March 13, 2001, 9:17 AM — What comes to mind when you hear the word e-business? Speed? Intuition? Daring? Seat-of-the-pants? But what about metrics? Bottom line? ROI? Value? For all the attention that's been paid to the first set of words, you don't hear much about the second. In fact, few Fortune 500 retailers and manufacturers that are steeped in the thrill of the Internet are willing to talk about measuring the real value of their e-business ventures.
"Many companies seem to be just doing e-business and not measuring at all," says Jim Highsmith, director of the e-project management advisory service at Cutter Consortium in Arlington, Mass.
"We worry about people just throwing up their hands and saying, 'We can't measure this, and anyway, we just have to do it,' " says Tom Bugnitz, managing director of the E-Busineess Forum and president of The Beta Group, a St. Louis consulting firm.
But metrics are crucial. "If you can't describe something in business numerically, you're not doing your job properly," says Eric Singleton, director of global e-business at Raytheon Co. in Lexington, Mass. "How can you communicate success, failure or the gaps that need to be closed?"
Part of the problem may be that people feel overwhelmed by the abstractness -- the "virtualness" -- of e-business as well as by the breadth of applications, but it's not really that difficult if you think less about the e and more about the business, says Bugnitz. "People put e-business into one big block of stuff, and, really, there are a lot of different blocks," he says. "How you're going to measure depends on where you're doing this."
At Deere & Co. in Moline, Ill., for example, Jim Harl looked at a bunch of e-business metrics to establish the value of an e-business supply-chain project before Deere committed to it. "Everybody gets excited about doing e-business, but if you get caught up in it, you may put in some neat, great technology that doesn't touch your bottom line," says Harl, Deere's manager of e-business for supply management. "Don't lose sight of the fact that it's a tool in the context of a larger business plan."
Deere spends $1.5 billion annually on indirect materials and services -- from office supplies to drill bits to travel -- that don't go into products. Harl's challenge was to use technology to manage that expense, and he felt that the Internet might be the tool to drive those procurement costs down.
He started by measuring the existing indirect materials procurement process. "We looked at everything you do -- all the people, all the time on computers, putting [the purchase order] in an envelope -- we mapped that out in excruciating detail," he says. Then he determined which steps would go away with an Internet system and how that translated into driving down cycle time and costs.
