Ready Or Not
The Internet Will Change
Your Business in 1998
By Mary J. Cronin, Ph.D.
Professor of Management
Strategic adviser of Mainspring Communications USA
Edition for portuguese EXPRESSO/Copyright Expresso/XXI translation
Edition on line Copyright Janela na Web
Companies that decide to pursue profits on the Internet confront lots of difficult issues-everything from Web page design to connection speeds to the security of payment mechanisms. But how about all those businesses that never intend to set up shop on the Web? Are they completely exempt from worrying about electronic commerce? Far from it. Like it or not, the impact of the Internet has become so far-reaching that every company is going to be affected. So this column is a wake up call for managers who think it is safest to stay on the sidelines. During 1998 the Internet is going to transform some fundamental aspect of your business. Watch out for the following changes:
With hundreds of thousands of commercial Web sites offering every imaginable product for business and consumers, electronic commerce has already changed the rules for marketing and product support. Customers now expect in-depth product information and immediate, responsive service that's available 24 hour a day, seven days a week. Even if they are not ready to buy online, customers increasingly turn to the Web to gather information before making a purchase decision. A recent survey by Ernst &Young showed that 64% of Web users research products online and then buy them using traditional channels. If these customers don't find information on the Net for your company, you won't get their business.
Channels for distribution
A growing number of companies are using the Web to sell their products direct to customers and their success is clearly challenging the traditional delivery channels. Dell Computers, for example, averages more than 2 million dollars in revenues every day from online sales via the Web. This track record has led IBM and other computer manufacturers to open their own direct sales Web sites. Even companies that are still committed to traditional distribution channels are pressuring their distributors to use the Web more effectively to track customer buying decisions and product preferences. This information has become essential for timely product development, distribution, and inventory decisions.
More and more companies rely on an their intranets to streamline internal processes and keep pace with demands for faster product development and customization. Ford Motor, for example, now has an internal Web site to track the design and manufacture of every one of its vehicles. As a result, it has cut the time for producing popular models like the Mustang from over 50 days to just two weeks. Allowing business partners and suppliers to access the intranet supports more effective collaboration throughout the manufacturing chain, saving significant amounts of time and money. Smaller companies are also using the Web to get their customers and suppliers involved in product design and upgrades, adding flexibility and immediate market feedback so that they can stay ahead of the competition.
Cost and availability of goods and services
Extranets are more than just the latest buzz word on the Internet. Secure links to suppliers allows companies to use the Web to manage their purchasing processes and cut the cost of obtaining supplies. Extranets allow managers to outsource a broad range of services, often using the Net to get bids from vendors around the world and to coordinate all the logistics from vendor selection through delivery and payment. Now every size company can take advantage of the most competitive prices and order their supplies on a just-in-time basis.
All of these changes combine to transform the competitive landscape for every line of business. The Internet opens local markets to global competition, and allows the smallest company to deliver its message and product information right to the customer desktop. It also encourages technology companies and other early Web adopters who have invested in setting up the infrastructure for electronic commerce to target new industries and markets for expansion. Well established business models are also at risk from the more nimble, virtual companies that are taking full advantage of all the capabilities of the Net without being tied down by traditional overhead and expense structures. These virtual businesses can challenge existing companies on speed, price, service and flexibility, and they have everything to gain from changing the terms of competition.
Companies that don't keep a close eye on electronic commerce developments may find it all too easy to ignore these changes for a while longer. But by the end of 1998 they are going to start seeing the impact on their customers and their bottom line. Then it may be a little too late to get back in the game.