B2B: The Real World

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

QUANTITATIVE ASSESSMENT

A variety of benefit models are available for B2B initiatives that measure value quantitatively, but the most common strategies address lowering operational costs. These strategies include:

• Improved productivity. This strategy is usually measured in process cost savings through time studies, which are most apparent when automating a paper-based manual process, such as requisitioning.
• Improved policy compliance. This strategy also improves quality and timeliness - whether you are forcing specific general ledger codes that eliminate manual corrections later or forcing buys from only approved vendors.
• Better data for more informed decisions. Often, B2B systems provide a repository of information to generate more useful information in the future, such as identification of vendor issues.
• Higher employee satisfaction. When users have easier access to information and automated processes, they have higher job satisfaction, so retention and productivity can indirectly increase.

Many recent B2B initiatives focus on extending legacy ERP systems, such as purchasing and order entry, to wider audiences inside the enterprise (such as e-procurement) or outside the enterprise (such as digital storefronts). These technologies are a natural evolution of ERP solutions (purchasing and order entry) and much of the value in these B2B systems lies in unlocking and extending the value in existing ERP implementations.

Here's one way to illustrate how extending ERP with B2B solutions can be valuable: think of a bank teller vs. an automated teller machine (ATM). If you've ever glanced at the system a bank teller uses when recording your transaction, you've probably noticed that it's very complex. The teller's system can, of course, perform every transaction, no matter how complicated, that the teller requires. As a result, tellers usually have to fill in many dense screens with a lot of information and remember many commands, for which they may even need self-reminder notes.

You can think of the bank teller's system as part of an ERP system targeted to a very small audience of users (bank tellers) who have to service the transactions of a much larger audience.

However, when these same processes were exposed to a larger audience (customers), banks needed a new kind of system. These new systems were meant to let banks place the power of their core systems into the hands of a much larger audience: the customers (you and me). In many cases, the vendors who were very good at developing the core banking transaction systems, targeting bank departments with small groups of users, were not nearly as adept at developing systems that had to be simple and easy-to-use so they could interact with a huge number of users.

As a result, new companies evolved to create systems that began putting a "pretty face" on the banks' core systems with ATMs, letting anyone perform basic bank transactions quickly and with minimal training. So you have the following analogy: ATMs add value to bank teller's systems in similar ways that certain B2B systems add value to ERP systems. They unlock the power of the core ERP systems and put it directly into the hands of the users - inside or outside the enterprise - reducing costs and improving user satisfaction. The value of B2B systems can extend well beyond a user-friendly interface. They can allow coordination and collaboration between firms that was never before possible. Even so, the operational cost savings of extending the reach of ERP is frequently the starting point in B2B initiatives.

Nevertheless, these operational cost-saving methods are only part of the equation. Sometimes if subject matter experts in supply chain management or procurement develop the technology business case, the B2B system will only focus on cost-saving benefits. These operationally focused solutions are usually on the buy-side of the value chain, with systems and processes that interact with suppliers.

On the sell-side of the value chain, working with channels and customers, B2B technology strategy makes revenue-enhancing benefits possible. These benefits include:

• New channels. Establishing new channels such as a trading exchange, a new distribution network, or direct selling, can provide revenue opportunities that you are not currently capturing. For example, what new revenue opportunities result from establishing a trading exchange to leverage the sale of your products and services as a new channel?
• New customers. Often a side effect of establishing a new channel is the ability to reach alternative customers that you are not currently serving effectively. Can you reach other geographies or other customer types through B2B technologies? For example, if you extend EDI systems to XML or interactive Web sites, will you gain new desirable customers not currently being serviced?
• New information products. B2B technologies may capture data previously not available, and the packaging of this data may provide another product to sell. Is the data you already have valuable, or can you make it more valuable - such as through supplier, channel, product, or customer information that you can sell?
• New services. When extending a process, opportunities exist to supplement the parties involved with new services. What other value-added services make sense in your industry such as dispute resolution, financial settlement, logistics, or authentication?
• Higher customer satisfaction. By having a better and deeper relationship with customers, you can have happier and more loyal customers who spend more money and return more often. If you are the easiest and simplest channel to buy from and offer rich customer value (most variety, best information on availability, highest quality, and so on), then you have a competitive advantage.

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Assessing the value of your B2B technology strategy is critical to its success. A key success factor is ensuring that you don't overlook either the buy-side or the sell-side of the value chain - consider benefits and opportunities from both operational efficiency and new revenue potential. And, don't focus only on quantitative measures without first qualitatively aligning your B2B technology strategy to your business strategy. By addressing all of these considerations, you will have the opportunity to create sustainable competitive advantage for your firm with advanced B2B technologies.

Darius Vaskelis [Darius.Vaskelis@inforte.com] is vice president of digital markets responsible for the B2B practice areas at Inforte (www.inforte.com), a strategic technology consultancy.

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Related Articles on IntelligentEnterprise.com:

"Critical Acclaim," May 24, 2001: www.intelligententerprise.com/010524/decision1_1.jhtml

"Supply Chains and the Retail Sector," June 4, 2000: www.intelligententerprise.com/000605/supplychain.jhtml