Fundamentals of e-Business Planning
Most lessons in this e-Business Plan Tutorial are about how to write an e-business plan. This lesson is different -- in this lesson you will learn what is a business plan and why do business planning. Other topics include a definition of a business case and how does an e-business plan differ from a traditional, "non e-business" plan. Also, you may recognize that portions of this lesson are an extended version of section 14.2 in Electronic Commerce 2006.
The lesson outline is:
Introduction to e-Business PlanningWhat is a business plan?
Why write a business plan?When do a business plan?The "e-difference" in e-Business Planning
Introduction to e-Business
What is a business plan? One way to think of a business plan is as a road map for the development and operation of your e-business. You wouldn't think about setting off on a trip without a destination, a plan how to get there, and a road map to be sure you don't get lost. A business plan does these things for your company, and more. Other strategists call the plan a blueprint of your company, an outline of your business idea, or a document that describes how your business will be profitable.
Formally, we define a business plan as a written document that identifies a company's goals and outlines how the company intends to achieve those goals. A business plan is almost always written for the creation of a new company in the marketplace and it is written for external audiences such as investors, potential business partners, or prospective managers. A special type of business plan is a business case, as defined in Business Case Box 1.
Business Case Box 1
A business case is a business plan that explains a new initiative or project inside an existing company. Its purpose is to justify a specific investment of funds and the audience is the company's board of directors and senior management.
As a special case of a business plan it has similar content as a business plan, but a business case contains more operational detail and it fits the project within the organizational context (e.g., justifies the initiative on the basis of the firm's mission and goals).
Throughout this tutorial these business case boxes explain the differences between writing a business plan and a business case.
Why write a business plan? A skeptic might answer this question "because I have to," meaning that a bank or venture capitalist wants to see a business plan before providing funds to the business. However, there are many
other reasons why a business plan is a business requirement:
- To acquire funding: This is the usual reason why a business needs a business plan. An existing firm may be seeking funding for an e-commerce initiative from a bank, the financial markets (e.g., an initial public offering or "IPO"), a prospective business partner, or from an internal allocation of funds (i.e., a business case scenario). A start-up company is likely to be looking for funding from an angel investor, a venture capitalist, or a bank. Even if -- especially if -- you are providing your own funds to start a business, you should have a business plan.
- To acquire other resources: Sometimes it isn't just a bank that wants to see a business plan. A prospective landlord, equipment supplier, or application service provider may want to see a viable business plan before entering into a business partnership with business owners.
- Recruitment of senior management: Pretend you are an
entrepreneur setting up your life-long dream business. You have just made a business appointment with someone who you think would be a superb member of your management team. Just as you are saying goodbye she says "Oh, I would like to see your business plan. Please bring it with you." But you haven't taken the time to write a plan. So what do you do now? Anyone truly capable of leading a start-up or existing firm into the digital future will want to see a business plan that explains your business idea. Don't start your recruitment effort without one.
- To make you a better business owner: By committing your business ideas to paper, your ability to create and manage the business will improve. The process of writing the plan forces you to think ahead, set goals, anticipate problems, and set some measures for your success.
- To make a realistic approach to your business: Given human nature, at the start of any project we are all optimists, happily seeing a smooth
road ahead to our destination. Writing a business plan puts a good dose of realism into that picture. Business plan activities such as seeking out and analyzing competitors, figuring out how to reach target markets, and comparing projected revenue streams against realistic expense statements increases awareness of the bumps in that road. Identifying problems is the first step to avoid or minimize them and a business plan enables you to do that.
- To decide not to develop the business: Sometimes the most successful outcome of a business plan is a decision not to proceed. Researching and writing a plan can reveal the realities of tough competition, a small target market, or an income and expense statement that is awash in red ink. Many owners of failed businesses would have been saved considerable time, money, and heartbreak if a proper business plan had been done.
- To keep you on track: The process of writing goals, objectives, manufacturing plans, distribution
plans, and financial statements sets targets against which actual performance can be measured (i.e., as discussed in your textbook, this is the process of setting metrics). By setting goals and objectives in your business plan, you take the first step to be able to compare actual results with anticipated goals.
When do a business plan? First, the classic case of the need to write a business plan is when a new business proposition needs to be shared with others.
Second, a business plan may need to be done in conjunction with a strategic planning process. If, as part of its electronic commerce strategy, a company is planning to create a separate company, reengineer or restructure the existing company, or launch the company into a new direction, then a business plan, or business case, is required.
Third, a business plan is required when the previous plan has reached its use-by date. If the original business plan set forth a three-year plan and the
business just celebrated its second birthday, it is time to write a new plan.
However a business plan is never done. Business planning must be seen as a continuing process without an end point. Rather, at some points the process becomes more formal and receives more attention from management, partners, and other stakeholders.
The "e-difference" in e-Business Planning
How is an e-business plan different from any other business plan? First, it must be said that there are far more similarities than differences. A business is a business and a plan is a plan, so most of what you expect to see in a business plan will also be in an e-business plan. Beyond adding an "e" to the title, what are some of the differences that make writing an e-business plan different from writing a business plan?
- The Internet is unlike any other sales channel. The Internet allows companies to distribute information at the speed of light and at almost zero cost, to reach
customers with both reach and range, to introduce new and innovative business models, to reduce costs and generate savings, and many, many more differences, as discussed in your textbook. However, the Internet also creates more bargaining power for the customer, creates a more perfect information market to the customer's benefit, and makes it easier for competitors to invade a company's marketplace, also as discussed in your textbook. So the first, and biggest, difference in e-business planning is the need for the entrepreneur to recognize the different and unique capabilities of the Internet and begin to think differently, and creatively, about the opportunities and problems the Internet presents.
- The Internet is global. Being on the Web means your business will be visible to an international audience. This introduces complexity for payment options (e.g., show prices in US dollars or local currency?), distribution channels, Web site design, and the logistics of product
- Web storefronts never close. Being on the Web means your store will be open 24 hours a day, 7 days a week. Your e-business plan must account for this difference in Web hosting and customer service requirements.
- E-commerce is conducted at Internet speed. This means Web site deployment must be planned in months, or even weeks, not years. First-mover advantage will be lost if companies are unable to move at Internet speed, and business plan readers will know that.
- The Web allows greater opportunities for personalization of content, one-to-one marketing, and customer self-service. Because the Web allows these and other customer service features, your competitors can make them part of their e-commerce strategy, so you must too.
- The Internet intensifies customer relationship management. Business has always been about "getting close to the customer" but that was in a world without the potential of personalization, one-on-one
marketing, data mining, concurrent reach and range, and customer relationship management. The Internet, and the customer-oriented applications that the Internet makes possible, means that every e-business must be totally focused on the customer. This belief is evident throughout this tutorial with requirements for clearly defining the value proposition the business offers to the customer, identify target markets, and a competitor analysis from a customer point-of-view.
In all these ways, and more, writing a business plan for an e-business is different, new, exciting, and difficult. In the lessons ahead, this tutorial will continue to point out the "e-difference" in e-business planning.
Navigation Guide for the e-Business Plan Tutorial
Introduction to the E-Business Plan Tutorial
--Top Ten Resources for Writing an e-Business Plan
Fundamentals of e-Business
Writing a "Read Right" Plan
Making an Effective Business Plan Presentation
Appendix: e-Business Plan Tutorial Assignments
This e-Business Plan lesson was last updated on June 7, 2005. Questions, comments, and suggestions for improvement can be sent to Dennis Viehland (email@example.com).