 | Issue: | Latin America 2002 |
| Article no.: | 5 | |
| Topic: | Internet Economy: To Succeed in the Internet Economy, Companies Must Learn to Play by a New Set of Rules | |
| Author: | Carlos Carnevali and Ricardo Santos | |
| Title: | Operations Director, Director of Marketing | |
| Organisation: | Cisco Brazil | |
| PDF size: | 20KB |
About author
Not available
Article abstract
Doing business on the Internet requires different rules – not just Web site design. The fundamentals still apply; there is no magic. Many companies have technology and products, and the Internet just makes it easier, less costly, to compete. Understanding customer needs and delivering innovative, customized products on a timely basis are vital, as are engaged employees and targeted leadership. New rules may apply, but the results are familiar: reduced costs, increased efficiency, new market opportunities and more loyal, satisfied customers.
Full Article
The term “Internet economy” has been badly abused – first by the spin doctors of the dot-com boom in the late 1990s and then by critics eager to assign blame for the subsequent economic downturn. Yet if one looks beyond the hype, it is clear that the Internet has, indeed, transformed the global marketplace: According to a March 2002 marketer report, annual worldwide business-to-business e-commerce sales will total more than $823 billion by the end of 2002 and nearly $2.4 trillion by 2004. Within this new economy, the fundamentals still apply: the ability to compete, manage costs, generate revenue and improve productivity ultimately determine the winners and losers. Yet the terrain of this competitive landscape has changed considerably. In an industrial economy, success depended in part upon a firm’s ability to control as much of the value chain as possible. In today’s Internet economy, knowledge, information and time form the basis for competitive success; markets have evolved into broad, highly inclusive environments driven by common technology standards and low competitive barriers. This setting requires companies to cooperate as well as compete, and success depends on a firm’s ability to create value not only for its customers but also for its partners in the value chain – as well as for itself. Challenge How will this transformation in the economy affect a company’s day-to-day operations? Consider some of the ways in which the Internet has changed the rules by which successful firms operate: o Customers aren’t who they used to be. The Internet has created more sophisticated customers – customers that demand innovative, personalized products and services delivered at their convenience. The Internet has also expanded the very definition of the word ‘customer’, so that it now includes employees, distributors, suppliers, business partners and shareholders. As a result of these changes, a company’s competitive position in the Internet economy depends on its ability to deliver customized, relevant, highly responsive service to every participant in these networks of economic relationships. o Old solutions don’t meet today’s needs. To meet the needs of these new types of customers, the traditional solutions of more salespeople, more paperwork and more factories no longer work – What this means for business is that new products and new factories are no longer at the heart of innovation. In place of traditional physical assets, intangible assets such as intellectual property and productive, mutually profitable relationships with business partners have become increasingly important. The speed at which players in the Internet economy conduct business, make decisions and gather information has also played a role in this transformation; traditional decision-making procedures cannot keep pace with rapidly changing market conditions. o Employees must be engaged. Since people are the source for the creative ideas that ensure success, their brainpower has replaced the warehouse, the truck fleet, and other ‘bricks’ as the indispensable asset in the new economy. Companies must recruit highly motivated, empowered employees who are prepared to solve business problems as they happen. A firm’s success at encouraging these qualities depends upon two factors: the ability to deliver the information employees need to make decisions, and the ability to create a collaborative, flexible, highly customer-focused work environment. Solution What does it take to manage these challenges and to succeed in the Internet economy? According to John Sifonis, a director in the Cisco Systems Internet Business Solutions Group and co-author of the book Net Ready, companies must address four key elements: leadership, governance, competencies and technology. Leadership Effective leadership may be the single most important reason companies succeed in the Internet economy. “The most successful companies in the Internet economy, without exception, have strong, targeted leadership,” according to Sifonis. “Without it, even the most disciplined, competent, technologically adept organization goes nowhere.” One of the most vital elements of successful leadership, according to Sifonis, is the ability to communicate a clear vision of what it means to be an Internet company. This includes using the Internet as a vehicle for corporate communication and evangelization; training and empowering employees to use the Internet as a business tool; providing incentives and holding employees accountable for executing a company’s Internet strategy; and creating a culture of information sharing by personal example as well as through corporate policy. Governance According to Sifonis, “Governance involves control, accountability, responsibility, and authority.” Successful governance in an Internet economy requires firms to emphasize cross-functional teamwork. Business and technology teams, for example, share similar project goals and benchmarks, rather than answering to different groups within the corporate hierarchy. Teams should focus on short-term projects with highly focused deliverables; work to build acceptance of Internet-based technologies both within and outside the organization; and fund Internet technology initiatives based on specific expectations of the returns they will generate. Competencies Any successful firm must understand how to exploit the technical, physical and intellectual assets at its disposal. It must understand how to take advantage of partnerships and external relationships, allowing it to identify and develop a specific role within an economic network. At the same time, it must also know the limits of these partnerships. In addition, corporate leaders must understand how to identify and prioritize new business opportunities, how to execute business initiatives with tremendous focus and efficiency, and when to abandon ineffective projects or partnerships. Technical and operational teams must have the knowledge, authority and confidence to work quickly and with minimal oversight. And firms must have the cultural, organizational and technical means to deal with rapid, ongoing change – a defining characteristic of the Internet economy. Technology Clearly, the ability to communicate effectively is critical in this type of business environment. Companies must be able to provide information exactly where and when it is needed, at any time and any place within the organization. This information infrastructure must also extend seamlessly from a company’s internal operations to its external relationships; it must use an open, flexible, standards-based technology infrastructure; and it must be scalable enough to accommodate rapid, often unpredictable growth. An Internet-based technology infrastructure meets all of these requirements. It is standards-based, allowing uniform, cost-effective application development within the organization and providing connectivity with business partners, customers and third-party information exchanges. In order to use this technology foundation effectively, as Sifonis observes, firms must also create “a business-smart technology organization and a technologically smart business organization” that emphasize mutual accountability and common objectives while resisting complexity, lack of standardization, and proprietary rigidity. Conclusion Succeeding in the Internet economy is not just a matter of boosting online sales or building a successful Web site. In fact, some of the best examples of how companies adjust to this new environment combine effective leadership with the right mix of technology, organizational change and other factors. Ultimately, different firms adjust to the Internet economy in different ways, depending on their size, competitive environment and industry type. In each case, however, applying the rules of the new economy yields familiar results: reduced costs, increased efficiency, new market opportunities and more loyal, satisfied customers. Finding a place in the Internet economy involves far more than a technology investment. It requires a firm to think carefully about its business objectives, corporate culture, corporate management style, attitude towards change and innovation, and relationships with partners, customers and competitors. It also means understanding the links between a company’s business goals and its technology infrastructure – the foundation upon which the Internet economy is built. (o) This Article contains information based on the book N R by Amir Hartman and John Sifonis and a selection of texts from Cisco systems’ Web site.
