Strategy implementation of E-business

Strategy implementation includes all tactics used to achieve strategic objectives. The main tactics and actions required are summarized in Figure 5.20. These actions are described in more detail in the remainder of Part 2 and in Part 3 as indicated in the figure.

Chapter 10 focuses on approaches to managing the change associated with change man­agement. Figure 10.2 summarizes different implementation marketing activities that need to be completed by an online retailer structured according to customer acquisition, conversion and retention activities.

1. Failed e-business strategies

There are many case studies of successes with e-business strategy, but unsurprisingly there are few companies that want to have their mistakes detailed in public. However, the names of failures are well known: Boo (clothing retail – see Case Study 5.3), eToys (retail), CDNow (retail), Peapod (online grocer), VerticalNet (online B2B marketplaces) and Mondus (B2B marketplaces). Behind these well-known names, there are many other Internet companies that have failed or that have merged and many existing companies that invested in e-commerce without achieving a satisfactory return on investment. For example, bookseller Waterstones, which has 200 bookstores in the UK, spent several million euro on developing its Waterstones Online service, but then changed its strategy to partnership with Amazon (www.amazon.co.uk) because it failed to stop Amazon becoming dominant in the online book retail market. By 2002, Amazon UK had achieved book sales of around £150m com­pared to Waterstones’ total turnover of around £400m.

What then can be learned from these failures which can also be applied to all companies looking to implement e-business? The story of the failure of Boo has become a best-seller since it was one of the first dot-coms to fail in May 2000. You can read the exciting, but ulti­mately sad story in Case Study 5.3.

There are usually more fundamental problems resulting in failure of Internet companies. Miller (2003) has reviewed these misjudgements from an analysis of many Internet failures. He believes that the biggest mistake companies made was to ‘massively overestimate the speed at
which the marketplace would adopt dot com innovations’. Furthermore, it was assumed that new innovations would rapidly displace existing product offerings, for example online grocery shop­ping would rapidly replace conventional grocery shopping. Even Tesco.com, one of the most successful online retailers achieves a single-digit percentage of its retail sales from the Internet – and this has taken several years to achieve. Other reasons mentioned by Miller include:

• Timing errors: for example, services for download of digital entertainment that were offered before high-speed broadband Internet access was widely available. The learning is that insufficient research had been conducted about demand for online products in terms of the Access:Use:Buy framework introduced in Chapter 4.
• Lack of creativity: many services copied existing business models, or other online retail services. The learning is that insufficient research had been conducted about competitor differentiators and capabilities and whether these would be sufficient to encourage consumers to switch providers.
• Offering free services: many services were offered free to gain site visitors and registration. If a good free facility was provided it then became difficult to encourage payment for margin­ally better services. This is a difficult balance to get right. A straightforward example is provided byWebshots.com which provides a comprehensive image library and screensaver for free, but hopes to gain revenue from those who wish to download many images.
• Over-ambition. To achieve investor funding amongst many competing companies, some entrepreneurs exaggerated the demand for their products and the growth.

Beyond these reasons, we can also point to classic mistakes that start-up and existing busi­nesses have always made and will continue to make from all stages of the strategy process described in this chapter. These include:

• Situation analysis – insufficient rigour in researching demand for new products and competitive forces.
• Objective setting – setting unrealistic objectives or, worse still, not setting clear objectives.
• Strategy definition – poor decisions about business and revenue models, target markets, product differentiation, pricing, distribution, etc.
• Implementation – problems with customer service quality, infrastructure and change management, as described in Chapter 10.

2. E-business strategy implementation success factors for SMEs

Of course, government statistics show that a high proportion of new businesses fail within 2 to 3 years of start-up regardless of whether they are online or offline and good planning practice and financial risk management are important in both.

An assessment of success factors for e-business strategy implementation in SMEs has been produced by Jeffcoate et al. (2002). They suggest these 11 critical success factors, which can also be usefully applied to larger organizations:

• Content. The effective presentation of a products or services.
• Convenience.The usability of the web site.
• Control. The extent to which organizations have defined processes that they can manage.
• Interaction. The means of relationship building with individual customers.
• Community. The means of relationship building with groups of like-minded individuals or organizations.
• Price sensitivity. The sensitivity of a product or service to price competition on the Internet.
• Brand image. The ability to build up a credible brand name for e-commerce.
• Commitment. A strong motivation for using the Internet and the will to innovate.
• Partnership. The extent to which an e-commerce venture uses partnerships (value chain relationships) to leverage Internet presence and expand its business.
• Process improvement. The extent to which companies can change and automate business processes.
• Integration. The provision of links between underlying IT systems in support of partner­ship and process improvement.

As a counterpoint to Case Study 5.3, consider Mini Case Study 2.3 which shows how SME Firebox.com has survived and prospered.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).