Sept. 11, 2000

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The Business Of E-Biz

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E-business systems also create new markets for products and services. Half of the CIOs surveyed say they've increased the number of customers their companies have as a direct result of E-business.

For 81 years, Cummins Engine Co. in Columbus, Ind., has built diesel engines; it's the world's No. 1 manufacturer of diesel engines larger than 200 horsepower. Now known simply as Cummins Inc., because of its diversification into filtration systems and power generators, the $6.64 billion manufacturer views the Web as the vehicle to reach new customers, and in turn, generate additional revenue.

Cummins is prototyping software--to be downloaded over the Internet into a truck's onboard computer--that can calibrate an engine to provide added horsepower. Rod Nehring, director of IT organizational effectiveness, envisions a truck driver willing to pay a fee to boost engine performance by 15% before climbing the Rocky Mountains. "We have to sort out the best ways to use all this new technology to get to the customer," Nehring says.

Nearly seven of 10 IT executives surveyed say choosing the right business model is one of the biggest obstacles to succeeding in E-business. It's a challenge confronting First Union Corp., the $22.08 billion banking company in Charlotte, N.C. "With all three types of stakeholders--partners, suppliers, and customers--the Internet, quite simply, is ratcheting up the complexity," says Jeff Scott, director of advanced technology. The Internet, Scott says, can cause a company to distance itself from some customers. The bank could miss opportunities to make loans because customers use online search engines to find the best price instead of coming into a branch office to discuss their needs. Still, the right mix of online and physical business models can deepen a company's relationship with its customers. "The Internet will enable us to reach out to more of our customers with relationship-building services, such as online financial advising," he says. "Then we could reach customers with these types of services in a purely physical world."

One in four of the IT executives surveyed says moving traditional business processes to the Internet is the greatest challenge to IT innovation in his or her company; one in five cites budget limitations as the No. 1 challenge. Despite these challenges, InformationWeek 500 companies aren't risk-averse: two-thirds of CIOs say their companies are more likely than in the past to take risks with new technology investments.

The Internet isn't the only technology that leading companies are focused on. In All, 87% of InformationWeek 500 executives list relational databases and data warehouses as strategic technology priorities. Closely following is network infrastructure and bandwidth. And on the horizon for many companies is wireless computing--seven of 10 InformationWeek 500 companies rank it as a company priority.

Galileo International Inc., a $1.53 billion travel-reservation service in Rosemont, Ill., is giving customers access to its reservation systems through wireless devices such as personal digital assistants and Web phones. James Lubinski, executive VP for operations, says the value of the wireless service is its ability to let customers serve themselves. "A wireless travel-management service must be more than information," he says. "It must be actionable to be valuable."

The biggest nontechnology challenges IT executives cite involve recruiting skilled IT workers and retaining talented employees in a tight labor market. Finding the right talent tops the list as the biggest obstacle to E-business success.

Capital One Financial Corp., the $3.96 billion credit-card issuer in Falls Church, Va., is in a growth spurt, with earnings growth exceeding 20% annually for the past five years. Overall employment at Capital One has tripled in the past two years to 15,000. Within IT, Capital One hired 500 new employees last year alone. To assure that it's hiring the right people, Capital One requires job applicants to take a battery of tests designed to predict how well they will perform in their jobs. The company seeks employees who can flourish in its corporate culture, described by senior VP of human resources Dennis Liberson as entrepreneurial, fast-paced, nonhierarchical, and collaborative. "We can't afford to be like other companies that are getting less selective as the labor market gets tougher," he says. "We wouldn't succeed if we did that." New employees attend a weeklong assimilation program to help them adapt to the company's culture; IT personnel get at least one additional week of assimilation training. Liberson credits these programs for the company's low 4% annual attrition rate for IT employees, well below the industry average of 20% to 25%.

Corporate culture plays a major role in most InformationWeek 500 companies. Elements of culture that foster innovation include welcoming employees' suggestions, knowledge sharing, and cultural diversity.

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Illustration by Brian Cronin

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