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UK: www flair - New business. - The power of the internet is limited only by people's imagination. Those with the ability to think laterally will gain competitive advantage.

by David Bowen.
Last Updated: 31 Aug 2010

The power of the internet is limited only by people's imagination. Those with the ability to think laterally will gain competitive advantage.

When the car was invented, there was not much mystery about how it would be used - to get from A to B, rapidly. The internet, the most chattered-about invention of the last few years, is not so easy. It is certainly clever: linking up computers on the opposite sides of the world for the price of a local phone call, it has managed to 'destroy distance'.

And with some style: pages on the world wide web, rich in graphics, photos and even sound, make the boring computer screens of old seem, well, boring.

Everywhere, managers have been examining this strange new device as though it were some sort of tool that wasn't quite a drill, nor a saw, nor anything else really. Or maybe it was everything, if only the managers knew how to use it.

The fact is that it is everything, pretty much. The internet can be used to boost profits, cut costs, improve customer service, enhance a company's image, and maybe even re-engineer the way it works. No one has yet come close to realising its full potential - realise in both senses, of 'exploit' and 'understand'. They probably never will, because the internet's power is limited more by people's imaginations than by technology. The trick is to understand what the internet can and cannot do, and exploit these abilities to the full.

More than in any other medium, lateral thinking about the internet will be the major source of competitive advantage. Managers who look only within their sector, or job function, will soon grind to a halt. Those who make real progress will be those who look sideways into other areas.

It is worth raising a cheer for the simplest internet application: e-mail. It is ideal for business: cheaper than fax, quicker than letter, handier than the phone for the day-to-day brief communications that keep a business spinning. E-mail is sliding into our lives with the same lack of fanfare as the fax did 15 years ago. The world wide web has suffered from no such lack of publicity. It is the internet's glamour kid, a multimedia notice board that can be viewed by anyone online. The trouble is, if you think of the web only in this way, you will follow the thousands of companies that have created sites rarely troubled by visitors. The reason is not hard to find: there are 2.7 million sites on the web. Finding a needle in a haystack suddenly seems a doddle.

The web can be a powerful marketing tool, but only for companies that use their imagination. Fortunately, there are many examples of companies that have used the internet in just such a way. A successful web-based marketing campaign was run by London International Group (LIG), which wanted to increase awareness of Durex in the US. The internet was already well peopled by the young audience LIG sought, but it was still deemed necessary to run a campaign on MTV to drive traffic to the site. Once there, visitors found an offering that trod a delicate line between wit and smut, and also the offer of free Durex samples to anyone who filled in and e-mailed back a questionnaire. The result? More than 45,000 responses in two months, both building Durex's brand and providing the company with a mass of useful marketing data.

Television advertising is a straightforward but expensive way of getting visitors to sites, but there are cheaper ways for sideways thinkers. Shell UK has extended its SMART card loyalty scheme to the web. Visitors to seven sites, including Commercial Union and Victoria Wine, will find SMART symbols scattered throughout them. As they travel these sites, maybe even absorbing their information, they gather points they can swap for goodies at their local Shell station.

Transactional web sites, where you can buy things, should not need such gimmickry to attract traffic. But they have their own problems - chiefly, how to keep ahead in a medium where the cost of entry is so low. Once again, the trick will be to play to the internet's strengths. One such site, Amazon, a US web-based bookshop with 2.5 million titles on offer, is often referred to as 'the biggest bookshop in the world'. If Amazon is to maintain a competitive edge, it will most likely be because it has created a 'community' of users who enjoy going into its 'chat area' to give or read opinions on books. Amazon is using the internet's interactivity to provide a service unmatchable by an ordinary bookshop and also to create a loyal fiefdom of customers.

Blackwell's Online has deployed another internet-friendly weapon - the ability to tailor information. Users will find that after a few visits the home (first) page reflects their interest uncannily. The site has been building up a profile of them, as revealed by a registration form, by books they have bought and even by sections they have visited. The only other marketing medium that can be 'personalised' is direct mail.

But the internet allows it to be done on a massive scale, automatically, and with unmatchable precision.

New 'virtual' companies find it easiest to exploit the internet's talents, but some conventional organisations are starting to put it at the hub of their strategy. Electro-components, for example, has just spent more than £1 million putting the 100,000-part catalogue of its subsidiary, RS Components, on the web. It believes the web catalogue will replace the CD-Rom version and, eventually, the paper one.

The RS site is a natural for the internet. First, because the company already has a slick phone ordering and fulfilment system, the web site integrates easily into it. Second, it is not just a selling but also a customer service operation. It offers 10,000 documents, mostly technical manuals, that can be downloaded and printed out, and lets customers ask technical questions online. This is not altruism. Every document that is downloaded from the RS site, rather than put in the post, is saving Electrocomponents' shareholders money.

This kind of golden combination, where a customer gets better service and the company saves money, occurs when visitors can delve directly into a database. Courier companies such as Federal Express pioneered this, allowing customers to check where their packages have got to. They could do this before by phone, so it was a no-brainer to bolt on a web version.

The only losers, for whom it may be a no-jobber, are workers in the courier's call centres.

Closer to home, Barclaycard has launched a system that allows you not only to check on your account details, but also to pay your credit card bill using a debit card. Expect more of the same. It will not be long before we can pay our bills, buy insurance, manage our bank accounts and even put in meter readings on the web. This may or may not cause large-scale redundancies - but it will certainly trim employment growth in the service sector.

Logically, a web-based ordering system can be integrated into the entire supply process of a company, and possibly a chain of companies. If you order a personal computer from Gateway 2000's web site, you can tailor it (by screen size, power, software etc), and pay by credit card. The order is then e-mailed direct to the factory, where it is picked up by a 'cell' of workers who build it to order.

This integration of the supply process takes us towards some of the most interesting internet-related thinking. It has long been understood that it can make sense to tie companies in a supply chain together - Electronic Data Interchange (EDI) is a set of standards developed to make such integration easier. But until now EDI has been expensive because it has been run over private networks which have suited big buyers, such as supermarkets, but not so much cash-strapped small suppliers. Now the internet makes EDI much more affordable for suppliers. It can also reduce the cost of electronic purchasing by encouraging e-mail bidding, while buyers should also benefit because bigger choice means lower prices. General Electric's US lighting division uses an internet-based system to ask for bids to supply standard items, and says its cost of purchasing has dropped by 5% to 20%. Could this mean the 20-year trend towards smaller supply bases is about to go into reverse?

Consultants have been pushing the logic of internet-based supply chains to see what might develop. Coopers and Lybrand has set up a system linking a hospital in Leeds with a trucking company and Johnson & Johnson, the pharmaceutical manufacturer. The link is over the internet, and the parts being linked are the intranets (or internal computer networks) of each company. Now, information can flow between them at least as smoothly as it would between parts of the same group: the supply chain has in effect been turned into a single company. To an extent this recreates the vertical integration that went out of fashion 20 years ago, but without the complacency such an arrangement can encourage within a single organisation. If a member underperforms it can easily be expelled, or a rival company bought in to compete for the same business.

These remodelled supply chains take advantage of perhaps the most fundamental quality of the internet: its ability to destroy distance. It can turn the world into a huge electronic bazaar. A particularly intriguing example is Global RP (see above), but others are emerging. Womex, for example, is a web site that brings together buyers of general goods (mostly in Western department stores), and manufacturers (mostly in small factories in Asia). Womex's managers have tramped around the Far East taking photographs of products and putting them on its web site. Buyers can see what is available along with the information they require such as lead times and batch quantities.

The factories do not even need an internet connection: Womex can 'translate' e-mail requests into faxes. Result: fewer buying trips, greater transparency, and, in theory, more business all round.

The ultimate 'bazaar' model must be the online auction. Here interactivity and the ability to change information instantly combine profitably with a huge potential audience. Several airlines have used online auctions to clear tickets, while the auctioning of computer equipment in the US is becoming almost commonplace. In the UK, the recently established Quixell is likely to turn over several million pounds this year. It has arranged with computer manufacturers and refurbishers to sell stock that has been returned or is slightly out-of-date. Before, this would have been sold off cheaply to the developing world. By selling online, Quixell gets a better price for the manufacturer and offers bargains for the buyer. Nice bit of lateral thinking, that.

MARRIOTT HOTELS

Direct route into the booking system

Washington-based Marriott Hotels is pushing the internet about as far as it can go. Its site shows how the medium can threaten intermediaries by acting as a first-rate marketing and customer service tool. The idea, of course, is for the company to find the cheapest and easiest way of making bookings, says Peter Dennis, manager of interactive sales and marketing.

The site is expected to generate sales of $12 million this year. It makes full use of the internet's ability to bypass call centres and deal direct through the booking system - but customers get a better service than they ever could from a phone call. They can check what rooms are available at what price, and book online. They can also see what each room looks like and, if they are in the US, print out driving directions to the hotel from anywhere up to 1,000 miles away. Market research showed that these final two ideas were not just gimmicks. Customers wanted an idea of where they would be staying, and didn't want to get lost finding it.

The internet bolted easily onto existing reservation systems. 'When we designed the model we didn't even think about the internet,' Dennis says.

A weakness had been the inability to display specially negotiated corporate rates. That is now being overcome, using the medium's ability to segment an audience.

STYLES

Where designer meets model-maker designersmanufacturers for

The internet is the world's biggest clearing house, capable of matching supply and demand in a way that was previously impossible.

Manufacturers designing new components usually require modelled prototypes for evaluation. The modern way of doing this is by 'rapid prototyping' using stereolithography machines (SLMs). These cost up to £1 million and translate 3-D computer-generated designs into models. Because they are so expensive, SLMs' profitability is highly dependent on their workload.

Styles, one of the UK's leading rapid prototypers, realised that if there were a way of filling the capacity of SLMs, both prototypers and manufacturers could benefit. So Styles set up a subsidiary on the internet, Global RP, to provide an online matching service, in order to 'change the way prototyping is done', according to Nick Gladwin, the company's sales support engineer.

Global RP's key web site, Cyberbuild, can be accessed only by the three dozen rapid prototypers that have signed up. Here they can see designs submitted by manufacturers and also the price they will be paid to produce them. Global RP sets this price. It must be low enough to attract manufacturers, but high enough to make the job worthwhile for the specialist prototyping companies. The matching system is not perfect, with slightly longer waiting times than before, but the amount of usage is on the increase.

BioMedNet

THE ONLINE COMMUNITY

BioMedNet represents a new model for publishing with an 'online community' of readers. Set up in London in 1995, it is a web site which acts as a journal, a library and a 'club' for 150,000 biological researchers and physicians around the world.

They can keep up-to-date with an electronic 'magazine', look for jobs, search for and read specialist articles, and take part in discussions.

People from all over the world can meet online in a way that would otherwise be awkward and expensive.

BioMedNet has attracted a lot of advertising. Its strength is that it is international yet highly targeted. When members join, they fill in a form listing their specialisations. Tempted (by promises of special offers) to an area called 'your room', they see only relevant ads which they may also receive by e-mail. The response rate, says BioMedNet, is 'much higher than from mass mailings'.

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