UK industry still has a long way to go down the e-commerce route, according to a new survey* of 100 industrial companies with turnover in excess of £100m.
But whatever the hype surrounding e-commerce, it’s apparent that US practice is now starting to feed into the UK. In fact, more than half of those surveyed (54%) say that e-commerce will be significant or even critical in meeting their 2000-01 revenue or profit objectives. Most businesses that have not yet adopted an e-commerce strategy expect to do so over the coming year.
The report authors make the point that, with the launch of industry internet markets such as Covisint (an auto industry market involving Daimler Chrysler, Ford, GM, Nissan and Renault) and the government-backed defence service DECS, businesses that wish to continue supplying these customers will have to be e-enabled. “Planning needs to start now,” says the report.
So far, however, UK industry’s experience of such internet markets is limited. Also, the e-commerce initiatives that are undertaken here are often not even organisation-wide, the survey found. But the authors’ experience in the US suggests that operating cost reductions of up to 20% are probably there to be had – though at present, the savings are “more press releases than realised”.
* E-commerce Strategies: a UK industrial view, is published by Ernst & Young.
Respondents were asked to rank a number of key drivers determining their e-commerce strategies. “Improving customer focus” came top of the list, while “Exploit new channels to market” and “Protect revenue from existing businesses” ranked 6th and 7th – but still had considerable support. “New channels” and the building of “new revenue sources for existing businesses” were most likely to be regarded as of critical importance. Establishing a reputation in the e-marketplace – “create an e-cachet” as the survey put it – was seen as critical or important by more than half.
ADOPTING A STRATEGY While more than two businesses in five had yet to formally adopt an e-commerce strategy at board level, three-quarters of them expected to do so within the next year. In just over half of the cases, 51%, the board had collective responsibility for e-commerce strategy, while in 45% of businesses just one individual had strategic responsibility.
WHERE IS IT AT? For two-thirds of the respondents, their e-commerce strategy is at an early development, planning, or early implementation stage. Almost one in ten have no plan, the same proportion for whom their e-commerce strategy is substantially complete or at an advanced stage of implementation. Shareholder value is being impacted by the e-commerce strategy in 8% of businesses, and created in another 5%.
PRODUCTS Most respondents regard e-commerce as being critical or important in the establishment of new marketing initiatives, with only 15% disagreeing with this. But less than half took the view that e-commerce could make a contribution in the development of products. The survey authors argue that product development may become more highly ranked “as business find ways of using e-commerce to create collaborative NPD processes”.
PROCUREMENT Electronic communication is almost unanimously seen as the one aspect of procurement where e-commerce is important, with on-line transactions taking second place, supported by 86% of respondents. About a quarter do not regard supply chain management or e-procurement as an important part of their e-commerce strategy – though the former is regarded as more critical than the latter, which may be seen as more peripheral than core.
CUSTOMERS On-line information is a more important driver than on-line ordering, the survey found. Information was regarded as critical by 38%, with just 11% saying it was not at all important. More than a quarter did not regard it as important to integrate information systems with those of their customers, while a third saw little merit in “integrated activity” with customers.
PERSONNEL DEVELOPMENT Management of employee relations was typically seen as an unimportant e-commerce driver by a quarter of respondents. Of the options available in the questionnaire, the creation of an internal infrastructure was more highly rated than the integration of activity between functions. Almost two-thirds did not regard e-commerce as important when considering incentive development, though the survey authors expect this to change.
SERVICES “Services are an area which is only just starting to change in the connected economy,” the survey finds, with a significant minority – 27% and 32% respectively – not seeing any important role for e-commerce in the creation of new services or delivery mechanisms.