InformationWeek

November 1, 1999

The Enterprise:
A Delicate E-Business Balance
Being effective is not enough for an electronic business; it must be efficient as well if it plans to be around for the long haul

By Judith S. Hurwitz

Judith S. Hurwitz ou've become an E-business. You've started selling your products and services over the Internet, and life is pretty good. But are you sure you know what you're doing? Are you ready for the inevitable changes that arrive with serious E-business competition? The likely answer is that you are unprepared for the future. Most successful E-businesses know that the key to profitability lies in maintaining the delicate balance between being effective and being efficient.

Effectiveness is what we see when companies create brand recognition, market awareness, and customer loyalty. Companies such as Amazon.com and eBay have come out of nowhere with the effectiveness to reach out to the masses and create momentum and credibility well beyond their corporate size, structure, and revenue. Effectiveness has become the distinguishing characteristic of the E-business revolution. The companies that have excelled at opening up new market opportunities and creating customer loyalty have done so by living and breathing five basic principles of effectiveness:

Take the lead in customer expectations. Effective companies take the phrase "the customer is always right" to the nth degree. They offer round-the-clock availability, immediate responses, and customized product offerings to meet their customers' desires.

Reach out to new markets by filling a gap. Effective companies understand their customers' buying habits. They identify gaps in market segments or customers served and offer products or services to meet those unfilled consumer needs.

Get to market quickly. Effective companies tend to be first, or at least early, to market, and then swiftly bring new products and services to that market.

Anticipate or react in a flash to market changes. Not only do effective companies tend to be first to market, they are also extremely adaptable. These companies consistently use the data furnished by the Internet to enhance future interactions with customers or suppliers and to respond quickly to market changes.

Operate in a daily planning model. The Web offers an incredible tool for understanding customer behavior and expectations, supplier and partner needs, and even changing employee needs. Effective companies are those that use this information to make ongoing strategic business decisions.

These are the hallmarks of highly effective companies. Is this enough? No. For companies to succeed long term with an E-business strategy, a second ingredient must be added: efficiency. Efficiency is not glamorous. It is the stuff that brick-and-mortar companies have been doing for decades. It is about streamlining business processes, automating tasks, integrating systems and resources, increasing margins, and decreasing costs. Federal Express has built its entire business on delivering efficiency.

Efficiency has its own set of guidelines:

Sound process management. Efficient companies tend to have standardized procedures and business rules to guide internal and external processes and procurement policies.
Integrated information systems. The integration of front- and back-end systems such as order entry, customer support, invoicing, shipping, and inventory is critical in streamlining business processes and enabling cross-functional operations to run smoothly and cost-effectively.
Deep business knowledge. Efficient companies tend to have experienced leaders with a strong foothold in their industry. These people can leverage their knowledge and experience to the long-term benefit of their business.
Long-range planning. Efficient companies tend to have 3- to 5-year plans vs. the 3- to 5-month plans put forth by their effective counterparts. While this type of long-range planning might seem stodgy for an E-business, there is significant business value in preparing to be around for the duration.

While effectiveness and efficiency present valid scenarios for best practices, striking a balance between the two is crucial to reaching profitability. In a world where the competition is just a click away, companies that can deliver what their customers need and want--in a way that maximizes both effectiveness and efficiency--will be around to reap the benefits of the E-business revolution.

Judith S. Hurwitz is president and CEO of Hurwitz Group Inc., a Framingham, Mass., research and consulting firm focused on E-business applications and services. She can be reached at jhurwitz@hurwitz.com.

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