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November 16, 1998

E-Business Defines Relationships

Electronic business is booming in a wide range of companies across the country. In fact, according to InformationWeek Research, 80% of the InformationWeek 500 companies use the Web to provide customer service or to sell products or services on the Web. How does E-business change relationships with employees, customers, suppliers, or business partners? To find out, InformationWeek invited four representatives from different industries to address these issues during the recent InformationWeek Conference. Here are some highlights of the discussion, which was moderated by Clinton Wilder, a senior writer for InformationWeek who covers Internet commerce and online services.

Michael Janes
VP of electronic commerce and logistics marketing, Federal Express

John Keast
CIO, PG&E Corp.

Ken Landis
CIO, Strong Capital Management Group

Michael Prince
CIO, Burlington Coat Factory

E-Commerce:
The Next Step

Selling Overseas

Beyond Transactions

Billing Via The Web

E-Business Roundtable

InformationWeek: Electronic business can cause a lot of disruptions in an organization. How do you deal with it?

Prince: My job is to make the disruption happen as fast as possible, and, at the same time, to be sensitive to the human aspects. For example, we have a disproportionate number of people involved in the accounts payable matching area. That's because we traditionally did a lot of vendor drop ships to our stores, which generated literally hundreds of thousands of invoices every month; it was a pretty laborious matching process. One of the initiatives we're taking with our vendors is to move toward Web-based electronic data interchange, to reengineer the way we reconcile accounts payable. As a result, some of the individuals within the organization are being disintermediated. While I work to make the transition happen quickly, I also try to find opportunities for the people who are impacted.

Landis: There's a storm approaching when it comes to corporate staff functions in any kind of firm that generates profits by doing business either with consumers or other companies. Internet technologies let customers go exactly where they want in the company. And vice versa--someone in the company can go to exactly who they want in another firm. The result is that anyone in the value chain who isn't adding value will be vaporized. It's pretty straightforward--they'll be in the way of doing business.

InformationWeek: When it comes to electronic business, the wisdom of the day is that everyone has to be like Amazon.com--start with no legacy systems and be really fast. But in reality, if you're going to do this right, don't you need an extensive infrastructure, an extensive way to do fulfillment?

Keast: You need to have access to resources. You don't have to build the organization itself; the virtual corporation is real. You have to pull together the right pieces, manage it very carefully, know where you're going. You don't have to own it; you don't have to have the infrastructure yourself.

InformationWeek: Have you encountered resistance to any electronic-business initiatives?

Janes: Basically, we're blessed with a customer base that skews very much toward high-tech, which accounts for the success we've had. Our objective is to be integrated with everybody who touches FedEx in any way. Of course, we still have customers who want to use an air bill or call somebody.

But our job is to create such a compelling value proposition for being online that people will want to do business that way. What's really missing in most E-business initiatives these days is a compelling reason to do business that way.

InformationWeek: How is business-to-business commerce, or dealings on the Web, more like business-to-consumer commerce?

Janes: The expectations are set now. This is a tired and overworked phrase, but everything runs on Internet time. You don't send me your request and not expect an answer back within two hours. If it's something like tracking a package, you expect the acknowledgment back in two to three seconds.

The business space, which used to be slower in terms of cycle times, is now running at the same speed as consumer cycle times. The impact on that has actually been an acceleration in cost. One key point: If you're not marketing to expectation, invariably someone is going to step in between you and your customer and take over that space.

InformationWeek: How do you manage the flow of information in a business-to-business situation? For example, on an extranet, your applications might reside on your business partner's servers.

Landis: Architecture is key to the success of managing the flow of information--the way we deliver the applications to the people with whom we trade and do business.

There's a great deal to be said for planning on how they're installed and how they'll run, down to the nitty-gritty details about who monitors the technical aspect of what's happening, the router, and the server.

InformationWeek: If you're facing resistance to change in your organization--and you're supposed to be one of the leaders who brings about that change--how does that alter your job?

Landis: If I had the choice to change my title to reflect what I actually do, I'd call myself a technology personal trainer. My job is to drag these people into the future kicking and screaming. I wouldn't suggest using my approach; it just happens to suit my personality. After I scare the living daylights out of them, I show them a thin promise of the future and hope they'll grasp onto it. When they get there, they're pleased with the result--but not until then. If they're not, they become my enemies for life, which might explain all the jobs I had to change.

Keast: I'm in a different boat--right now, at least. The traders are hungry for the technology, but we actually have to curtail transactions because we can't get the technology in fast enough.

InformationWeek: Doing business on the Internet and touching the customer sounds really nice, but how brutal is the competition?

Landis: When representatives from the consumer products industry go into supermarkets, they rearrange the shelves--they move their products up and make their displays nice, neat, and clean, and they move competing products to a place where they won't catch customers' eyes. The same thing happens on the Internet. We all try to go out with well-designed pages that have good navigation, features, and functions, but the truth is the category killers--those that can get your attention no matter how they do it--are the ones who are winning.

Whether Amazon.com is a good book-delivery service is not the issue. The fact is that you can't pick up any piece of mainstream business press and not read about them every single day. That's how they're taking their competitors' ketchup and putting it on the bottom shelf.

It's the reason Barnes & Noble and Borders are doomed to failure--because stores don't establish a brand. When you see a Barnes & Noble store or a Borders store, you think of coffee, not books. Research indicates that a good segment of the population is using retail locations to browse and the Internet to shop.

Keast: The Internet space is very brutal. And yet you have to move fast and you have to make mistakes. We have to create a culture where we don't punish people for making mistakes. We almost need to celebrate mistakes. The important thing is that you learn from the mistake, you move on, and you come up with another good idea. That's part of the way we're going about it in the deregulating businesses. You have to get everybody energized together, employ systems from the ground up, and really focus on how to add value in this sort of integrated supply chain from start to finish. It's not easy, but think differently.