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The Best E-Business No One Has Heard Of

  |  November 13, 2000   |  Comments

What practices encourage e-business success? See what principles one e-tail operation embraced on its way to bringing in over $4 billion in revenue and over $2 billion in profits. E-business excellence shows up in surprising places!

What e-business has over $4 billion in revenue, over $2 billion in profits, supports a workforce of over 2,200 people, and has one of the largest e-tail operations in the world, according to the National Retail Federation?

You guessed it, the US Mint.

This government agency was founded in 1792 and is responsible for manufacturing, distributing, and managing all coins and metal assets of the United States. It oversees Fort Knox, distributes coins to the Federal Reserve, and develops commemorative coins that are sold to the public.

In May 1998, the Mint entered the world of e-business when it launched its first web site. Since then, it's evolved from a static content site to a fully functional e-business with integrated manufacturing and marketing processes. To give you an idea of how successful the e-business operations of the Mint have been: Hits on its site exploded from 1.5 million per day in January 1999 to 11 million in May 2000. The site closed its first $1 million sales month in May 1999, its first $1 million week in July, its first $1 million day in October, and its first $1 million hour in April 2000. According to the Mint, it intends to close over $126 million in online sales for 2000.

Given all the news related to the demise of e-tail and daily announcements of dot-com bankruptcies, how does this e-business that is managed by a public-sector entity survive? And how is it able to turn a huge profit to boot?

Well, the Mint executes successfully in all facets of its operations and has aggressively embraced the following basic principles of e-business.

Collaborative product development. The Mint collaborates, develops, and tests all new products with its customers prior to launch. For example, the 50 State Quarter program is the result of an extensive study to determine what coin collectors want. Private marketing firms and retailers were enlisted to provide feedback on product development. And when it came time to actually design each coin, citizens were invited to contribute to the insignia of their respective states.

Investment in business infrastructure. The Mint's success is not solely the result of good web site strategy; it is a byproduct of continual investment into infrastructure and an obsession with cost-saving measures. In 1996, the agency, through its Performance Measurement Action Team (PMAT), reinvented its procurement processes. As a result, the Mint implemented new cost-saving procedures and integrated many order management, distribution, sales, and customer support operations. The outcome: Processes were simplified, operations were made more flexible, and over $300,000 per month was saved in procurement.

Loyalty to customers. According to a recent report in CIO magazine, the Mint ranks as one of the most customer-centric businesses in the world. This is particularly hard to believe in light of the common perception of government-run services; however, this agency does a superior job of keeping its customers happy. A quick examination of the Mint's site shows a very flexible order process, streamlined return procedures, and robust customer loyalty programs. The Mint's newsletter attracts over one million customers, and it provides a good channel for community development, product information, and sales.

Process integration with its suppliers. Since the early 1990s, the Mint has worked very closely with raw-material suppliers that provide the metals for coin manufacturing. As a result, inventory levels are optimized, and the agency's business relationships allow it to work collaboratively with suppliers to design new material specifications for future product releases.

Continual benchmarking and performance management. Profitability is a mandate for the Mint. As a result, each operation is examined carefully for its effect on the bottom line. Product satisfaction metrics are used prior to new coin launches. Order fulfillment is rated on turnaround time and customer return percentages. Inventory turns are benchmarked against prior year levels. And in customer service, an independent auditing firm monitors 35 benchmarks on monthly, daily, and hourly bases. In short, every aspect of its e-business is measured, evaluated, and iterated to improve the financial performance of the agency.

Business intelligence. When Philip Diehl took over the Mint in 1994, he carefully looked at the promotional activities of the agency. He discovered that the agency's marketing department sent 12 to 15 product promotions per year to all customers, whether that customer was purchasing an $8 commemorative coin or a $1,500 rare-coin set.

So to target the Mint's customers more effectively, Diehl hired an independent database marketing firm to analyze and segment the agency's customer information. As a result, the Mint has been able to develop product offerings and marketing programs specific to each customer segment. Moreover, its knowledge of customer behavior has lead it to create entire business units tailored to serve specific groups.

What Can We Learn?

Prior to 1994, the Mint was like many other government agencies: fraught with byzantine business processes, inefficiency, and wasteful spending. However, in a relatively short period of time, it has become one of the most profitable arms of the US government.

The Mint's success is remarkable considering that the turnaround was achieved in a public-sector setting. The agency's approach and results should serve as inspiration to all e-businesses in today's challenging environment. It demonstrates that with the proper mix of executive leadership, innovation, and commitment to continual improvement, even nonentrepreneurial companies can achieve e-business success.

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ABOUT THE AUTHOR

Philip Say Philip Say is a principal at Blacksquare, LLC., a Web services firm dedicated to building intelligent business solutions for clients. Prior to Blacksquare, Philip was a product marketing manager for PeopleSoft and a business consultant for Accenture and Novo Media Group. His deep understanding of business technology has helped more than a dozen Global 2000 companies achieve their marketing and supply chain objectives. He has written for ClickZ since August 2000.

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