E-Commerce equals empowerment.

• Author: Cohan, Peter S.
• Position: Cover Story

It's time to give e-commerce a serious look -- it's improving companies' ability to connect with customers and boosting financial results. Here's what's working and how one industry is leveraging technology to capitalize on its content delivery.

E-Commerce: Beyond the Hype, Real Hope

E-commerce and dot-coms are inextricably linked together. Yet, their business results are quite different. For the dot-coms, much has been lost: Six trillion dollars worth of stock market wealth has evaporated. Hundreds of companies have shut down, leaving millions of employees jobless. Venture capital -- fuel to the dot-com boom -- suffered its worst year since 1969, with negative average returns of minus 32 percent for the 12 months ending September 2001. American consumer and business bankruptcy filings jumped 19 percent in 2001, hitting a record high of 1.5 million. And a wave of bankruptcies in related industries -- particularly telecommunications, laden with $1.3 trillion in debt -- is just getting started. That's the bad news.

For e-commerce, however, there is good news: it's paying off. During the dot-com boom, e-commerce was a strategic imperative -- driven by the dual fears of being "Amazoned" and missing out on the gold rush. In the current "dot-dead" era, e-commerce is an operational initiative whose survival depends on its ability to fund itself through cost cuts or (tougher to realize) revenue increases.

While most dot-coms failed miserably to deliver short-term returns, the promise of e-commerce is in its infancy, and examples of profitable e-commerce initiatives are emerging. There is now history that provides lessons on what to do and what to avoid. Now, initiatives can be planned with more knowledge, purpose and direction. It's time to give e-commerce a serious look, because it is improving companies' financial results.

Effective e-commerce creates competitively superior value for a firm's stakeholders -- its customers, suppliers, partners, employees and shareholders -- by using the Internet and its technology capabilities to change the way business is conducted. Hesitancy to spend substantially on technology and an uncertain future is understandable in an uncertain economic environment. Yet, spending is imperative; the key is to recognize where to -- and where not to -- commit finances. Those who delay spending may be focusing on the wrong priorities that, in the long run, may impede rather than invigorate their business growth.

CFOs seeking to understand and profit from the evolution of e-commerce need to ask the following questions: How should companies evaluate their initiatives? Which initiatives are delivering profits? Which companies are leading the way? What general principles can be applied?

With several concurrent e-commerce initiatives underway, a tempting response to the global economic contraction is to cut off funding for all non-critical programs. The danger of such an approach is that it may stop programs that could generate meaningful payoffs. A more appropriate strategy would be for firms to devote senior management time to rigorous analysis of their e-commerce projects, and then to fund only those best-suited to their objectives and capabilities.

Hard-learned experience suggests at least four specific types of e-commerce initiatives do, in fact, deliver those high payoffs:

1. Electronic procurement. Firms using the Internet...