Part 1 : Surviving the impact of the Internet

Hi David, let's first look at the impacts of the Internet on corporate business. Much has been made of the "Internet changes everything" maxim. But is this true, and what are the areas where the Internet is likely to have most impact on today's corporations?
It's true, but I'm biased of course. We won't really know for years just how pervasive the changes will be. But a good gauge may be that the Internet, and all the turmoil associated with it, has already engendered a whole set of revolutions in just a few years.

Some of these will turn out to be less than earth shaking, of course, but a wise person would avoid predicting which ones will have the biggest impacts. Or, since we are really talking here about a whole global economy's worth of changes, which of these will actually have a lasting impact.

Which limits the scope for journalists and pundits, no?
Not much chance of that, I'm sure! But it seems smart to realize that we won't be able to see most of the impact, much less measure it, until well after the fact.

Consider the current perceived collapse of "e-tailing", for example. In the same month that we learn of the demise of three or four more online consumer sites, we also hear that online sales will probably double this holiday season compared to the last.

But won't the majority of those new sales be made by traditional retailers now moving online?
Sure. Who cares? It's tough for those dot coms facing early extinction, of course, but the survival of any particular company is not the question here. The question is, does the Internet change everything? And it seems to, even Wal-Mart. My point is that we can see lots of examples where the impact of the Internet is already being or about to be felt, and, speaking for myself, I can see no business areas that will remain comfortably isolated from the changes.

How well are corporations adjusting to these changes and challenges?
Not to dodge a perfectly legitimate question, but it is just too early to make measurements. The Internet presents a whole set of new challenges, and these have to be dealt with. But since few fully understand all the implications, few are yet in any position to say how well we are doing.

So how does a management team or an individual company set up meaningful goals and benchmarks for Internet-based initiatives?
Good question. Our answer in the Internet Business Forum, as you know, is to set up idea exchange and feedback mechanisms, so managers (and the money people behind them) can learn more quickly what seems to work, what doesn't, and why. There will doubtless be many more such meeting grounds for this discussion. And I see that the major B-Schools are beginning to build e-business into their curricula, so we'll soon see proper studies, working papers and the like.

But the fact remains that the Internet - and its ramifications for businesses large and small - is hugely complex, and still evolving at a furious pace. So for years to come, companies are going to need to assume a much higher degree of risk in deciding how best to exploit it.

Or survive it.
Right. I actually find that an even more interesting area. We like to think of the numerous new economy possibilities associated with the Internet, but the Net also offers the promise of new or radically better solutions to many "old economy" challenges.

I expect that most of the economic implications of an interactive marketplace will be seen in existing companies and operations, more than in dot coms themselves.

And the evidence for this?
We've already mentioned the most striking so far, namely the e-tailing phenomenon. We saw the rapid emergence of new, "pure Internet" e-tailing companies only a couple of holiday shopping seasons back, followed by fantastic growth in total seasonal sales. Now, in this holiday season, we have predictions of very strong continuing growth, but coupled with the prediction that most of that growth will be going to old economy retailers, as they desperately build their online presences.

This seems to surprise many pundits, but it shouldn't; before it can be a brave new world full of opportunity, the Web is going to be a real survival test for most companies. So we should expect them to react with all the speed and muscle they can muster. Seeing the growth in e-sales was a ringing wake-up call for old-line retailers.

So your conclusion would be, at least for the retail sector, that companies are doing pretty well, at least in recognizing the threat or opportunity?
Perhaps, but it's still early days. But at least the measurements problem will be much easier for these established companies, since they can compare the success of new web-based methods to ones they already understand.

This ability to measure with proven tools is much more important than many yet realize. I am convinced that the Internet offers major new economies, so I expect that from now on, more and more Net initiatives will be funded by older companies, simply because the latter's managers can better assess the bottom-line pay-out of the new communications techniques and such.

The old-economy companies will be the innovators, then?
Yes, and I suspect to a degree many people would not have believed possible. This doesn't mean that the space and scope for innovation by small companies or new start-ups is diminished, not at all. It's just a way of pointing out that once the older companies gain confidence in bank-rolling Web-based development and re-engineering projects, then we can expect to see a massive new source of funding emerge. A source of funding that is likely to make the pool of VC capital look puny. And a good portion of that new investment in Internet potential will, of course, end up flowing to smaller suppliers and smart new companies.

Continued...