I have received several emails recently pointing my attention to some extremely important things to consider before you digitize your business. The number one item that almost everyone has pointed out as absolutely critical in any business process, and even more so in e-business, is differentiation. The reason I’m dedicating this column to differentiation is the fact that the speed at which companies have had to or are implementing e-business programs has sometimes resulted in a difficult situation. Specifically, in some cases, putting an ‘e’ in business has become more important than paying attention to what we have always considered as the core element of doing business, i.e. differentiating yourself from your competitors.
In our industry, we have not prided ourselves on exploiting IT. We are still an industry obsessed with materials and engineering and have come up with some great solutions for our customers. Of course, some IT tools like design software or communication channels have helped us in doing our jobs faster and better, but these tools have not been the drivers of innovations. What that means is that as an industry, our IT resources are rather weak. We have changed only when we had to.
This impacts us in two ways. By not having strong, internal IT resources, we have been slow to embrace technological changes. Secondly, we are forced to rely on outside agencies to help us with some of these programs. While I am a strong advocate of outsourcing, effectively managing your IT provider is still your responsibility. A provider can only know so much about your business and, while this company may have only good intentions for your business, it may still end up providing you with a solution that is no different than what they sold to half a dozen of your competitors.
The solutions providers have another interest in selling you a standard product. If you do not know enough and also do not want to select a customized product, the only way that you can be served is by using an off-the-shelf product that requires minimum tweaking. The outcome is that, while your packaging products may be significantly superior to your competitors, your website is unable to convey that message.
Why is differentiation crucial even in e-business?
So far the pressure on us has been to develop an online platform to conduct business. However, very soon everyone will be there, and the issue will no longer be if you have an online channel, but how effective it is in highlighting the differences and advantages that you have over everyone else. If that is not clearly apparent, the dot com mantra that ‘your competitor is only few clicks away’ is actually true.
As I have indicated in my previous columns, with the elimination of business inefficiencies through better information management, commercial friction will largely disappear, further squeezing our margins. As a result, retaining customers will be predicated on how much value we can create for our customers and what differentiates us from our competitors. Thus, the basic rules related to differentiation from competitors still apply.
Suggested road map
While e-business may be a new channel, the principle of competitive advantage remains essentially the same. You still have to differentiate yourself from your competitors, no matter what. If not, your customers will simply select the supplier with the lowest price every time they have to make a selection.
While developing an online strategy, make sure that you have your strategy managers on the team. If you do not have good internal IT people who understand your business inside and out, get some help from industry experts who understand the packaging business as well as IT. Putting together a team with such diverse backgrounds will enable you to work more effectively with your e-business provider so that you will be able to develop an online presence that duplicates your offline strengths.