Great companies use crises to create competitive advantage over weaker rivals scrambling to stay in business. Companies that invest in b-to-b today position themselves to emerge strong from the current downturn.
However, advocates of b-to-b spending must go beyond cheerleading. In today's "stop the bleeding" financial environment, companies will focus where they see long-term strategic advantage and a realistic return on investment.
Here are some ways to get your b-to-b spending plans approved by sharp-eyed financial officers:
Invest money to save money. A project that invests $3 million in b-to-b must show a solid payback—the quicker, the better, but likely within three years at the outside. Don't rely on "avoided cost" scenarios: "Here's what we'd save by not incurring new expenses."
Look for savings on working capital by slimming inventories. Inventory visibility systems let trading partners see where inventory lies in a supply chain so you don't need to stockpile goods if a partner already does. General Electric Co., for example, requires suppliers to use its Global Supplier Network, a private trading network. GE aims to cut 30% to 50% of its costs for producing and selling goods, thus doubling profitability in five years. Most of these gains will come from reduced inventories and more efficient manufacturing.
Reducing inventories is a winning situation for suppliers and distribution partners, too. Inventory visibility allows everyone in a supply chain to reduce working capital, a key selling point for partners that might balk at making an investment in the current economy.
Technology companies of all sorts have warned Wall Street about earnings shortfalls as tech spending falls. That means tech vendors will be motivated to be more flexible than usual on pricing.
While cost-saving scenarios are the easiest means to build business cases for b-to-b investments, don't overlook other benefits from b-to-b connectivity and collaboration. Collaborating with suppliers on new product designs can mean faster time to market and better manufacturing yields. Put numbers to those business cases, too.
Tim Clark is an analyst specializing in b-to-b e-commerce at Jupiter Media Metrix Inc., an Internet research firm. He can be reached at [email protected]