B2B: The Real World

Developing a clear technology strategy is vital to the success of your B2B projects and initiatives

By Darius Vaskelis

A clear technology strategy is pivotal to your B2B projects and initiatives, from integrating with legacy ERP order-entry systems to implementing newer technologies such as Internet-based supplier collaboration systems. If you do not align these initiatives with a clear B2B strategy, your firm risks having a series of complex, disparate, stand alone but closely related projects, with none leveraging the other. Most firms want the final plan to be a phased series of projects and technologies, prioritized by value. But in defining your B2B roadmaps, how do you measure the value of these initiatives?

Measuring a B2B initiative's value is not simple. In some cases it depends on the financial management techniques employed by your organization when it builds its business cases. Assessing the value of an entire B2B technology strategy adds even more complexity - typically crossing many functions within a firm's value chain, from purchasing and suppliers to selling and customers, requiring the attainment of new operational efficiencies and new revenue opportunities. Combine this with the complexity and range of systems that you can use, from those that execute transactions (such as e-procurement) to those used to make better decisions (such as collaborative sourcing), and the exercise may appear futile.

To begin addressing these complex issues, you should start by assessing the value of your B2B technology strategy in two ways: qualitatively and quantitatively.

QUALITATIVE ASSESSMENT

Since B2B projects typically cross many functions throughout the value chain, it makes sense that they should be strongly aligned with your firm's business strategy. In other words, from a qualitative standpoint, how effectively does a specific B2B project support and reinforce your business strategy? Does it provide your company support for a unique competitive advantage that other companies cannot or do not want to copy? Or is it a "best practice," which is important for operational efficiency, but by definition replicates industry leaders' business practices and does not distinguish your organization with a unique advantage?

Keep in mind that best practices are not a mistake - in fact, they are incredibly important to business success. When you need to reduce cost, and "wasteful" systems or procedures exist within an organization, established best practices can make certain activities more efficient, such as procurement and inventory planning. If you don't adopt best practices, and thus face higher cost structures or longer cycle times, you are giving your competitors an advantage based strictly on known and replicable operational efficiencies. Best practices are particularly critical in addressing supporting functions or activities that aren't part of a company's high-level strategy or core business, such as accounts payable and accounts receivable. Best practices by definition imitate more efficient competitors. In some cases, doing something unique means not following best practices.

For example, I was the IT director at a hospitality company that maintained remote offices in hotels catering to business meetings. These hotels had to procure goods and services to sell or rent to their guests for use in meetings, from flipcharts and markers to screens and projectors. The execution of these buying and receiving transactions had to be extremely quick and flexible in order to make customers happy and ensure their continued business and loyalty. As a result, the e-procurement system the hotel employees used to buy these goods and services was actually a highly strategic business system and a driver of competitive advantage that let the firm more widely source, buy, receive, and pay better than the competition.

To achieve this differentiation from competitors, industry best practices such as national vendor contracts or commodity-based approval rules were purposefully not adopted. In this specific firm, the best practice would have limited the flexibility in satisfying a demanding client. Instead, we established a unique way of running a highly demand-driven, decentralized buying process while still maintaining a centralized procurement organization built to serve the needs of field offices in hotels.

Our implementation of the B2B purchasing applications required a highly tailored configuration of the e-procurement system, including how it was integrated with other systems not typically associated with purchasing, such as the sales quotation and customer billing systems. While competing hotels could replicate this process, they didn't want to, because doing so would have meant abandoning their own rules of how to run field office operations and procurement. That uniquely tailored demand-driven e-procurement system helped support and reinforce sustainable competitive advantage through being highly flexible with business clients. The company chose to implement its B2B system in this manner because it qualitatively supported the company's strategic positioning.

On the other hand, enhancements to the general ledger system, which reduced costs and time and improved performance, were not a core business driver and didn't provide any substantial competitive advantage. Therefore, we configured the general ledger system with best practices in mind. The system's processing of tasks such as journal entries and monthly reporting were not extensively customized, as the basic "vanilla" configuration delivered by the ERP vendor was sufficient. In this case, while having a good general ledger system was important, it wasn't actually strategic: it didn't differentiate us from the competition. While best practices are a required cost of doing business, they are not a source of sustainable competitive advantage because by definition, competitors can, and will, adopt them. See Table 1 for a high-level comparison of best practices projects vs. strategic projects.

When you build a business case for B2B initiatives, the first tool to prioritize and analyze these projects should be a qualitative assessment of how well technologies support and reinforce the overall business strategy. How critical is the set of activities and B2B technologies that supports you in achieving competitive advantage? Are you trying to replicate industry best practices or trying to achieve unique strategic positioning? Neither is "right" or "wrong," but without a qualitative assessment, your business case can become weak, if only because you don't have clear reasons for evaluating B2B systems for implementation.