As established business-to-consumer (B2C) companies set out to take advantage of the Internet, m any have found the task far more difficult and potentially destabilizing than they had anticipated. No mere business tool, the Internet goes to the heart of the corporation, challenging its existing business models and customer relationships.1
The challenges force traditional companies to address some fundamental questions, including: What do the Internet and its associated technologies mean for our business, our competitive strategy and our information-systems strategy? Which former imperatives need to be considered if we are to build a sustainable Internet business? How do we leverage the speed, access, connectivity and economy created by Web technologies to extend our business vision? And how do we organize in order to execute our business-Internet strategy?
The answers to those questions largely determine the success of a company’s Internet initiative. To investigate how organizations can effectively deal with the challenges, we examined 58 major B2C corporations from three continents and a wide range of industries. (See “Research Methodology.”) We found 15 “leaders,” 25“laggards” and 18 “medium-performing” organizations. Leaders shared generic characteristics that distinguished them from other companies. (See “Characteristics of B2C E-Business Leaders.”) However, they also followed distinctive routes. Although they may have started with strategy based upon the idea of technology leadership, they migrated through interim stages to a market strategy. Only then were they capable of yielding sustainable, consistent e-business profits. Leaders were the fastest and most focused at moving from an “e” that stands for electronic to an “e” that represents earnings.
1. N. Venkatraman, “Five Steps to a Dot-Com Strategy: How To Find Your Footing on the Web,” Sloan Management Review 41 (spring 2000): 15–28; and D. Feeny, “Making Business Sense of the E-Opportunity,” Sloan Management Review 42 (winter 2001): 41–50.
2. M. Vitale, “The Growing Risks of Information Systems Success,” Management Information Systems Quarterly 10 (December 1986): 327–336. The article points to systems that change the basis of competition to a company’s disadvantage, lower entry barriers, bring litigation or regulation, increase customers’ or suppliers’ power to the detriment of the innovator, turn out to be indefensible and may even induce disadvantage, are badly timed, transfer power and are resisted by other market players, and may work in one market niche but not in another. That implies an overreliance on the technology and inadequate analysis of the competitive context to which it is applied.
3. T. Davenport, “Putting the I in IT,” in “Mastering Information Management,” eds. T. Davenport and D. Marchand (London: Financial Times Prentice Hall, 1999), 1–6.
4. L. Willcocks, D. Feeny and G. Islei, eds., “Managing IT as a Strategic Resource” (Maidenhead, England: McGraw-Hill, 1997).
5. B.J. Pine, “Mass Customization: The New Frontier in Business Competition” (Boston: Harvard Business School Press, 1993). Though written before the Internet took off as a business tool, the book is highly relevant to Internet applications.
6. S. Mathur and A. Kenyon, “Creating Value: Shaping Tomorrow’s Business” (London: Butterworth-Heinemann, 1997); and A.M. Van Nievelt, “Benchmarking Organizational and IT Performance,” in “Beyond the IT Productivity Paradox,” eds. L. Willcocks and S. Lester (Chichester, England: Wiley, 1999), 99–119.
7. See, for example, P. Seybold with R. Marshak, “Customer.com: How To Create a Profitable Business Strategy for the Internet and Beyond” (New York: Random House, 1998); and S. Vandermerwe, “Customer Capitalism” (London: Nicholas Brealey Publishing, 1998); and F. Newell, “Loyalty.com: Customer Relationship Management in the New Era of Marketing” (New York: McGraw-Hill, 2000).
8. See, for example, A.M. van Nievelt and L. Willcocks, “Benchmarking Organizational and IT Performance” (Oxford: Templeton College, 1998); and E. Brynjolffson and L. Hitt, “Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending,” in “Beyond the IT Productivity Paradox,” eds. L. Willcocks and S. Lester (Chichester, England: Wiley, 1999), 39–68.
9. R. Plant, “E-Commerce: Formulation of Strategy” (New York: Prentice Hall, 2000); and C. Sauer and L. Willcocks, “Building the E-Business Infrastructure” (London: Business Intelligence, 2001).
Two recent Sloan Management Review articles on developing e-strategy for bricks-and-mortar companies will be helpful to readers: David Feeny’s “Making Business Sense of the E-Opportunity” in winter 2001 and N. Venkatraman’s “Five Steps to a Dot-Com Strategy: How To Find Your Footing on the Web” in spring 2000. Recommended books are the 1999 “Information Rules: Strategic Guide to the Network Economy,” by Carl Shapiro and Hal Varian, and the 2000 “How Digital Is Your Business?” by Adrian Slywotzky and David Morrison, which presents case studies of Cemex, IBM, Schwab, General Electric, Cisco Systems and Dell. Michael Rappa runs a good Internet site on business models (http://ecommerce.csc.ncsu.edu/business_models.html). Peter Weill and Mike Vitale’s “E-Commerce Business Models,” published this year, is a well-researched analysis of eight foundational models. For information on branding, see Michael Moon and Doug Millison’s 2000 “Firebrands: Building Loyalty in the Internet Age.” Readers also may find useful Chris Sauer and Leslie Willcocks’ 2001 “Building the E-Business Infrastructure,” which provides a comprehensively researched review of infrastructure. One of the best monthly magazines tracing developments is still Business 2.0 (Web site: www.Business2.com).