profit made in the past. Estimating the extent to which customer satisfaction might rise as a result of an e-business system, however, can be problematic. It may be that other companies (maybe even your competitors) have used similar e-business systems, and have achieved rises in customer satisfaction levels; if so, these figures are useful ammunition in your fight to obtain budget approval. If not, take a conservative estimate of how much customer satisfaction will rise, and use this to point out that these figures represent the minimum payback you anticipate your system will provide.
Again, many companies have readily available figures representing the estimated cost of each customer lost. Although it may be difficult to anticipate how many more customers will be retained if an e-business system is successful, it is worth emphasising that for each customer lost, your competition gains a customer, and that represents a great opportunity loss from that point onwards.
Questionnaires and surveys, either paper-based or posted on your Web site (or hosted by questionnaire-generation Web sitessee http://www.e-survey.com) can be used to provide estimates of the amount of customer demand there is for the new features, services, or facilities to be provided by the new system.
Many e-business systems however, do not have customer focus, and instead are focussed on internal processes. With these systems, because there is no direct relationship between the system and customer behavior, it is important to look for indirect savings on what is spent internally in order to provide customer services/products.
For example, if it is anticipated that the system will reduce the amount of paper used to carry out business processes by 80%, the cost of buying paper currently should be ascertained so that a specific figure can be given as to how much money will be saved by the system.
If, by providing one system that all business partners have access to, the e-business system is expected to reduce the number of errors made within a business process, the cost of building this system can be justified by working out the average cost of each error currently and multiplying that by the number of errors currently detected. Even the costs of retyping data from paper into a computer system, the costs of maintaining two sets of data, wasted phone calls and visitsall can be measured to support the case for the introduction of the new e-business system.
Some e-business systems enable business partners to collaborate on projects so that better planning, estimating, and forecasting is possible. In such cases, it is important to ascertain how much money is lost whenever a forecast is inaccurate due to lost sales or the cost of storing stock, and to estimate how much more accurate forecasts will be when both parties can contribute towards the forecasts, and/or more historical data is made available to aid forecasting. Sainsbury's, a major retailer in the UK, saved a great deal of money through more accurate forecasting enabled in this way using its collaborative planning e-business system.
Providing a Web site via which business partners can communicate and/or share data and documents may provide some monetary benefits that are not easy to provesuch as the reduced need for phone calls, faxes, and physical meetings (the cost of the latter can be enormous).
Another benefit that is difficult to translate into monetary terms is the capability to make more accurate judgments and decisions because e-business systems are constantly being updated with the latest information, and therefore the data is more accurate and up-to-date.