IBIS NEWSLETTER 2003- NUMBER 7

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IBIS NEWSLETTER 2003- NUMBER 7 Powered By Docstoc
					                                  IBIS NEWSLETTER 2003- NUMBER 7
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CONTENTS:

E-BUSINESS TRANSFORMATION – A STEP BY STEP SUGGESTION FOR THE SME
DETERMINATION RATED AS KEY QUALITY IN START UP BUSINESS
VIRTUAL FIRMS GAINING IN POPULARITY
FEMALE ENTREPRENEURS – A NEED TO REASSESS SUPPORT
BALANCED SCORECARD – STILL LIMITED APPLICATION IN SME
EFFECTS OF EMPLOYEE SHARE OWNERSHIP QUANTIFIED
WHY A STRUCTURED APPROACH TO PLAN ANALYSIS, DEVELOPMENT, AND
CONTROL?

_______________________________________________________________________

IBIS - SPECIALISTS IN BUSINESS PLANNING. 20 YEARS EXPERIENCE AND THE
BEST SELLING BOOK, A BUSINESS PLAN (FINANCIAL TIMES PUBLISHED,
NATIONAL WESTMINSTER BANK SPONSORED, TRANSLATED, ISBN 0273 63562X.
IBIS EMPHASISE A QUANTIFIED AND OBJECTIVE APPROACH TO THE ANALYSIS
AND DEVELOPMENT OF BUSINESS PLANS WITH A UNIQUE SCORING SYSTEM
(LIMITED VERSION AVAILABLE FREE OF CHARGE AT THEIR WEB SITE).
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E-BUSINESS TRANSFORMATION – A STEP BY STEP SUGGESTION FOR THE SME

Though the benefits of e-business transformation are continually debated, and there is
ample evidence that both productivity and cost savings have been achieved by a variety of
organisations (though not all – it is clearly not a universal panacea), only a small
percentage of businesses are adopting comprehensive e-business practices. With the
pressures of cost containment over the past three years, research shows that the larger
companies have been most enthusiastic investors in e-business systems.

When properly planned and managed it is clear that such a process can:

Retain more of the existing customer base;
Enable the company to drive out more services to its existing customer base;
Cut costs;
Develop new clients;
Develop new products for the existing client base and new customers.
For the typical SME, the difficulties of moving the company towards e-business
transformation are often considered practically unsurmountable and to be only attempted
in a radical and complete re-organisation. Like all major business problems, a step by step
programme of building e-skills into the organisation and converting the internal and
external stakeholders is possible and logical. This slower development process also
substantially lowers costs and ensures that each stage can be properly completed prior to
further expansion.

Obviously, in any planned development of this kind, there are arguments concerning the
precise order of the various stages. There is, we feel, a need to build front end expertise
into the organisation prior to implementing the more complex and demanding back office
systems.

Ibis has contributed to the creation and development of www.pb2pb.com which provides
the user with a structured platform to introduce such e-business transformation – indeed
the early stages of such a programme are built into the web site itself and will generate the
transformation automatically.

What does this step-by-step process entail (in the order chosen by Ibis)?

1. Building web site content and ease of search. Getting the backbone web site structure
and design right is obviously the first step as it provides the foundation for future
development. There are many on-line commentaries on web site design and structure, but
all agree that ease and speed of navigation and above all CONTENT are the major
requirements for the initial development for the company building its presence on the web.
There are immediate advantages in cost management, customer retention and service
development.

2. Transferring your clients and internal staff to web based contact and communication.
The creation of a more sophisticated web site should be combined with an increasing
emphasis on electronic communication and electronic management of data. Components
include:

Document scanning and central file development for each customer – driving towards a
reduced office paper load;
Improving document security both internally, and via encryption externally – more and
more important as government involvement grows;
Promoting the company web site via e-mail “alerts” and newsletter development;
Creating standard operating procedures and standard form letters/ documents to become
established on a company wide Intranet;
Moving the company away from traditional telephone systems and communication
methods towards video conferencing, Web based presentation methods and IP based
systems.

3. Web based purchasing and outsourcing. One of the immediate advantages of the e-
business “mind set” is to rigorously analyse the company cost base, and link this with the
depth and breadth of suppliers on the Internet. Typical questions that can be asked
include:

Have we compared our existing raw material/ finished component supply base with that
available through on-line trading sites?
Have we compared our utility costings with those available on-line?
Have we compared our current travel/ entertainment costings with those available on-line?
Have we compared our current finance costings with those available on-line?
Have we compared our current logistics costs with those available on-line?
Have we compared our current service supply with those available on-line?
Have we compared our current recruitment policy with those available on-line?
Have we considered an increased use of outsourcing – personnel, systems?

If a company begins to work through these examples (and there are others), not only will
costs be managed and reduced, but the mind set of the organisation will increasingly move
towards the web as the best starting point for all new stakeholder relationships.

4. Web based marketing and sales development. With the increased awareness of the
value of the Internet in improving operational effectiveness, the organisation can look at
using its web presence to drive out the services, both to the existing customer base, but
more importantly to new potential clients. Typical components of such web based
promotional planning include:

Listing in all appropriate trading and directory sites;
Integrating web based content with all other company promotional planning;
Optimising the design of the site for search engine submissions;
Developing a linking and affiliate programme for search engine positioning;
Evaluating paid positioning in search engine and advertising on key target sites.

Once this becomes part of regular marketing and sales planning the company will become
steadily more and more focused in developing the site and developing site based sales
and marketing initiatives.

5. Developing an e-based training programme. The Internet is developing rapidly as a
source of detailed, focused training. More and more providers are generating quality
material in key business areas. Some of this is free – but an increasing volume is available
as paid online courses. With the growing penetration of broadband it is becoming the
better option for most companies to consider – it is cost effective – can be delivered at the
place of work – and is self paced.

Converting the organisation towards e-learning provides yet another area of focus which
builds skills and understanding of the e-business environment. It also enables the firm to
build up a library of training material for each specific area of company activity which can
be linked to the standard operating procedures that the organisation has in place.

6. Developing an e-based research programme. The Internet is also becoming a major
source of research information. There are two different strands of information that can be
generated – regular updates on particular areas of interest (such as employee or corporate
legislation) or information on specific areas of short or medium term development –
potential new customers, market trends, IT solutions.

Once the company has started to use the Internet for research, it is able to build up a
similar library to that for training, which contains the topics that are consistently relevant to
managing the main risks of the environment.

7. Integrating customer relationship management (CRM) systems into the web site. Once
the company has made the website a central feature of its entire operation, a change in
the web architecture is needed to track and service client requirements. Client registration,
and the separation of the web site into open and closed systems provides the company
with a mechanism to develop back office systems to deliver more and more sophisticated
services via its web site.

Linking the customer base to the company web site as a service supply point enables the
organisation to start tracking the uses that different clients make of the range of services
and products. CRM systems provide a detailed analysis of what is working and what is not;
what segments provide the greatest returns.

8. Evolving virtual office systems. With the creation of secure internal architecture within
the web site, the company can move towards the expansion of external links with full and
part time staff. This greatly expands the potential for outsourcing and lowering costs, with
the Intranet system capable of integrating project teams and co-ordinating the recording
and revision of work. Such virtual systems also encourage the further development of
standard operating procedures and processes that streamline customer and supplier
management both on and off site.

9. Integrating E data back up systems into the e-business transformation process. As the
volume of data stored on the Intranet grows it becomes more and more vital to ensure that
adequate back ups are maintained both on and off site. Incorporating an on-line back up
facility ensures that virtual office systems can be effectively supported on a 24/7 basis –
wherever the server and data storage facilities are maintained.

10. Integrating E payment systems into the e-business transformation process. As the firm
increasingly links its suppliers and customers through Internet based systems it becomes
more acceptable to introduce e-payment systems, as a means of speeding payment and
dealing with different currencies. The steady growth in the volume of e-payment
alternatives and the ease of operation makes this a more and more attractive option.

11. Courier systems and geotracking technology. Companies with specific delivery
requirements can now also integrate courier and vehicle tracking technology into their e-
business operations to provide greater control over these specific parts of the operation.

12. Integrating financial, order processing, and HR management into the e-business
transformation process. By the time that these skills and knowledge have been built into
the organisation more complex systems can be introduced with a high degree of
probability that the systems will work and generate the productivity improvements that are
promoted by the system providers.

The most straightforward of the alternatives is the Oracle Small Business Suite which can
be integrated into existing Intranet and Extranet frameworks and drive the organisation
towards a fully functional enterprise resource planning (ERP) system. Experience with the
introduction of these systems over the past two years suggests that they proceed far more
smoothly and rapidly once the firm is “pro” the Internet and is does not suffer from high
levels of technophobia.

By the end of this step-by-step process, the SME will have developed considerable
expertise in developing and managing e-based projects and be able to adapt new systems
when they become available relatively smoothly and cost effectively. This approach
enables the SME to improve competitiveness and enjoy the benefits of e-business at a
fraction of the cost of the investment made by their larger rivals.
   AW

DETERMINATION RATED AS KEY QUALITY IN START UP BUSINESS

Canadian research asked successful entrepreneurs to rate the most important qualities in
the start up.

44 per cent rated determination as the most important characteristic;
17 per cent love of risk;
12 per cent rated leadership as most important;
10 per cent rated personality;
10 per cent rated love of success;
and 6 per cent creativity.

The researchers also asked what was the prime motive for starting the business.

17 per cent decided that they could seize an opportunity;
13 per cent decided on the grounds of personal achievement;
27 per cent decided on the grounds of either independence, maximising skills or fulfilling a
dream;
3 per cent decided on the grounds of making a lot of money

   DB

VIRTUAL FIRMS GAINING IN POPULARITY

An increasing proportion of start ups are moving towards virtual operations. Research in
the US found that in 2002 over 15% of the start up firms studied in the South West of the
US were structured as virtual organisations – up from 5% in 2000.

The authors of the report found that the main driving forces for this change were the more
restrictive funding environment, and the availability of software and telecommunications
platforms that make virtual organisations more viable.

   MK

FEMALE ENTREPENEURS – A NEED TO REASSESS SUPPORT

Research across the European Union support the view that individual female
entrepreneurs or teams with a preponderance of women are a small percentage of the
total entrepreneurial pool, though such groups have a significantly lower failure rate than
their male counterparts. Female teams tend to have better prepared plans; they research
the market in greater detail; they set more conservative and achievable goals and
objectives; and the implementation of the plan is better and more realistic.

A study in the Netherlands set out to attempt to define what support frameworks could be
in place to improve the percentage of female entrepreneurs entering the pool of potential
start ups. The survey was based on replies from 63 successful female entrepreneurs in
North East Europe (Germany, Belgium, the Netherlands). The main problems encountered
were:

Failure to take female proposals seriously            87%
Lack of access to effective mentors                  67%
Difficulties in building effective teams             61%
Difficulties in gaining access to networks           59%

Female groups tended to have significantly fewer business contacts than similar male
teams, which perhaps suggests that building a supportive environment for female
entrepreneurs requires industry groups to look at the way in which resources are targeted
should be re-assessed. The research supports this view – that the “one model fits all”
approach to start up support needs some revision to deal with the specific demands of
differing segments of the start up audience.

   RR

BALANCED SCORECARD – STILL LIMITED APPLICATION IN SME

Research in Germany found that there was still a limited use of balanced scorecard
methodologies in the SME sector. Only 18% of the companies questioned used balanced
scorecard techniques in developing their medium term planning.

Ibis has long focused its business plan development on a limited range of critical success
factors which serve as a starting point for most established businesses -

Gross profit – which is we think the measure of competitive advantage;
Return on capital employed – a medium term driver which sets targets for operational
efficiencies;
Customer satisfaction - which drives product development, customer retention and
medium term profitability;
Skills levels – which drive employee retention, and productivity
New product/ new service development – which drives gross profit, customer satisfaction,
and long term market share.

   MK

EFFECTS OF EMPLOYEE SHARE OWNERSHIP QUANTIFIED

Research in the US comparing similar companies with and without employee share
ownership schemes revealed in a detailed study that overall performance (profitability) was
improved by 2.4% as a result of the introduction of employee ownership schemes, and
labour retention was enhanced. The study emphasised the need to create universal
schemes rather than those focused on senior management.

   KP

WHY A STRUCTURED APPROACH TO PLAN ANALYSIS, DEVELOPMENT, AND
CONTROL?

Investors, advisers and business managers are faced with common problems in business
planning and development. What should we concentrate on? What are key issues
which drive success and reduce failure? How can we create a framework in which
performance is enhanced? Though plans come in all shapes and sizes with different
objectives and audiences, certain common ground is easily established.
It  is clear that start/ up and early stage operations must be separated from established.
    The focus of attention for start up operations, and their planning, should be on
    structure – how the organisation is structured to deal with product, market, customer,
    stakeholder, resource access (money, personnel, production/ service delivery), and
    implementation. For the established company, the emphasis, and the focus of their
    planning, must be on operations – how the organisation will drive forward its existing
    interaction of market, product/ service and organisational delivery.

Start up operations

Start  up and early stage operations have key drivers for success and failure which can
    be measured and evaluated. Applying these criteria means that:
           (1) The business does not receive resources until key questions are resolved.
           (2) That the chances of success are substantially increased once this initial
           hurdle is completed

All studies (not just Ibis) indicate that a disciplined and detailed stage of business
development yields enormous benefits.

The Ibis model provides one such framework for evaluating start up and early stage
plans, which involves an overall view of the organisation outside the financial
analysis. This includes a much greater understanding of the risk management
environment than is normal. As 50 per cent of businesses fail for non-financial
reasons any business plan review methodology should involve this broader
assessment. Ibis can mentor plan development – but the plan must retain the
conviction of the founding members.

   Most start up and early stage companies lack key skills and a broad understanding of
    the business environment. To make the company successful it will need:
         (1) Early identification of potential problems in operational as well as financial
         performance
         (2) Additional advice and support from the outside

Studies support the value of a range of support functions and the potential for improved
monitoring to build skills, and reduce the potential for problems.

The introduction of Ibis monitoring modules into the growing early stage company
provides one such mechanism. By making early stage companies (providing
sufficient management is in place) create firm foundations in each area of operation
it enables them to focus on key opportunities or problems. The introduction of
standard operating procedures (SOP's) is also central to this building programme.
SOP's cover the entire range of procedures in the organisation and are continually
reviewed to ensure best practice.

Established businesses

   Established businesses have different success and failure drivers from start up early
    stage which can also be evaluated in the plan. Applying these criteria will:
         (1) Ensure that the business has solid foundations prior to the injection of
         additional finance
         (2) Improve the ability of the business to add value in a controlled way
Non-financial factors continue to be as important in the established business as the start
up. Traditional evaluation methods focus on a small proportion of the key factors.

The Ibis model provides one such framework for analysing established business
plans. The Ibis approach of building the plan from a bottom up (customer, product,
divisional achievements) identifies operational performance in businesses as a
basis for project/ expansion finance.

   Established businesses need to create targets for performance throughout the
    organisation so that efficiencies can be maximised, growth enhanced, and problems
    rapidly resolved.

The introduction of Ibis style monitoring modules linked to benchmark targets
devolve responsibility within the organisation and set clear realistic goals for
performance. Building better than benchmark performance throughout the
organisation creates world class companies. Standard operating procedures
(SOP's) also help in identifying best practice in entire areas of company operations.

The ladder of plan development – stages, milestones and suggested external input

Stage                          Milestone                        External input
Pre -start up                  Completed concept analysis       Personnel analysis
                                                                Concept analysis
                                                                Preliminary risk analysis
Why? Lower failure, lower        Ensure that concepts do not    Ibis has templates for
investment                       pass without written clearance evaluating pre-business plan
                                                                viability
Start up                         Comprehensive business plan    Plan review and upgrading
Why? Lower failure, better       Ensure that plans do not pass Ibis has detailed evaluation
returns on investment, faster    without full evaluation and    methodology for plan analysis
growth                           clearance
Early stage                      Target achievement             Non-financial monitoring
                                                                modules, benchmarking
Why? Non-financial monitoring Ensure that targets are closely Ibis has detailed benchmarks
provides the longer term control tracked and corrective action across most sectors, experience
than financial assessment        taken                          with non-financial monitoring
Established                      Business platform              Platform review
                                                                Plan review and upgrading
Why? Creating firm foundations Ensure that plans are not        Ibis has evaluation system for
is essential to ensuring that    accepted without full          established business plan
progress will occur and risk is evaluation and clearance        analysis
reduced
Expanding                        Target achievement             Non-financial monitoring
                                                                modules, benchmarking
                                                                Standard operating procedures
Why? Building the knowledge Ensure that targets are closely Ibis has detailed benchmarks
based company is the final       tracked and corrective action for most European sectors, over
challenge to ensure long term taken                             60 standard operating
success in an increasingly                                      procedures, extensive non
competitive market                                              financial monitoring experience
Knowledge centric                Full transfer of internal and Information rich organisation
                                 external data to appropriate through appropriate HR and IT
                               individuals                  tools
Why? As the organisation grows Ensure that systems build
it must structure and use its  towards complete integration
knowledge of the market, and   of external and internal
internal resources to achieve  knowledge
maximum competitive advantage

Ibis

Tel: ++ 44 (0) 1256 429349
Fax: ++ 44 (0) 1256 429350
E mail: info@ibisassoc.co.uk
Web site: www.ibisassoc.co.uk

Written by:

Alan West (AW)
David Brinton (DB)
Karyn Prezawcyz (KP)
Renuka Rajkumar (RR)
Martin Khune (MK) – Ibis Germany
Andrew Deenes (AD)