When the judges started sorting through this year’s Enterprise Value Awards entries, they were able to quickly pick the standouts—systems that changed organizationsand included demonstrable ROI. n Two other entries attracted the judges’ attention—ESAB Welding & Cutting Products and General Motors North America. ESAB’s efforts to build new online links with its customers and GM North America’s Web portal both earned accolades for being industry leaders, although the judges felt it was too early to judge the ROI. n John Glaser, one of the judges and the CIO at Partners HealthCare, says both ESAB’s and GM’s projects were “well-conceived experiments” designed to reveal the Internet’s potential impact on their core business. “They’re learning very thoughtfully in a very well-managed fashion.”
Deals on Wheels
GM’s website drives qualified customers to dealerships
General Motors North America
Core Business Automotive industry
Employees 388,000 worldwide
Yearly sales $176.6 billion
Ed Wiezorek wasn’t planning to buy a new truck. His 2-year-old Dodge Dakota had only 50,000 miles on it. “I don’t even think about a new truck until I’ve put at least 100,000 miles on,” says the program manager for Daleen Technology, an Atlanta-based e-business software maker.
As a General Motors credit card holder, Wiezorek had heard of GMBuyPower.com, but he had not yet visited the site. Just for fun, he started poking around and found he could sort through the inventory of nearby GM dealers, configure a dream truck, check sticker prices and even request a best price by e-mail.
That most people don’t relish the car-buying experience is not a shock to auto dealers and manufacturers. To change the process, General Motors began to use the Internet four years ago. GM had two goals: to give potential car buyers more control over their shopping experience while educating themselves about the intricacies of how modern shoppers make purchases and use the Internet as part of their car-buying process.
“Traditional manufacturers had isolated themselves behind retailers, and we thought it was important to find a way to form direct relationships with our end consumers,” says Dan McNicholl, GM’s CIO. While developing this direct bond, GM had to be cautious of offending its dealers or making them feel like they were being trimmed out of the process in any way.
“We showed dealers how much they’d be getting in terms of new systems with new capabilities and functionality and new customer leads, but they had to commit to the standards we required,” says Ann Blakney. She is currently western director of Motors Holding (GM’s dealer investment group), but she was the director responsible for the nationwide launch of GMBuyPower.com. “They had to accept a new way of selling, which included sending potential buyers an e-mail price quote. It was very dicey for a while,” she says.
Joining the BuyPower program wasn’t mandatory for GM dealers, but because the system so clearly demonstrated the capability to deliver better leads, GM was able to overcome some of the early grumbling and sell them on the program. Today, 88 percent of GM’s more than 6,700 U.S. dealerships participate in GMBuyPower.com.
Build It and They Will Come
The GM buypower portal site provides customers the ability to find the exact vehicle of their choice at a nearby dealership within an online inventory of more than 1 million new cars and GM certified used vehicles.
While customers are searching through all of this data, GM is closely measuring online behavior to better understand what results in a final sale. The site precisely measures dozens of actions, including time spent on each feature, how site visitors move through the site, what steps usually progress to sales quote requests and what features get the most single-hit traffic. GM has learned that visitors spend an average of 18 minutes on the site and that 83 percent of site users who click on more than one of the features contacted a dealer by e-mail or in person, generating more than 20,000 sales leads. Those BuyPower leads are a gold mine for sales.
GM spent $8 million developing and launching the site. Function upgrades during 1999 and 2000 cost approximately $7 million, and the price tag for annual maintenance (including weekly site modifications and hardware/software licenses and support) comes to $5 million.
The CIO Enterprise Value Awards judges were particularly impressed with GM’s effort to use the Internet to begin changing a business seemingly entrenched in an offline way of doing business and to measure every detail it could along the way. “GM is pushing things forward in the auto industry,” says Doug Barker, awards judge and the CIO and vice president at the Nature Conservancy. “The system is so well integrated with their business objectives that it will [eventually] demonstrate enterprise value.”
John Glaser, awards judge and CIO of Partners HealthCare, says GM’s efforts show the desire to learn what the Internet will mean to their business. “This is a well-conceived program to learn what the role of the Internet is to what they do.”
Ed’s New Truck
Wiezorek ended up buying a new truck, of course—a 2000 Chevy S-10. “I’d always bought basic trucks: four-cylinder, manual transmission, no power anything. The S-10 is a V6 automatic with cruise control, power windows and locks, the works, but with trade-in and rebates from my GM card it came to just $3 more per month,” he says.
ESAB Welding AND Cutting Products (a division of Charter)
North american Headquarters Atlanta
Core Business Cutting and welding equipment
Worldwide Employees 7,800
Yearly sales $1.25 billion
Melody Wargo remembers all too clearly how she used to spend her days: tracking orders she had placed with suppliers. Her work life changed the day one of those suppliers, ESAB Cutting and Welding, implemented a new online ordering and tracking system to better connect with its customers.
As a regional purchasing agent at Danbury, Conn.-based Praxair, one of the largest industrial gas and welding equipment distributors in North and South America, Wargo placed orders with equipment makers by phone, fax and EDI, and then spent hours tracking order status. “It could take a whole day to get an order in and confirmed,” she says.
Welcome to the old economy.
ESAB Cutting and Welding, one of Praxair’s primary suppliers, was a central figure in this old economy. The 96-year-old company (now a division of London-based Charter) is the world’s largest manufacturer and supplier of welding and cutting equipment. The Atlanta-based company is its industry’s global market leader, with the most patents for technological advances and yearly revenues reaching $1.25 billion.
Still, ESAB faced big trouble in the late 1990s because of the way the welding manufacturing industry works. Dramatic industry consolidation reduced the number of distributors from 2,000 in 1995 to approximately 600 today. With the number of potential customers falling, competition became fiercer than ever and every lost client held the possibility of fiscal disaster for the suppliers.
“We were facing an environment that was changing and dangerous,” says Ray Hoglund, CEO of ESAB. “In order to survive and be a market leader, we had to excel in either cost leadership, innovation or service. In a mature market, hyperefficiency in logistics is one of the few competitive weapons.”
“Our distributors were also concerned that we had plans to use the Internet to cut them out of the sales process,” says Dick Powell, an ESAB senior vice president. “So we had to show them how our plans were to provide better and stronger links between us and them, the distributors themselves, rather than trying to go around them.”
ESAB set out to provide its distributor customers with a new level of customer service through a suite of e-commerce capabilities. The centerpiece of ESAB’s efforts is an extranet portal called ESABonline, which lets customers look up product and pricing information, place orders, check order status and track shipments online.
ESAB’s goal in spending approximately $1.3 million on hardware, software, development and maintenance wasn’t just to make its sales force happy or spread the gospel of the Internet, but to strengthen ties with customers and add more value to those relationships than its competitors. The investment is beginning to pay off, says Mark Shepherd, ESAB’s director of IT and electronic commerce. “We’ve seen our e-business customers buy 10 percent more annually, which is particularly beneficial since they now cost the least to serve. “Our distributors are beginning to understand the whole equation of doing business with us compared with our competitors. They’re seeing that it’s no longer just a matter of cheap product costs but the overall cost of doing business that matters.”
ESAB also estimates it has reduced its inventory by 21 percent since customers can better predict what they need using ESABonline. In addition, the company has been able to trim its customer service staff by 30 percent since 1997 and redeploy these workers within the company.
The CIO Enterprise Value Awards judges were impressed with ESAB’s efforts to carry the welding industry into both the computer age and the Internet age. “They’ve caught the buzz around the Internet and are asking, ’What does this mean for us?’” says John Glaser, awards judge and CIO at Partners HealthCare System. “They have gone out and learned about it and how it can be applied to their business in a thoughtful way.
“Their attitude was: Let’s go learn, let’s put something up and see how the Internet might change us. They didn’t bet the farm on it because it’s not clear that would be the right thing to do. It’s a well-conceived experiment to understand the role of the Internet in their business,” Glaser added.
For ESAB customer Wargo at Praxair, the ESABonline system has changed her life. “I use the system to check deliveries, open orders and see when back orders will approximately ship,” she says. “I’m certainly more partial and more loyal to [ESAB’s] product line now because it’s so easy to work with them. As far as I’m concerned it’s fantastic, and I’m thrilled at how it has transformed my day.”
Welcome to the new economy.