ECA Innovation and Competitiveness Workshop
e-Business for MSME Competitiveness
February 18, 2004
• e-Business as innovation
• Contributions to development
• Accelerating e-business adoption
Jim Hanna
Lead Operations Officer & eBusiness Advisor
Latin America & Caribbean Region
jhanna@worldbank.org
The World Bank Group
Working for a World Free of Poverty
e-Business…more than PCs and wires
“E-business is a major business innovation that most firms will have to adopt.”
“ICT and Economic Growth: Evidence from OECD Countries, Industries & Firms”, OECD, 2003
Most economic benefits of e-business begin with:
•
•
2
Transactions – “front office” relational & product
innovation to improve market reach and product range
•
Customer development & e-marketing solutions
•
E-business solutions to buy & sell services via Internet
•
Customer service and support solutions
Integration –“back office” process & organizational
innovation to improve production and management
•
Product design and production solutions
•
Procurement and supply chain management
•
Finance, online banking and accounting solutions
•
eLearning solutions to upgrade employee skills
Contributing to productivity & growth
A micro view
“Net Impact Study Canada: The International Experience” 1/
Canadian eBusiness Initiative, May 2003
Key business innovation impacts
eBusiness Adoption by Small Firms
eBusiness Adoption by Small Firms
Solutions Adopted
Back Office
•
Lower customer service costs
•
Sales and marketing efficiency
Supply Chain Management
Sales Force Automation
Procurement
Finance & Accounting
EU
Front Office
Canada
Customer service
US
•
Increased worker efficiency
•
Reduced materials costs
•
Improved inventory management
•
Lower dist’n or shipping cost
•
New customer acquisition
e-Commerce (incl. B2B)
Financial Impacts
% Decrease in
Sales & Gen.
Admin.
% Decrease in
Cost of Goods
Sold
EU
Canada
US
% Increase in
Revenue
Customer Dev. & e-Marketing
0
10
20
30
40
50
% Share of Total Firms
60
70
___________________________________
0
2
4
6
8
Percent Increase / Decrease
10
12
1/ Source: The Canadian e-Business Initiative (CeBI) and the OECD ICT Database Eurostat Survey measuring the Information Economy, 2002. Total survey
size was 1,668 small (to 100 employees) and medium (100-250 employees) firms in Canada, the US and EU. Results reflect 1-2 years implementation periods.
3
Reducing transaction costs, expanding opportunity
Chile
Programa Ventanilla
eBusiness agencies development
Empresa 2002-2003
services programs
• Simplified and Internet-enabled
• MIN. ECONOMY’S www.comprachile.cl
•
New business registration - tax administration,
trademarks & patents, health
•
Export procedures - customs, transport permits, public
health certificates
•
•
•
Information & bidding on public services
Contracting for more than 100 public services
• SERCOTEC’s www.redsercotec.com
•
•
•
•
Labor regulations - labor ministry work permits,
severance, contractor certification
• Selected by 1,200 entrepreneurs themselves in
focus groups
Supports small business management
Facilitates new business opportunities
Encourages business networks
Access to training and consulting services
• PROCHILE’s “VideoNegocios” and “Inter-PYME”
• Cost-shared among 17 government participating
institutions
•
•
• Implementation costs already paid for in public
budget savings – business savings to be calculated
4
Export market information & assessments
Export management support and training
Advancing the MDG to reduce poverty
Peru
“Tortas Peru” - the virtual cake network expanding market outreach and income
• Business
• W omen’s cakes & desserts baking network
•
Producing & delivering to families in 8 provinces of Peru
•
Goods purchased mainly by Peruvian expatriates
• E-business functions
•
Web-based marketing, ordering and payment
• Business growth
•
4-5 orders per month to 50 orders per day, now with
a client base of 500 customers
• Employment
•
Full-time for 14 “mamas”
• Wages & profitability
•
Twice minimum wage, 30% margins
• Non-monetary benefits
•
“...settles a conflict between finding a job or being with our children”
•
“…a way for women to become comfortable with technology”
•
“…right here in Peru, we are part of the globalization process”
María del Carmen Vucetich, Proprietor
5
e-Business market trends
• LA e-business markets - est. $6.5 billion in 2002, of
which Brazil $3.7 billion
•
Argentina – most advanced infrastructure but in deep
recession depressing investment
•
Brazil & Mexico - largest LA markets for hardware, software,
internet access services, e-business revenues
•
E-business Adoption Rates in Australia & Chile
(share of total firms)
Chile, 2000-2003
Functionality
Internet access
Web presence
order online
receive orders online
Chile - most developed technology infrastructure and highest
Internet penetration in region, small market (16 million people)
• LA markets small in relation to OECD – nearly $1
trillion in B2B e-business in 2002
•
No sign of major expansion a la Korea, where total B2B
revenues nearly doubled over 2001-03 to over $170 billion
•
eBusiness transactions and integration rates are not following
trends in Internet access rates, even in market leader Chile,
•
Rates are markedly lower than in digitally advanced countries
90% of Brazil’s e-business generated by 30 largest firms
•
Only 2% of Mexican SMEs engaged in e-business transactions
2001
61
11
Australia, 2000-2003
2000
2001
Internet access
Web presence
order online
receive orders online
• e-Business remains mainly a large-firm activity
operating in upper socio-economic income segments
•
2000
42
7
6
56
16
4
6
69
22
20
9
2002
64
16
2003
69
25
16
11
2002
2003
72
24
25
26
84
64
43
37
Supporting ebusiness innovation
LAC
• ESW & CAS exercises
•
•
•
•
•
• e-Business project finance & piloting
“From Natural Resources to the Knowledge Economy –
increasing growth and job quality” Flagship Report (2002)
Chile and Colombia CAS (2002)
“Closing the Gap in Education and Technology” Flagship
Report (2003)
Argentina & Chile New Economy Study (2003)
Brazil and Mexico CAS Reports (2003)
Bolivia
•
Honduras & Nicaragua (Bank)
•
Costa Rica
•
Jamaica
•
Panama & T&T
• Telecom reform & connectivity project finance
•
Bolivia Rural Telecommunications
•
Chile Community Telecenters (infoDEV)
•
El Salvador Mobile Telphony
•
Honduras Solar Power Rural Telecenters
•
Nicaragua Telecommunications Reform
•
Venezuela Movilnet
Ecuador Power, Communications & Rural Services Reforms
(Bank, MicroNet component)
•
Mexico E-business for Small Business Development Project
(Bank, free-standing project)
•
NOVICA e-business portal for artisans (IFC)
•
Peru – Connecting Small-Scale Coffee Farmers and
Consumers via Internet (infoDEV)
• LAC e-Business for Small Business Competitiveness
Initiative (2004)
• e-Readiness assessments (infoDEV)
•
•
7
•
Research on good practices programs
•
GDLN e-Business series LAC & advanced countries
•
“En Breve” dissemination series
•
www.worldbank.org/ebusinesslac web site
Building e-business leadership
• Policy reforms
•
The EC’s eBusiness Support Network
Promote coordinated regulatory reforms and digital adoption
across government agencies
Supporting member countries’ national programs
of the EU eBusiness Action Plan 2005
• Program designs
• Policy analysis, workshops and summits on
•
Decentralize program focus on end-users at regional and
local levels
•
Encourage sectoral & inter-sectoral collaboration
• Implementation
•
Minimize expansion of public entities utilizing outsourcing
•
Facilitating private intermediary market delivery capacity –
consulting, trade associations, banks, training institutes, etc.
•
ICT & e-business skills
•
Economic analysis of e-business
•
Methodologies in e-business measurement
•
Legal environment for e-business
•
B2B Internet trading platofrms
•
Competitiveness of the ICT sector
• Regular benchmarking of progress and
constraints to e-business adoption
• Monitoring & evaluation
•
Regular national, sectoral & regional data collection,
surveys, analysis & dissemination
•
Refocus impact indicators on innovation & productivityoriented benchmarks
• ICT skills & e-Learning
• new market outreach
• B2B relationships
• trust & security
• Outsource contractor for member state firmlevels surveys and analysis
• Web-based tools, such as eBusiness Lex on
legal issues in doing e-business
8
Continuing policy reforms
Infrastructure, trust and security
• Trust –most Latin American countries enacted legislation
on electronic signatures, contract & other documents
• Broadband makes firms more competitive
•
•
•
•
Unmetered and fast access to the web
Use of videoconferencing, outsourcing (ASPs), e-learning
Online procurement/auctions, online ordering, email
marketing and customer service support
Accelerates local content development
•
•
•
• Key broadband access policy issues – foster private
sector competition
model legislation, like UNCITRAL (Colombia, Peru)
own legislation based on comparative law (Argentina, Brazil,
Chile, Panama, Venezuela)
specific amendments to federal civil & commerce codes,
administrative law, criminal code (Mexico)
• Security - upgrading is now a main focus
•
•
Promote and facilitate inter-modal competition between
cable, DSL, fiber and wireless operators.
•
•
Remove barriers to local loop and leased line competition
and sharing of infrastructure
•
•
Promote demand by shared use of Internet (schools,
SMEs, etc) and community access to broadband
(telecenters, schools)
•
•
•
9
Protection from third-party access/threat to communications,
transactions and confidential information
Increase in firm-level and private sector protection – digital
tools, risk management strategies, trust marks and seals
Cybercrime legislation to criminalize interference with
infrastructure, transactions
Privacy & data protection laws to regulate collection, use,
dissemination of personal data accessible to Internet actors
Intellectual property protection of digital rights management
systems to protect content, secure rights, revenues
Awareness campaigns and regulatory simplification to build
trust of MSMEs
Expanding G2B
Business registration & procurement in Mexico
• Issues
•
Registration time for business formation is 91 for medium
complexity and 136 days for high complexity firms
(Monterrey)
•
Government lacks comprehensive system to electronically
link the more than a dozen agencies involved in the process
• Objectives
•
Process re-engineering to simplify registration & operating
permits in 10 states
•
ICT-based solutions to integrate operations at all layers
•
Improved e-procurement system to build value chains
•
Training for government staff and business
•
Dissemination program among business to promote use
• Approach
•
Demand-driven by interests of states and municipalities
•
Coordinated with Federal regulatory reform program (SARE)
for business process simplification
•
Managed under each state and local authorities working
group by integrator managers
•
Bank financing of consulting services, equipment, works and
training under approved reform plan
•
Minimum 25% state financing contribution
10
Deepening ebusiness markets
Awareness, training & learning-by-doing
• Top barriers to e-business adoption among MSMEs
•
Lack understanding of how e-business functions as a strategic,
value-adding tool
•
Lack metrics and models that convince them that benefits are
greater than costs
•
Lack internal ICT & e-business know-how, outside support &
time to design and implement e-business systems
Barriers to Adoption of E-business by Chilean Firms
(Percentage of total responses)
Not interested or consider unjustified
Staff unprepared
No trust or lack of know ledge
Inadequate financial resources
• Promote e-business awareness information, tools &
training programs used to determine business case and
prepare e-business investment plan
•
Workshops and peer exchange of experience
•
Online information, downloads and self-service tools
•
Initial economic & technical consultations
Inadequate ICT infrastructure
Size of firm
Privacy/security
Cost
Complexity
0
• Facilitate pre-investment support for in-firm learning-bydoing and innovation
•
•
Demonstrates success in overcoming market failures
•
lack of information & hands-on experience in e-business
•
underestimate e-business value & under-invest in eassets
Support development of intermediaries to facilitate adoption
11
5
10
15
20
25
30
35
40
Deepening ebusiness markets among microbusiness
Sustainable eBusiness development services markets
• Reaching the poor - lessons of telecenters in LAC
•
•
•
•
•
Good at expanding communications
Weak ICT and e-business training and upskilling
Low sustainability and business value added
Low development impact
Little commercial investment in e-learning, applications & content
• Need to redirect toward high value, sustainable e-business
service markets - pilots in Ecuador and Mexico to
•
•
•
•
•
Connectivity, not productivity
• 89% of Peru’s Internet users use RCP
“Cabinas Publicas”
• User profile - higher education & income
Reach at least 50,000 low income microbusinesses
Generate market outreach, competitiveness, growth
Yield financial sustainability & franchising within 3 years
•
•
• Key design features
•
•
•
Peru - Red Cientifica Peruana (RCP)
56% users between 15- 25 years old
40% users have a computer at home
• Use profile – email, info search, chat
Private sector management, governance & co-financing
Sector-specific e-learning programs
Microbusiness-appropriate applications for market outreach,
transactions and improving core business processes
Local business content market development
eBanking services with microfinance partners
 Email (60%), Search for information (51%),
chat (39%)
 60,5% total users visit Cabinas between 2 to 3
times per week.
12
Recap
E-business is one important innovation strategy that can
– Advance productivity, competitiveness and growth
– Reduce business environment barriers
– Contribute to MDG for poverty reduction
The Bank can help accelerate e-business adoption by supporting
1.
2.
3.
4.
5.
e-leadership institution-building for policy reforms, programs, monitoring and evaluation
Continued reforms in ICT infrastructure, trust and security regulations
G2B programs to lower transaction costs and expand opportunities
Awareness, training and pre-investment programs to deepen e-business markets
Expansion of sustainable e-business services markets to reach low-income microbusiness
13