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To E or not to E?
by Edmond H. Legum

2001: A Web Odyssey
'"IDC predicts that goods purchased on-line by businesses will grow from $1.3 billion in 1996 to over $176 billion in 2001... They expect the number of people connected to the Web to rise to 550 million within three years."

USA Today, 8-page insert on e-commerce, October 22nd

If you read the Wall Street Journal or watch television, you've probably seen IBM's ads talking about the rewards of getting into e-business. When you see the next ad, you may want think about whether this kind of thing make sense for your business. If you're not on the Web, perhaps now's the time to consider making your move. If you have a Web presence, but you are not using the power of the Web to actually complete a transaction for your products and service, perhaps now is the time to unleash the selling power of the Internet.

Take, for example, the communications catalog company, Hello Direct. They have a Web site, and if you visit the site you will find that they now offer Nextel service. I visited their Web site to see what the process might be to start service. What I found is this: if a customer wants to actually buy a Nextel phone over the Web through Hello Direct, they can't do it. Their Web site does not allow the transaction to go to all the way through. Instead, a prospective buyer is asked to leave their personal information, and someone from Hello Direct would then call the customer back.

But, I was impatient. So, at 9:06 a.m. I called them, instead. At 9:08 a representative transferred me to a special Nextel-savvy agent that could take care of me. At 9:22 a chipper young man explained the process, "First we determine which rate plan you want, then we do a credit check, then we program your phone and send it out." I asked, "How long would this take?" He said, "Three days." [You may want to ask yourself if this is an acceptable time to wait - from the customers' perspective.]

In search of the complete transaction
I did a little surfing, and checked out other Web sites run by TechnoStore and Let's Talk Cellular. Here I found instructions to fill out forms, fax them in, and await calls from their representatives. Still searching to see if I could really buy a phone and get it activated on the Web, I finally arrived at Cellular Works's Web site, and there I found what I was looking for. Almost.

At www.cellworks.com you enter your zipcode, and then it tells you if they have a relationship with a carrier in that area. I entered my Atlanta zip, and was informed that it wasn't covered. I did the same for a Dallas zipcode I knew. Still no luck. Then I entered a San Diego zip, and viola, the screen gave me all of the rate plans available through the service provider in that area aligned with the Web site. I chose a plan, and another screen asked for information. I could then send the info electronically for processing. But final activation would still require some manual steps.

I was curious about why this manual phase was being inserted, so I called Cellular Works, and talked to John Voss, their Marketing Director. I asked him why customers could not get activated over the Web, and he said, "No service providers will let you go all the way. It's a fraud issue. We need to get a driver's license." I asked him what would have to change to make it possible to activate over the Web, without the manual steps. He said, "Requirements for applications would have to change."

I asked Andy Link, CEO of Cellular Works, what would be the benefit to his company, as an e-business, if the transaction could be completed totally through the Web without manual intervention. He said, "Full integration would have tremendous advantage in operational efficiency. The carriers in the past, when competition was not so severe, didn't have to worry about the process. Now competition is driving carriers to make the process much simpler. As competition heats up, restrictions on what we can do to activate a customer are becoming less and less."

Mr Link also brought up the fact that many customers are still not comfortable with the security of a Web based transaction. He finds this interesting in view of the fact that customers seem to have no problem handing their credit cards to waiters or waitresses, without checking where they take them or what they do with them during the time it takes to process their restaurant bill. In any event, Cellular Works counteracts customers' fears of Web transaction by subscribing to AT&T's Secure Buy service, that absolutely guarantees their customers against fraud.

In search of answers
Web customers are looking for information, solutions, answers to their questions, and things to buy - now. It may be fair to say, they expect better and faster service than they can get in a store. And, they need some reassurance that their purchases are secure. But, I wondered, can e-commerce really work for the way the wireless industry does business now, and can a difficult transaction process really be taken all the way to completion over the Web?

So, I called IBM's offices in Dallas and spoke to Randall McComas, head of their global Telecommunications and Media Industry Solutions Unit. First I asked him an easy question. I said, "IBM is spending millions to explain why businesses should be in e-business, does this include the wireless industry?" And he said, "Yes." I then asked him some questions that I thought might be interesting to carriers, retailers, and resellers.

Can e-business make it easier to do business?
McComas feels that there is a better way. With preset menus, the process itself is not the main time concern. This will go by as fast as the user can fill in the blanks. He then walked me through a theoretical Web transaction, as follows:

"A customer does a search on wireless or phones. He or she would come up with several hits on the Web for malls, for phone manufacturers and carriers. The client selects one. A store might provide a listing of phones and carriers with a matrix review of their features and functions, just as Service Merchandise does today in a table. The client selects one, reviews a video of how it works and what the pricing plans and charges.

"The client decides to purchase, and a template appears on the screen or is copied from his personal database with his permission onto the template giving the provider the information required to complete the transaction. The information is then sent to the carrier, retailer, or manufacturer containing the same things that would be collected in the store, along with a signed electronic copy of his signature, the same way I ordered my $3,000 PC.

"The phone is shipped form the supplier triggered by an electronic request to the manufacturer's data base in inventory system. The phone arrives overnight at the client. At this point the phone is activated to call one number. The carrier has programmed into the network (1) the new number of the phone to be downloaded, (2) the information of the credit card and identifying number on the card, and (3) the social security number of the buyer.

"To complete the activation of the phone, the buyer would have to dial the number included in the box with the phone, once connected he would receive a tone and need to key in his social security number, credit card number and ID number. If these match what is in the network, the new number is downloaded to the phone and activation is complete. Prior to shipping the phone the carrier or supplier took the credit card information and social security number and matched them at the credit card agency prior to shipping the phone.

Can e-business translate into more adds?
I asked Mr. McComas another question, "How might a carrier activate more lines with a Web site?" He said, "If you believe the fact that people are using the Internet for research; that they are looking for answers, then you may want to attract their attention. You may want to tell them, 'We can provide you a wireless phone and a pager. We can solve all your communications problems. People on the Net are driving down the Interstate looking for a sign telling them where to turn off. The carriers have a choice. They can put up their sign."

Can e-business result in better customer service?
Customers may know how to get to customer service - they can punch in 611 or 711, or they can call the person that sold them the phone. McComas presents a different solution under new conditions. He suggests that many customers may be home accessing the Internet, and he feels that they should be able to get all the information they need over the Web. They should be able to get all their questions answered either from a list of commonly encountered problems or from an auto respond e-mail service. It could be tied into a carrier's customer care center, and specific questions not found on the Web site might be answered in 24 hours by a remote customer service representative.

This raises questions for the carrier: Might a well-oiled Web site remove some or much of the burden from an overworked customer service infrastructure? If this is feasible, how might the carrier educate their customers on how to get service from the Web?

Does e-business invite backlash?
Many worry about channel conflict. Carriers already distribute through their own outside direct sales force, their own stores, master agents, resellers, and through both locally owned and national chains of retail dealers. Might going to the Web circumvent their existing distribution strategy, and possibly create a backlash of discontent?

McComas doesn't think so. His reasoning goes like this: Carriers can use the Web to provide information for access by their diverse channels of distribution. If a request for new service comes in, they might set up a hot link to the closest retail outlet, or the closest channel, based on proximity to the customer's zipcode. McComas adds perspective, "What the carriers should try to do is drive the surf-buyer to their site. This is a different segment of the prospective wireless buying population."

Mr. McComas makes a point. Instead of worrying about channel conflict he suggests that the e-business customer may not be the same customer that likes to use any of the carrier's other channels of distribution. In fact, the Web may ask management to turn traditional wireless business models around to face this new customer. Here is what John Hagel and Arthur Armstrong, authors of Net Gain, have to say on the subject:

"The business model thus shifts from one in which the organization 'pushes' products or services on target customers toward on in which it acts as an agent for customers, representing and championing their interests as they seek improved access to resources. In this way, virtual communities 'reverse markets', where customers seek out vendors and deal with them on a much more level playing field in terms of information access."*

*John Hagel III and Arthur G. Armstrong, Net Gain, (Boston, 1997), 13.

Can e-business deliver to carriers a secure transaction?
If you want to see a carrier get really depressed, you can ask them about fraud. By building a Web site for wireless service activations will carriers be placing themselves at the mercy of high tech hackers who might create a new fraud explosion? I asked McComas about this and he talked about firewalls that keep unauthorized users or intruders outside of the inner workings of a network. He talked about encryption, mathematical algorithms that scramble and unscramble digital messages so that only the legitimate user can read them. With IBM technology at his back, McComas stated confidently that privacy and security have not been taken lightly; the issues have been addressed and resolved.

What's more, phones might be sent out in a way that's similar to the way credit cards are sent by mail. When received, the customers may call into a 1-800 verification service, give their security numbers, and then their service can be officially turned on.

Remember, in McComas's theoretical model, the carrier has already programmed into the network (1) the new number of the phone to be downloaded, (2) the information of the credit card and identifying number on the card, and (3) the social security number of the buyer. And also, to complete the activation of the phone, the buyer would have to dial the number included with the phone to obtain final verification.

Can e-business save money?
The industry has spent millions and millions of dollars on billing systems. And they are still paying millions more to make their systems less cumbersome and more user friendly and flexible. Is it possible to integrate what they currently use with their new e-commerce venture?

I asked McComas to give it to us straight: what kind of investment might carriers be looking at to integrate all of what they have with Web based transactions? McComas said that carriers should not fear a huge investment. They can integrate Web data records into their current system. IBM can even enable their billing system to send bills on line, saving the cost of postage. I asked him how much money this might save a carrier. He said, "An absolute ton."

How much is 'an absolute ton," I wondered. To determine exact numbers, a new wireless company, interested in starting a new Web initiative, enters into a consultative engagement with IBM. A business model is created and a financial impact analysis is presented. As in any business plan, if the model cannot show hard dollar justification for building a Web site - through reduced cost of acquisition, lower customer service maintenance costs, and improved customer loyalty - then it would make no sense to get into it. At the same time, through smart management of Web assets, wireless players may discover surprising returns on their investments.

Can e-business create equity value?
Although Hagel and Armstrong warn about expecting too much too soon out of a new Web site, they also talk about identifying and focusing on the elements that drive growth. It's what they call, "the economics of increasing returns." Here are five key assets from which the authors suggest you might profit.

1 Critical mass of members

2 Critical mass of usage profiles

3 Critical mass of advertisers

4 Critical mass of transaction profiles

5 Critical mass of transactions

By managing these assets over time, the authors present a compelling argument that the cumulative effect of growing these assets produce 'powerful engines of long-term value creation ... engines driven by a combination of accelerating revenue growth and declining unit costs."*

*John Hagel III and Arthur G. Armstrong, Net Gain, (Boston, 1997), 56, 81. [Italics added for emphasis.]

Does e-business offer a competitive advantage?
What advantages, if any, are there for the wireless communications industry players who make the first move and get up and running with well designed Web based e-business sites before their competitors? McComas looks at it this way: "There is a flow of traffic on the Web; people go where they know they can find information. They get on the Web; they go to the best site; they find what they're looking for; they get it; and they leave. They don't have time to shop around anymore."

We talked about the wireless industry's growth - how it will become a $20 billion market by 2002. We talked about the question: what portion of that might come from the Web? McComas said, "It's schizophrenic. Carriers know they should be going on the Web now, but very few are thinking about how to do it. New players who want to make a mark can let the huge Web buying population know why they're different. To do this, they may want to put together a business plan and model. They may want to define clearly where things are going. And this process of Web entry needs to be driven by the marketing side of the house."

McComas said that he can get a carrier up and running on the Web in two weeks. In three months a carrier can take orders and bill on line. In his words, "Every 60 days equals one Web year." Hagel and Armstrong put it this way: "Preemptive strategies become so important ... if you don't get there first, you may be too late. 'Speed is God, and time is the devil.'"*

*John Hagel III and Arthur G. Armstrong, Net Gain, (Boston, 1997), 7.

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