"It is impossible for ideas to compete in the marketplace if no forum for
  their presentation is provided or available." �        �Thomas Mann, 1896

The Business Forum organized a Luncheon Forum discussion on the above subject at the Los Angeles Marriott Hotel in Los Angeles, California 

Those accepting our invitation for lunch included:  

Transamerica Business Technology Corporation - Vice President Data Center Services * Transit Casualty Company - Vice President Chief Information Officer * Golden State Mutual Life Insurances Company - Director of Administrations Services * Transamerica Occidental Life Insurance Company - Vice President Information Technology Services * Gelsand Newman Wasserman Insurance Company Vice President * Automobile Club of Southern California - Group Manager Enterprise Applications * Maxicare Health Plans Inc. - Senior Vice President General Counsel * Crest Financial Corporation - Vice President Information Systems * HealthMed Services - Network Administrator * Cedars Sinai Medical Center - Director Internal Audit *  21st Century Insurance Company - Special Projects Director

As e-commerce gains prominence, many companies have moved beyond trying to define e-commerce.  Instead, they are now looking at how to make e-commerce work for their specific business needs.  Early e-commerce success stories were about selling relatively simple products. However, the larger opportunity is in selling complex products and services over the Internet. Consequently, a business-to-business commerce revolution is occurring. The global nature of the Internet itself is enabling new business models, new relationships between players in the value chain, and new levels of competitiveness. At the same time, Internet technology is changing the way companies build and deploy all software applications to employees, distributors, partners, and customers.

As you might expect, the markets are responding to these changes. Technology companies are creating new software applications to more efficiently support the sale of complex goods and services through both traditional channels and the new e-sales channels. Companies that have adopted this technology are attaining a competitive selling advantage over those that have not. The focus of this report is in understanding the nature of these systems and their capabilities; demonstrating how a businessperson should approach the evaluation and implementation of an e-commerce system based on the success of companies that have successfully met this challenge.

The Internet economy is outpacing even the most optimistic projections of a year ago. The majority of e-commerce activity to date has been focused on the business-to-consumer (B2C) market.  However, today most analysts view business-to-business (B2B) e-commerce as the fastest-growing e-commerce sector. In April 1999, Forrester Research reported that B2B e-commerce sales reached $43.1 billion in 1998 and they expected them to leap to $109.3 billion by the end of 1999. By 2003, Forrester predicts that worldwide Internet sales will reach $3.2 trillion�an annual growth rate of 99%.

The first phase of e-commerce has been characterized by the purchase of relatively simple products bought through what might be referred to as a "pick and pay" paradigm: buyers browse a catalog, pick a product, put it in a shopping cart, and pay. This approach works well when the product is easy to select (such as books, CDs, and software) or when products from different sources are identical (such as stock trades and commodities). Consequently, these have been the e-commerce success stories that we have heard most about (Amazon.com, eToys, Chemdex, and so on).

There�s no question that pick-and-pay e-commerce is big business. Nevertheless, tapping the full potential of the $3.2 trillion e-commerce market will take more. What if your company makes or sells products that require buyers to assess their needs, evaluate combinations of features and options, and make informed decisions? A huge gap exists between the complexity of your selling process and the simple service that e-commerce based on shopping carts supports. In fact, recent market research from Biz Rate/NPD Group indicates that 75% of all e-commerce shopping carts are abandoned�and this is up from 67% one year ago. This statistic highlights that even in the pick-and-pay environment, Internet selling is failing to convert most shoppers to buyers. This gap, if not addressed, could spell failure for any e-commerce initiative.

Selling complex products on the Internet requires dealing with two different types of complexity: 

� Product complexity arises when products have many features that interact with one another to influence functionality, price, and performance, as well as the manufacturing and delivery process. Some examples include networking and telecommunications equipment, automobiles, and computers.

� Needs complexity arises in selling even relatively simple products and services such as PC printers or insurance policies. The product itself may be relatively simple, but many factors come into play when evaluating a customer�s needs and matching those needs with the best product or service.

Buying complex products requires analysis. Which model best fills specific needs within the budget? What are the optional features? What do they do, and how much do they cost? Are there incompatibilities among versions, makes, or components? Traditionally, sales representatives assisting prospects have performed this analysis. In fact, at most companies, what separates the top sales reps from the others is how well they provide this assistance. The rewards of selling more complex products are significant, because complex products usually represent the higher-margin products and services in any product line.

Another development has paralleled the growth of e-commerce: The Internet is quickly becoming the technology platform of choice for developing many kinds of business software. Traditionally, companies have implemented applications such as enterprise resource planning (ERP) or sales force automation (SFA) software on client-server architectures. These require loading a significant part of the application on each user�s computer. However, companies have found that the high cost of distributing and maintaining these applications makes it unattractive to provide them to all the users who could benefit such as employees, distributors and even customers. This ultimately limits the effectiveness of these applications.

With the emergence of the Internet as a platform, companies now have a cost-effective way to provide current applications and information immediately to anyone using an Internet-enabled device. This improved communication and information flow can enable:

New business models, such as auctions, demand aggregation, and dynamic pricing.

New selling channels, including customer-direct, electronic delivery of software and international distribution�which would have been prohibitively expensive a short while ago.

Enhanced delivery through existing channels, such as enabling telesales staff and distributors to sell much more complex products with less training and support.

Smart companies are discovering that the power of Internet technology is as enabling as the Internet itself.

How do you help buyers complete the purchase of complex products over the Internet?

Companies such as Dell and Cisco have invested heavily in custom-built systems that deliver a competitive advantage. As a result, each of these companies sells millions of dollars worth of products a day via the Internet. Now, however, a market is emerging for commercial software platforms that deliver this kind of customized selling experience without investing millions on in-house development. These platforms effectively leverage the power of the Internet to make selling assistance available not only to prospects over the Internet, but also to direct salespeople with notebook computers, call center telesales personnel and distributors worldwide.

Today companies such as BMW, 3Com, and Fujitsu are using these Internet Selling Systems (ISS) to change their business models, open new e-sales channels, and radically improve the efficiency of their selling processes.

An Internet Selling System may be defined as follows:

Internet: The ISS is developed specifically on and for the Internet platform. This means that it uses the Internet protocol (IP) to link a server to a client running on a browser.  There are two key advantages to a system specifically designed for the Internet platform versus one that is not: Portability and maintainability.

Portability�you can deploy a system developed on the Internet platform over your company�s intranet to inside salespeople, over your extranet to distributors, and over the public Internet directly to your customers.

Maintainability�a system developed for the Internet requires no client-side software. This means that updates are available to all users instantly, thereby keeping up with your ever-changing product environment.

Selling: An ISS manages product and needs complexity throughout the sales cycle�as opposed to sales force automation software, which focuses on managing the prospect information and relationships.

System: An ISS is a complete commercial product solution including:  

Application-development tools that facilitate developing applications without using proprietary languages and custom-developed routines.

Debugging, deployment, and maintenance tools that reduce total cost of ownership.

New releases incorporating new features to extend the utility of the ISS and sustain the competitive advantage of the company deploying it.

By assisting at every step of the selling process, Internet Selling Systems make buying a complex product or service as easy as buying a simple one. An ISS can take the knowledge and experience of your best salesperson and product manager and use it to guide the customer to the right selection. Using an ISS, you can increase sales, reduce cost of sales, greatly improve customer satisfaction, and launch entirely new business models rapidly.

The major components of an Internet Selling System are:

Product KnowledgeBase: You develop this repository as part of the ISS deployment.  Ideally, it is a single repository that stores all rules and constraints about product features, pricing, and manufacturability. It also stores the desired behaviors regarding marketing, up-selling/cross-selling, and upgrades that your ISS will implement. It is important to note that the KnowledgeBase does not need to be the primary data storage for all this information. In fact, it should be able to reference data and databases stored in other systems, including your sales force automation and ERP platforms.

Application: This is the application logic itself that runs your ISS. You may integrate it with a proprietary application server or use one that is commercially available.

Internet-based connectivity: This is the network that connects your users (internal sales, field sales, distributors, or customers) to the ISS system. For an Internet-enabled system, it may be any IP network.

Browser: This is the user interface to the Internet-based application. If you design your application without extensive downloads (such as Java applets), the ISS can run on almost any device capable of supporting a browser interface (even including a PDA or a cell phone). 

There are many advantages to using an Internet Selling System to model your product and business processes in a KnowledgeBase that enables all selling channels to manage complexity across an Internet platform:

Standardizing your best selling practices. You can model many of the best selling practices of your top salespeople in an ISS and make them available to your entire sales force.

Increasing average order size. Your ISS can identify up-selling and cross-selling opportunities during the sales process and offer related products to the buyer at appropriate times.

Selling everywhere, 24x7. With an ISS, you�re always available to sell to anyone with Internet access. This makes your company the easiest and most accessible firm to do business with�and isn�t that what your customers want?

Putting in-depth product information directly into the hands of salespeople, distributors, and customers. An ISS gives users the ability to evaluate and specify complex products without assistance. That, in turn, frees up product experts and technical sales assistants for higher value-added activities.

Preparing complex customized price quotes in minutes instead of days. With an ISS, salespeople or prospects can complete complex price quotes that used to take hours or more to prepare. This gives prospects immediate responses and saves precious selling time. The ISS then saves more time and labor by transferring accepted proposals directly to your order-processing system, ensuring accurate order handoff.

Improving order accuracy and reducing costs. It costs a lot of money to fix incorrect orders on the factory floor. Moreover, telling customers they can�t have what they ordered doesn�t improve customer satisfaction. Many companies actually accommodate incorrect orders and end up manufacturing products that are normally not available just to avoid this dissatisfaction�and that costs most of all. An ISS ensures that customers get what they order and that every order can be built without costly custom processes�before the order is accepted.

Making it easy to do business with you. Buyers will come back to your e-commerce site when they find it simple, intuitive, helpful, and responsive to their specific needs. They�ll get accurate quotations immediately. They�ll know they�ve ordered the solution they need.  Their orders will be filled faster and more accurately. Returned shipments and adjustments will decrease. Customer satisfaction will increase.

Leveraging the connectivity of the Internet and robust ISS technology to reinvent your business. Being connected to your salespeople, your distributors, and your customers can change the way you operate. ISS technology can enable these changes by enforcing new business practices, personalizing relationships, and assisting users whenever and wherever they want help. You can use ISS technology to:

• Support electronic exchanges that link buyers and sellers.

• Enable Internet-based auctions and other dynamic pricing approaches.

• Give your selling efforts a global reach that you can support efficiently.

• Empower you to change almost every facet of how you sell.

An ISS can do more than help you sell more and sell better�it can help you reinvent what selling means to your company.

By now, you have learned that implementing an Internet Selling System will bring many business benefits. However, you also may wonder what is involved. Successful deployment of an ISS requires preparation, excellent communication, and commitment. Listed below are seven key strategies collected from actual customer experiences:

An ISS initiative affects all areas of your company. The sales function is clearly affected.  Distributor relationships may also be impacted. Marketing will be impacted as well, from product presentations to promotions, packaging, and pricing. Service policies may have to adapt, and the way in which manufacturing receives orders may have to change too. You can only achieve this kind of cross-functional coordination with a strong commitment by all affected areas and ultimately by top management. Otherwise, your ability to enact change across the entire buying process may be limited. To ensure your success, be certain you fully understand your company�s e-business goals and how to measure success. Enumerate and quantify the benefits of your proposed ISS to the highest degree possible to ensure that top management understands the wide scope of potential benefits. In addition, don�t overlook the possible competitive disadvantage of not implementing an ISS and letting your competition beat you to the punch. In fact, the ability of the Internet to create new competitors who seize market share and establish new brands in record time can motivate top management to act. By clearly articulating and quantifying a business case, you will greatly enhance your chances for success.

Your Internet selling strategy and your ISS do not have to compete with your existing sales channels.  In fact, as the story of Aspect Communications demonstrates, you can use Internet technology to enable your existing sales channel to operate more effectively. The current trend in e-business is to blend virtual and physical channels�often referred to as "clicks and mortar." Physical channels give you points of presence and touch that you can use to complement the e-channel�s 24x7 availability and expanded reach. For example, customers can order via the Internet and then choose shipping and delivery options or, if they prefer, be advised of physical points at which they may pick up their products. Offices or stores can act as easy return locations, minimizing the hassle of returning products by mail or courier. This makes it easier to buy from you in the first place.

Interactive kiosks can be another channel in a well-executed Internet sales strategy, providing a relatively inexpensive way to expand your market presence. A kiosk implementation can act as a virtual sales assistant with in-depth product information and configuration capability. When linked via the Internet to a company�s sales, distribution, and manufacturing processes, kiosks can provide a fast and convenient way for a customer to purchase your products and services in markets and locations that you otherwise could not reach. When you place a kiosk in a store that stocks products from multiple manufacturers, you showcase relevant product features and differentiate your product from the competition. You can link the kiosk to the store�s inventory system. Then, if the item is not in stock, the ISS can tap into your distribution network to have one shipped directly to the customer. For distributors, an ISS can help sell complex products that they may find intimidating or that they have not been effectively trained to sell. The ISS can make your product line stand out as easier to sell than competing lines, earning you valuable mind share with your distribution channel.

How you deploy your system is dependent on many factors, including the specific physical distribution mechanisms you use today.  No one strategy is right in every situation. In fact, most companies blend elements of the two to fit their specific needs. The most important thing to keep in mind is that eventually an ISS can, and must, impact all sales channels in order to be most effective. To make this happen, you should build your ISS on a technology platform that lets you deploy it efficiently to internal sales people, to outside salespeople using laptop computers, and to distributors and end users over the Internet, in-store kiosks, PDAs, cell phones�any Internet-enabled device.

Simplification is the essence of Internet selling success. In 1998, a Forrester Research study showed that 68% of Internet shopping carts were abandoned, meaning that two-thirds of all Internet shoppers�even with simple products�found the process too complex and unconvincing to buy. In 1999, an updated study by Biz Rate/NPD Group showed that the abandonment rate had actually increased to 75%. Of those who abandoned the process, 31% cited changing their minds as the reason, 26% bought from a competitor, and 18% bought the product offline.

To enable your ISS to convert prospects to customers, you must provide an experience that helps customers or salespeople navigate through complex needs or products with ease. Moreover, your ISS must compel users to move from one step to the next in a seamless flow. At the same time, this flow must be customized to incorporate decisions and preferences that users express at each step in the process.

To accomplish this, your ISS effort should focus on simplifying the entire sales process�from needs analysis to product configuration, pricing, financing, and order creation. Even if you do not implement all of these capabilities initially, you should choose an ISS platform that supports them all. You may not be able to foresee how your needs may evolve, or where your customers or sales force will lead you once you have deployed the system.

A well-designed ISS will seamlessly leverage a single KnowledgeBase or repository across all steps in the selling process. Simplifying the entire process often requires a robust and comprehensive system�much more than just a "wizard" that provides relatively simple guidance through a linear process. Remember: your site competes with all the other sites on the Internet�your competition is always just a mouse click away. Thus, you must make the user experience as interactive, engaging, and simple as possible.

Along with comprehensive functionality and a compelling user interface, a key ISS requirement is to let your users move through the process in any order they choose, while at the same time guiding them to a valid and successful order. Without prior training, visitors to your e-commerce site should find it intuitive, easy to use, logical, and interesting. They should be able to move through the buying process and get the information they need to make a purchase decision. In addition, you should let your visitors roam. They should be able to start navigating from almost any point in the buying process. Too rigid a process may not appeal to many of your visitors. Let them change their minds and back up at any time without having to re-enter screens of information. Give them visual cues that tell them where they are in the process at all times. Provide instant access to any additional information they need. Make sure that the information you provide is precise and accurate.

Traditionally, systems designed for selling complex products have focused on creating and constructing one path through the process. This linear approach was specifically due to limitations in the underlying technology: many systems were built on rules-based configuration engines. You can think of a rules-based system as a series of steps that define what can or must occur as a result of each choice users make in the buying process. In other words, if you choose A, you can only choose B or C. If you model your buying process like this, you can see how rigid and deterministic the associated online experience can be for users.

In recent years, newer technologies have emerged that address the issue of inflexibility. These constraint-based technologies model your complex product and buying environment as a combination of rules and constraints. In other words, the modeling is done not just in terms of what must happen, but also in terms of what cannot happen. Thus, the buyer using a constraint-based system can explore alternatives within a range of options. For example, each time the user makes a new decision, a constraint-based system eliminates invalid alternatives from future consideration. The resulting experience lets users roam through only the set of valid options in any sequence. Another inherent advantage in constraint-based systems is that the user may begin the process of feature selection with any feature. This is unlike a rules-based approach, which typically requires that users begin with a particular feature and proceed through the selection process in a specific order.

In addition to considering the type of reasoning used to guide users, it is important to understand how that reasoning is implemented. Many simple systems require users to select a series of questions or product selections and then submit them in a "batch" to the system for evaluation. This approach, while simpler for programmers to deal with, frequently leads to user frustration. How many times have you filled out an online form, or answered a whole series of questions online, only to be told that one of the first items was invalid or unavailable? This is the result of batch submission. Newer systems are based on engines that run in the background and evaluate each selection as it is made, dynamically updating options and providing user feedback at each step. Immediate and continuous feedback ensures less user frustration�and to more completed transactions.

In summary, a constraint-based system, built on an interactive engine, will steer users away from invalid choices and lead them to a valid solution faster than rules-based systems. This interactive design adapts instantly to users� choices, tailoring the solution with each click of the mouse. It tactfully informs them when a product configuration is not feasible and guides them to a valid alternative. The result is a more intuitive and engaging experience that converts more prospects to customers.

The companies that pioneered e-commerce invested millions in the development of proprietary systems to do what an ISS does. Today, excellent commercial ISS packages are available, and there are five compelling reasons to use them instead of developing your own:

Lower total cost of ownership. Commercial systems cost less to develop, deploy, and maintain than systems developed in house. Make sure that a commercial system you consider offers productivity tools to help you develop applications quickly and to maintain them once you deploy them.

Shorter time-to-market. With a rapidly deployable commercial product, you can get to market faster than by designing and implementing one in house or through a consulting organization. In today�s Internet economy, speed is a critical key to success�getting to market fast can make the difference between success and failure.

Uninterrupted focus on your core competencies. Your company is not in the ISS business. Developing an ISS system may distract you from focusing on your core business. This is especially true if you�re a software company that depends on your development resources to build your own product. It is also true if your software-development resources are in tight supply and should be focused on your business-specific systems, rather than developing what is already available commercially.

The benefit of a commercial vendor�s accumulated expertise. Commercial ISS vendors have had experience implementing guided and e-sales solutions in many different companies and industries. Many of these best practices are built into these products, so you can take advantage of the lessons of others�instead of learning them the hard way for yourself. 

The opportunity to take advantage of new technologies and capabilities as they are developed. Commercial ISS vendors are constantly upgrading their software to optimize new technologies and knowledge they gain from customer installations. They frequently make new features available to existing users, so you get access to a constantly improving resource.

An Internet-based ISS opens up your selling process to many different communities. This places a large and unknown workload on your servers. This is unlike traditional client-server systems, where you can usually predict the load. Internet applications must be built from the ground up to support users numbering from a handful up to thousands without significant performance degradation. This scalability is essential to avoid Internet selling brownouts or blackouts�the kind of publicity no one wants. Beware of systems masquerading as Internet-ready. Raise the hood and examine the architectural underpinnings of each system you consider. Test it out in a lab to be sure. You cannot have too much scalability or reliability. Making wise choices here will position you as a leader.

One approach to e-commerce is to buy your ISS from a sales force automation or ERP vendor who already powers a part of your business. The usual argument for this approach is that the integration between ISS functionality and the other functionality will be seamless. Although this argument has its merits, the ISS component of most integrated systems cannot match the current best-of-breed ISS products in performance. In addition, the architecture of most current SFA and ERP platforms is too client-server-centric to provide the scalability and reliability that you will need for Internet deployment.

Integration issues were a factor in the 1980s. Today, significant advances in open systems standards (including ODBC, JDBC, and XML), coupled with enterprise-level software specifically designed to integrate disparate systems, make it possible to combine best-of-breed applications with legacy applications. The demands of an ISS application - broad functionality, interactive user experience, and Internet scalability - make a best-of-breed solution even more advantageous.

Of course, you need other partners in addition to a best-of-breed ISS vendor. If you need catalog and payment capabilities, you�ll want an e-commerce platform partner. If you need order management, you�ll want an ERP or supply-chain management system. In addition, you need an implementation partner who can support your customization, development, and deployment requirements and manage the project. You need internal experts to supply product and domain knowledge and manufacturability rules. Selecting partners wisely and defining roles carefully are keys to project success.

To ride the next wave of Internet commerce, you must be able to sell complex products and services online. ISS technology simplifies and accelerates the sales process, increases sales, reduces cost of sales, and increases customer satisfaction. Knowing the technology, and applying these seven key strategies, will help you implement your ISS quickly and effectively.

Selectica, Inc., is the leading provider of Internet Selling Systems (ISS) that enable companies to sell complex products and services more effectively through direct sales, via traditional distribution, and directly over the Internet. Selectica�s software is used to guide novice users through needs analysis and product selection, and to guide experienced users, salespersons, or distributors through product/service configuration, pricing, and order creation. The result is increased revenue, reduced sales cycles, and more accurate orders. Selectica�s ISS is based on a 100% Internet architecture that delivers unmatched scalability and reliability for mission-critical selling applications. Today Selectica powers the award-winning Internet selling efforts of corporations such as Cisco Systems, Dell Computer, BMW, 3Com, Hewlett-Packard, and Fireman�s Fund.