Part 6 : Challenges and solutions

What specific areas of corporate activity are most challenged by the Internet?
For the retailers, of course, it is the entire operation, sooner or later, not just the current catalog operations. The established retailers must quickly learn how to make the Internet work with their existing distribution and merchandising frameworks. They especially need to re-think their physical expansion strategy, since it may prove possible to see new stores more as servicing hubs for a host of basically interactive users than as customer aggregation points.

For everyone else, the affected areas vary from not much to 100%. Basically, the large industrial companies will be more concerned with Web applications and services having to do with shortening and speeding up the supply chain and internal processing, as opposed to using the Web as some sort of new business tool. This will not seem very dramatic. But, in fact, it means that these companies will fairly quickly go from stodgy grey ladies to relatively lively, revitalized enterprises, as the various functions and processes take on one or more interactive aspects and attributes.

Consumer products companies will be using the Internet for these same industrial applications, but will also be emphasizing new ways to reach and service the end customer. One such area that is very exciting is when these traditional companies begin to understand the power of the Dell model for direct selling. I see a whole new, Web-enabled push to literally cut the classic distributors out altogether. Even bypass the retailer, especially in cases where the product has a relatively high added value and does not need a local face-to-face support presence.

For example?
Therapeutic drugs. After the diagnosis and first prescription, there is no need to channel all future re-orders through the traditional pharmaceutical distribution system. Or appliances. They have to be a perfect case for the Dell model, especially as they take on more features and user-customizable options.

This sort of change is not really new, of course. Amway and Avon and others have basically been finding ways to compress the distribution chain for decades. What is different is when the efficiencies and speed of the Internet are brought into play.

And other industries?
The financial services industry faces huge change, of course, as more and more products are redefined or reinvented for online sale and delivery. The old branch networks are going to be under enormously increased pressure, even more than when the big banks began merging in the eighties.

The middleman industries, such as insurance agents, brokers and agencies of all types, face direct survival challenges, as we have already seen. If their net value add is basically providing information to the customer, then the Web can probably do the job better and faster - certainly cheaper.

The core commodity industries like agriculture will change too, along the lines I outlined earlier for other process-intensive companies.

In short, I can see no industry that will be isolated from the changes, and most will have to confront just about every current process management, product support, and communications activity they have.

Accustomed to being able to control and measure their operating environment very closely, how can corporate management cope with the uncertainty and dynamism inherent in the Internet business environment?
By cutting out every obstacle to instant, total, rational understanding of the external environment. The Web may seem like a threat to many businesses. But it can also be the primary source of information on how to deal with the threat.

Can we expect current senior management to provide the direction needed to cope with change, or will corporations need new "Web-savvy" blood?
As with any great industrial sea change, it will be a mix of both. But I would focus mainly - speaking here as a CEO - on those who are already on board. As I was trying to emphasize earlier with "insizing", the main effects of the Internet on most existing businesses will be felt in the guts of the organization, not expressed in wholly new spin-offs or new marketing thrusts.

I have been on both sides of this kind of problem, both as a large company general manager and as a consultant to big companies, and I am persuaded that with the Internet, the outside professionals and hired guns can have relatively limited utility. While their "solutions" can successfully package the technological answers, their experts cannot know the really vital questions. These are almost all based on an intimate, working, patient understanding of the way your whole team works together, or fails to.

Even on the big questions of strategy, I see the established experts coming up short, because a strategy for migrating online cannot easily be segregated from everything else a company is doing. It's altogether different from simply establishing a new business in a new market, or buying another company.

Said more simply, unless your own people learn how to ask all kinds of cross-divisional, cross-border, cross-product line, cross-market segment questions, there is not much chance they'll get the full benefit from the Internet. Conversely, there is an excellent chance that the outside "solutions" will be addressing problems you may not even have, or cause you to pursue objectives that are unproductive.

I would ask every CEO or other senior company manager to buy into one central idea about the Internet - that it is a challenge not so much because it's something new and different, but because it's going to bring into question almost everything that is old and customary.

Ninety percent of the benefits the Internet can deliver will be realized by your own people as they work through all those in-, out-, and upsizing issues and opportunities. Find the ones who can ask the tough questions, help them try as many answers as possible, and bring in outside resources to support them rather than roll over them with irrelevant "solutions".

Continued...