As one industry pundit puts it, gone are the days of walking in with a three-page business plan and walking out with a million dollars in funding.
E-commerce companies are increasingly realising the same rules of business used in the bricks-and-mortar world also apply to strategies for making money from Internet ventures. That means accurate and detailed business planning and carrying out risk management.
The last 18 months have seen a number of disturbing tales of companies which went belly up through lack of timely business planning, unrealistic expectations, and the inability to sustain cash-burn rates. Suffice to say, lessons can be learnt through their business mis-management. The moral being, it takes more than just luck and a good idea to survive.
Why bother?
With the economic climate having changed, some companies are finding they are not where they hoped to be by this time. Although this setback can't necessarily be completely attributed to lack of planning, having a structured approach to achieving one's goals often helps.
Rob Nicholls, a partner with lawyers Gilbert & Tobin, says planning is an important element of business. "If you plan correctly you will either succeed or correctly plan not to go ahead," he says.
Nicholls believes that because e-commerce is regarded with some scepticism by senior management, the benefits of doing the project have to be carefully quantified. This will include showing improvement in rate of return or expected savings, in addition to normal business planning elements such as length of the payback period and anticipated long-term savings.
Mal Bundey, partner in management solutions consulting practice at chartered accounting and consulting firm Deloitte Touche Tohmatsu, sees a business plan as a key to success. He believes planning gives businesses a roadmap that helps them allocate resources and achieve success. Moreover, Bundey doesn't see the plan as having to be in a straitjacket--it can still be flexible from a business perspective. "Your planning process should be a very strong phase of questioning," he says. " 'Is this the right market?', 'Who are the potential competitors in this market?' [If you ask these questions] you'll find you end up with a much stronger business plan and business case."
Know the signs
Gilbert & Tobin's Nicholls says a project that starts with the enthusiasm of a few, without having agreed performance indicators, often flounders due to lack of planning.
"Ultimately everyone will be disappointed even if it produces benefits, because [it's] not what people anticipated," he warns. "A well-planned project has a clear scope and clear expectations as to what the ultimate result will be."
According to Nicholls, an e-commerce project should be treated like any other capital project--it has to have a sensible payback period so that the person who starts the project also finishes it and has accountability all the way through.
Deloitte's Bundey sees project failure often happening around project prioritisation. "What we find [with these companies is] there might be 15 things they need to do to bring a project to fruition and they try and do all these 15 things at once." This then spreads their resources too thinly.
Bundey suggests a strong project plan, prioritising what has to be done, will help solve this problem. Ultimately, he suggests it comes back to capital and resource allocation--there is generally a limited amount of money companies have to spend so you have to make sure you spend wisely to get the maximum impact. "That gets back to the people side as well," he says. "You have to get the right people."
