'E-commerce' remains a source of frustration for many companies. While it is clearly a useful new medium in which to do business, they say it is doing little to help their bottom line. Almost a quarter of Europe's Top 500 organisations have abandoned e-commerce projects before completion, a report from Cambridge Intelligence Unit reveals. So why do so many of these projects fail?
Cynicism about the 'hype' surrounding e-commerce is one reason. Vague promises can sometimes cloud the sound business judgment of otherwise sane managers, says Daniel Franklin, editorial director at the Economist Intelligence Unit. When expectations are not met by results, the manager becomes deeply electro-sceptic, he says.
The bigger the institution, the bigger the problems, adds Phillip Blackwell, electronic commerce director at Cap Gemini and non-executive director of electronic retailer Interactive Music and Video Shop (IMV). 'Large companies are dealing with the barrier of baggage. They've got huge investment in systems already and are reluctant to take risks.'
A lack of commitment from senior managers is a recipe for failure, says Emily Nagle Green, managing director at Forrester Research. She derides what she calls the 'blame culture' of corporate life. Senior managers should spend less time looking for a scapegoat, and more time identifying improvements so that the next effort works better, she says.
The CIU report showed that, in the organisations that had already abandoned their first e-commerce project, 33% of marketing directors and 23% of IT directors rated a second attempt as unsuccessful. The 'most worrying trend' is how many organisations fail to learn from their mistakes and simply go on 'to repeat them on a grander scale', says Carl Potter, a management consultant at the CIU and main author of the report. A 'hit or miss' attitude is commonplace.
Often, a lack of commitment is due to ignorance. For IMV, getting the business off the ground in 1995 was hard because 'most people had no idea what we were talking about,' says its joint managing director, Chris Codrington.
The company now sells 230,000 music titles on-line a year but, adds Codrington, 'even today, we still spend a lot of time educating people, especially senior financial people'.
A lack of financing can bring a project to its knees but substantial early investment is less important than on-going financial and managerial commitment. The start-up technology for e-commerce is cheap, says Freddy Nurski, vice-president of GE Information Services. The real cost is longer term; the money required to integrate the system with other parts of the business and ensure adequate system support. 'You'll soon be relying 100% on your systems so you have to make sure these things are covered,' says Nurski.
Some managers worry that e-commerce will simply replace traditional business avenues, rather than adding to revenues. 'Many executives constrain e-commerce for fear that it will cannibalise traditional routes of doing business,' says Nagle Green. With such a lack of clear strategic thought, it is not surprising that the only return on investment for many companies is disappointment.