Ready for E-commerce? Measure Your ECQ First

By Jon Huggett, Vice-President Bain & Company

Published in The Globe and Mail, Toronto on August 12, 1999

Everyone knows that the Internet is reducing transaction costs, redefining markets and transforming businesses. Over the past three years, a small group of Internet companies has created more value than any other industry in the previous decade.

But how do you know if your company is ready to respond to the opportunities created by this dynamism? Check out your ECQ — electronic commerce quotient — to find out if your company has what it takes:

1. Do you sell over the Internet?
How much do you sell on the Web compared with your competition? What is your share of the E-commerce business in your market? Your sales may be small now, but if you’ve got a lead on your competitors, you could be sitting on gold. If so, mine it. If you’ve been afraid to take the plunge, why not just wade in and get your feet wet?

2. Does your company have a vision for making money with the Internet?
Are you leading, following or completely lost? Determine your point of arrival and ask yourself if you have a plan. Do you have a vision of how the Internet will affect your customer relationships, supplier relationships and the internal management of your company? What is your revenue model?

Making money on the Internet is not only about increasing revenue through on-line sales. The Web is a useful tool for building brands, strengthening business relationships and improving customer loyalty. Reducing costs by improving purchasing or the efficiency of inventory turnover, for example, can also increase shareholder value.

Mobilizing for E-commerce is never easy. There will be agonizing issues, including channel conflicts, brand management across different media and product-pricing strategy. If a car company or on-line brokerage can sell over the Internet, what should they do about their dealer or broker networks?

Also consider whether products sold on-line should be priced to include costs associated with the bricks and mortar side of the operation. And how does the potential for flexible pricing policies and product bundling presented by the Internet relate to traditional pricing strategies?

3. Do you know if you are making progress?
Consider how you measure revenue growth, E-commerce market share, eyeball counts, Web site stickiness or site performance? Do you even know what each of these terms mean?

Traditional measures of profitability are not always a good guide to the future profit of E-commerce ventures, but the need to measure results remains the same. Determining what E-commerce results to measure, and how to reward success, are key challenges.

4. Do you have senior accountable leadership in place?
Determine who is leading your E-commerce push and what they are accountable for. What results are they striving for and who’s keeping track? Will they be rewarded if they succeed? What happens to them if they fail?

Leadership must be accountable for meeting milestones, and rewarded with performance-based incentives. In the era of Internet time, tough decisions must be made swiftly, so rule out committees.

To ensure clear and quick decision making, E-commerce must either be spearheaded by a separate organization or become the CEO’s top priority.

5. Is senior management Internet-savvy?
Ask whether your senior managers still ask their secretaries to print out E-mail, or are you more likely to have to tear them away from their on-line strategizing to have a meeting?

Senior managers don’t all need to know how to program Java, but they must be able to access the Web. Every senior manager should surf the Web for a minimum half-hour a day. This will get the creative juices flowing about new ways of doing business.

6. Do you have a team in place that can execute your E-commerce strategy?
You may already have the in-house talent, and if not, are you successfully recruiting it? Ask if you form partnerships to fill your capability gaps. Is talent knocking down your door?

7. Has your stock benefited from E-commerce stock price valuations?
The chances are, if you answered no to any of the questions one through six, you also answered no to question number seven.

Your ECQ score will not validate your E-commerce strategy or assess your company’s vulnerability to E-commerce competition. But it does tell you whether you’re in the game.

If you answered no to one or more of the above questions, don’t panic — you are not alone. Just don’t relax either, because the leaders are making their break from the pack now.