“The Internet changes everything.” Although this might have been an overstatement just two years ago, it is clearly not so today. The impact of the Internet is obvious in business-to-consumer transactions: witness the proliferation of Web sites for facilitating sales and services across a broad range of offerings. But the real revolution is happening in business-to-business value chains as companies restructure their operations with trading partners.
The Internet also has had a profound impact on the valuation of individual companies and economic sectors. This can be seen not simply in the incredible market capitalization of companies whose business models are rooted in the Internet (e.g., Amazon, eBay, Yahoo!, Priceline), but also of companies that provide the technical infrastructure for the Net economy (e.g., Intel, Microsoft, AOL, IBM, Cisco). Such valuations—although highly volatile—are compelling established companies to seriously assess whether they will lose out to relative upstarts that are leveraging their lofty valuations into tangible capabilities through acquisition.
The Internet has also evolved beyond personal computers; soon it will be commonplace to access the Net through cellular telephones (Nokia, Ericsson), personal organizers (Palm Computing, Psion), videogame consoles (Sega’s Dreamcast or Sony’s PlayStation), as well as home appliances (Electrolux, Whirlpool), vending machines (Maytag), and automobiles (GM’s Onstar and Microsoft’s AutoPC). In short, the Internet has become more than a simple and effective way to exchange e-mail and documents; it is emerging as a critical backbone of commerce. And, it is happening at a faster pace than many thought possible1 and with which few feel comfortable.
But, if you ask managers about the strategies for their Internet businesses, you get a bewildering array of responses. Some mention the functionality of the Web (“you can get the details of our latest new product introductions”); some highlight their choice of platform (“we are driven on the Oracle platform or IBM’s e-business infrastructure or Hewlett-Packard’s latest suite of e-services”). Some trumpet how they use the Web to enhance customer service (“we provide enhanced customized service—such as specialized pricing and promotions or provide rapid response to customer inquiries”), whereas others point to their success in integrating the physical and digital infrastructures to provide seamless service (“our customers can interact with us in branches, by telephone, or over the Net without any differences in cost or service levels”).