|
|
 |
|
Home >
News Center >
|
|
The Real Value of the Internet |
|
 |
|
By
Dennis McKeon
|
|
| August 8, 2001 |
|
“The key question is not whether to deploy Internet technology – companies have no choice if they want to stay competitive – but how to deploy it. The Internet per se will rarely be a competitive advantage. Many of the companies that succeed will be ones that use the Internet as a complement to traditional ways of competing, not those that set their Internet initiatives apart from their established operations.” (Michael E. Porter, Harvard Business Review, March 2001)Before I begin, let me pose the following questions:
- Is the above quote consistent with your view of Internet technology?
- Do you view the Internet as a forum for essentially advertising who you are?
- Have you begun to integrate Internet technology into your core business processes and traditional mode of operation?
- Do you recognize that much of the long-term value of the Internet lies in its ability to dramatically improve operational efficiency, lower transaction costs, and reduce distance between buyers and sellers?
Because Internet technology is not widely touted as an operational efficiency tool in most media publications, many organizations have not begun to seriously think of the Internet as more than simply putting up a nice, functional Website to serve as a brochure. However, it is important that you recognize the true value of the Internet. Be assured that your competitors will. And when they do, you will be put at a serious competitive disadvantage. There currently exists a broader economic shift taking place as a result of the Internet revolution. For thousands of years buyers and sellers traded in an open marketplace. They haggled over everything from apples to handmade pottery to knives. Most business was conducted one-on-one. The notion that price was fixed or that one size fit all was unheard of. The uniqueness of products and services was an essential feature of business relationships, and business relationships were personal relationships. The industrial revolution ushered in new efficiencies that enabled many items to be mass-produced, standardized, and offered at a lower price. Machinery resulted in the specialization of labor. Just before the Industrial revolution began, the great free market economist Adam Smith proposed that efficiency could be realized by breaking up different functions along the chain of production. Thus, business relationships became impersonal. Business became driven by a product's list price, which was in turn influenced by how cheaply a manufacturer could produce it. Those with the lowest cost could offer their product at a lower list price and capture market share and in turn reap higher profits because products were not as highly differentiated from each other as they once were. To aid competition based on low cost production, the early 20th century ushered in the era of scientific business management thanks to the famous mechanical engineer Frederick Taylor. Mr. Taylor was the great implementer of Adam Smith’s theories. He segmented internal processes with scientific and mathematical precision. Taylor’s theories thrived within the context of the Industrial Revolution’s endless quest to minimize costs in order to maximize profit. The Industrial Revolution and the standardization of products made it imperative that for companies to gain market share and improve profits, they would have to have lower costs than their competitors. Henry Ford’s famous statement that customers can have any color they want as long as it’s black illustrates the mindset of standardization at the time. The quest to reduce costs with the aid of technology to gain a competitive advantage is nothing new. So, again, how is your organization using Internet technology, the most effective technology the business world has yet devised, to improve operational efficiency, lower transaction costs, and reduce distance between buyers and sellers? The Internet is unique because of its duality. The Internet provides the means for a business to differentiate itself (a well designed user interface) and the means to improve operational efficiency and increase profit (integrating the Internet into core business processes). So far, most businesses have done the first. Undoubtedly, the ability of Web technology to provide a user interface describing what an organization can do to potential customers throughout the world is amazing and deserving of the hype it has spawned. It is true that because of this the worldwide Internet is here to stay. However, Web technology fundamentally improves the bottom line by reducing costs. This is where businesses can now reap the greatest benefits in the same way companies have always utilized technology. The reality of the Internet era is that the companies that integrate Web technology into core business processes are the ones who will succeed over the long run. The firms that use the Internet only as an advertising forum, stopping short of integrating it into core business processes, will quickly be left behind. Many firms have already failed because they were unable to successfully integrate Web technology into their core business processes as quickly as their competitors. Let their experience serve as a reminder that adopters of Web technology will only survive over the long-term if they utilize it to make core business processes more efficient. Only you can answer the questions posed at the beginning regarding your current Internet strategy. The free market, by its very nature, rewards efficient producers and punishes inefficient ones. In the Internet era, neutrality is not an option.
|
|
|
