e-Business technologies continue to transform the way companies operate their supply chains and connect with their partners and customers. But have these technologies really made companies more competitive?
[From iSource Business, August/September 2003] A global pharmaceutical company has rolled out an e-procurement system that is helping to reduce costs, freeing up precious dollars that can be spent on developing the new products that drive the company's success in the marketplace.
A financial services company has used Web portals and other e-business technologies to help capture new customers and drive higher customer retention. And a building materials manufacturer is using an e-sourcing solution as the technology platform for its strategic sourcing initiative, helping the enterprise to remain cost competitive.
Three companies in divergent industries employing different e-business technologies to drive competitive advantage. Have these companies blown their competitors out of the marketplace? Alas, no at least not yet. Which begs the question: What good is all this technology, anyway?
Measuring Technology's Impact
Part of the challenge in thinking about how e-business solutions have contributed to competitiveness is assessing the real return on investment in these technologies and then relating that ROI to improvements in a company's supply chain performance and, ultimately, its position in the marketplace. Just getting through the first part of that equation can be difficult for the simple reason that most companies devote surprisingly little attention to tracking the ROI on technology implementations, according to Tom Pisello, president and CEO of Alinean, which develops tools for ROI- and value-assessment, as well as IT spending and performance comparisons. Pisello estimates, based on his company's experience, that something like 10 percent of technology projects see the necessary follow-up to determine whether they have delivered the expected performance gains. "It's just not being done today," he says, "mostly for lack of time and budget, sometimes for lack of business savvy below the level of the chief information officer, sometimes for lack of business savvy at the CIO level."
The second part of the question measuring improvements in a company's supply chain performance also is problematic. In fact, in a white paper called "Why Companies Flunk Supply Chain 101," business consulting firm Bain & Co. reports that just 33 percent of companies are correctly measuring the performance of their supply chains. "More than 85 percent of senior executives say improving their firms' supply chain performance is one of their top priorities," writes Miles Cook, co-director of the consultancy's supply chain management practice, "but fewer than 10 percent are adequately tracking that performance. And fewer still 7 percent collect the information necessary to meaningfully measure their progress."
Perceptions play a crucial role, too, in judging the impact of supply chain solutions. For example, a survey by technology consultancy Aberdeen Group revealed that companies considering buying a customer relationship management (CRM) solution expected that the technology would help them achieve "enhanced revenue/market share," but companies that had already implemented CRM cited "productivity improvements" at the top of the list of benefits actually achieved. Given the inherent difficulty in quantifying productivity gains and the perception of such benefits as "soft," this "expectations gap" has left many CRM users frustrated with their investments, Aberdeen concludes. Other studies confirm this "expectations gap": research by IT consultancy Gartner shows that 55 percent of European CRM projects were failing to meet expectations; nearly half (45 percent) of the respondents to a survey by business consultancy Booz Allen Hamilton said their supply chain technology solutions have not lived up to expectations; and 54 percent of those polled in a survey by Forrester Research said that their supply chain applications were not meeting their expectations.