eStrategy: Thinking About eBusiness Models (Part III)

Part I introduced the concept and importance of eBusiness Models. This article provides further detail on them. This article focuses on the transaction based eBusiness model.

This series of articles discusses different types of eBusiness models. To recap, the first article laid out four eBusiness models:

  1. Information
  2. Transaction
  3. Knowledge
  4. Community

Part II described the Information based eBusiness model. This article describes the Transaction based eBusiness models in detail.

eBusiness Model: Transaction

Have you ever filled out an online form? Well, then you know what a transaction based eBusiness model is!

A transaction based eBusiness model automates i.e. web enables a business process or a part of it.

This automation can be a simple “contact us” form or a complete transaction to purchase auto insurance.

Transactions require a complex set of programming to enable the web interface. However, that is the start of this complexity. The real deal is the integration with back systems to maintain data integrity and reduce rework of entering the same information multiple times.

Back end systems integration usually breaks the back of most “older” organizations. This is the place where most organizations fail because of their inherent flaws in architecture and systems engineering. For example, a simple thing such as the definition of the word “customer” usually evades the “old economy” companies. If you do not know the definition of a term, how are you going to enter the transaction involving that term?

The second major issue is with multiple systems containing the same information. Good old data normalization - and resulting integration layer – has evaded the most sophisticated of IT department at large companies. Dysfunctional organization design – read turf wars – and lack of funding because of “unclear” ROI has led to this situation.

These deficiencies are exposed like never before when companies try to go the way of the web! The result? Well, more spit and band aid to patch up systems and perpetuate the ugliness.

But we digress!

A transaction based business model is the start of visitor interaction. The model can start from a simple “fill a form and get an email” to more complex interactions. For example, those seen in Web 2.0 type applications. More on this later.

Suffice it to say, “Transactions” make a website stickier and generate more business value than “Information”:

  1. “Me too”: If you do not have a “contact us” form on your website then your life is not worth living! Or so the pundits would have us believe. There is a lot of truth to this statement because visitors are human and want to interact. So every web strategy must consider means of customer interaction with the company just to keep up with the Jones.
  2. “24x7x365” Operations: There is nothing sweeter than hearing the sound of the cash register ring while you are sleeping. If you are an online seller of anything, you can identify with this statement. If you do not sell anything online even then you need to keep the doors open 24x7 because you might have customers in parts of the world that are not asleep when you are and who might have a question or inquiry for you. There are many more reasons to have a round the clock operation.
  3. Cost: Is it cheaper to have a customer do most of the work in a customer service transaction? The web has provided means to accomplish this enviable task. Online transactions are a way to pass on the work to the customer – and other players in your ecosystem – but be careful as to the extent of work passed on to them. Also be careful what work you pass on to them. More often than not, it is advisable to directly interact with your customers not have them speak into machines or click at them!
  4. Revenue: Do some customers like to interact with machines more than pushy salespeople or slow tellers? Telephone Voice Response Units, Bank ATMs etc. are proof that customers want the convenience and privacy in their transactions. Vending machines and mini bars are proof that they will buy from a machine if it will sell stuff to them when they “must” have it! Online transactions accomplish the revenue goal in two ways:
  5. Customer service: 24x7 convenient service reduces cost. However, it accomplishes the important goal of creating customer loyalty. The latter is value that can be cashed at any time!
    Online sales: 24x7 convenient online “mini bar” sells things even at higher prices. This is slowly becoming the dominant sales channel


The competition for this model comes from its offline cousins, the most important one being the telephone. The reason to go with the web for transactions that can be done over the telephone is simple: better customer experience. However, the golden rule of transaction is: use multiple channels because your customers want to!

Do not substitute one channel for another till there is ample evidence that it is required. Complement channels.

Transaction based eBusiness model is important for most organizations. However, there are three decisions that need to be made:

  1. How deep should we go with this model? In other words, what are the various types of transactions our website should provide? Note: not everybody can nor everybody should sell online. Not everybody can nor everybody should provide all customer service online.
  2. Should we have only this model? In other words, should we have other channels active for the same transactions at the same time?
  3. How can we make the customer experience seamless? Will our customers see and feel the same things the same way if they saw, called or clicked?

It is almost, but not quite yet, a crime to have a transaction less site. Think before you jump into online transactions.

Examples:

1) Simple “contact us” form: who doesn’t have this? The question is: what do you do when someone actually contacts you?

2) Shopping Cart: http://www.amazon.com/ and other online sellers have a business model that makes money even when they are sleeping. Well, almost!

3) Online Exchanges: http://www.ebay.com/ connects buyers and sellers and makes a commission for every transaction. Their transaction based websites are focused on all transactions to make this experience smooth and secure

4) Pay your bills online: Banks of every shape and size have this capability. So does Intuit and others.

5) Pay your taxes online: You might hate paying taxes but it is easier and quicker to get refunds if you pay electronically!

6) Online voting: Switzerland has it. The US won’t have it for a long time because we only like to talk about democracy!

That brings us to the golden question: should a company like Boeing have online transactions or should they stick to their information based model?

Next, we will look at the Knowledge eBusiness Model

About the Author

Sourabh Hajela is a management consultant and trainer with over 20 years of experience creating shareholder value for his Fortune 50 clients. His consulting practice is focused on IT strategy, alignment and ROI. For more information, please visit www.StartSmartS.com. Or feel free to contact Sourabh at Sourabh.Hajela@StartSmartS.com


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Posted on 06/04/2009 by


eStrategy: Thinking About eBusiness Models (Part III) author sourabhhajela

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