A randomly chosen issue of the Financial Times in March included a front-page story predicting a massive shakeout of business-to-business (B2B) exchanges; a report on a survey showing that e-commerce among US manufacturers is still tiny; and a column on the imminent closure of eToys, not so long ago a dot.com darling. Not to mention an article on the results of a major company whose profits had been held back by its Internet investments – its share price slipped on the news, whereas a year before (when web investments were all the rage) the same story would have produced exactly the opposite effect.
It would be tempting to conclude from such a barrage of dreary headlines that the e-business “revolution” is over before it even really got going. Tempting, but wrong. As in the currency markets, it seems, sentiment on e-business overshoots. Just as the initial hype was overdone, so is the current doom and gloom. The Internet still represents an enormous upheaval for business, but its impact will be felt in rather different ways, and perhaps at a different pace, than many people originally assumed.
What makes me so sure? For one thing, on closer inspection the message from the media is not quite as gloomy as it seems at first glance. A few of the fledgling B2B exchanges are likely to succeed, says that same Financial Times article, and will grow very fast. E-commerce may still represent a small share of business among US manufacturers, but their recent heavy investments suggest it could be about to surge. And the column on eToys argued that, although it would be harder work than before, there were still plenty of opportunities for smart investments in the new economy.
Next, there is the experience of my own company, which tells me that the e-business revolution is very real. Four years ago, the Economist Intelligence Unit sold well over 90% of its business information in print form, mostly in reports published to a quarterly rhythm. Now, more than half of the company’s sales are electronic. Customers’ expectations have changed dramatically, and so has our pace of analysis: we have introduced daily services, data services, e-mail alerts, an Online Store for instant delivery over the Internet, and even a website (www.ebusinessforum.com) entirely on the subject of global e-business. Under the impact of the Internet, every part of the company’s operations, from editorial to marketing and sales, has undergone a radical transformation.
Is my company’s experience exceptional? Stories from other industries suggest it is not. E-business conferences, for example, though no longer full to overflowing as they were in the days of Internet fever, are still infused with a deep conviction about the sweeping scale of change that is under way. As the keynote speaker from a multinational company put it at one recent event, he remains an e-business “evangelist”.
But the gospel being preached has changed, in several vital respects. First, it is no longer about dot.coms (this revolution, like others, is devouring its children). The real story is about the e-transformation of traditional businesses, from the big carmakers setting up B2B exchanges to the major retailers reorganising their supply chains and their distribution channels. If even a diversified industrial giant such as GE (General Electric Company) sees the Internet infusing every aspect of its business – to the extent of having managers from the chief executive downwards tested on their e-knowledge – then every company must reckon on becoming, to a significant extent, an e-business.
Secondly, the heady talk of brave new business models (let alone of new laws of economics) has faded. Instead, the focus is on how best to apply the potential of the Internet to existing operations. Intensified competition is compelling companies to examine afresh where their true strengths lie, and to see how these can be web-enhanced.
A third change is a return to the discipline of the bottom line and return on investment. Gone are the days of wild spending on Internet schemes with overly optimistic revenue assumptions. But that still leaves ample scope for investments whose benefits can be carefully calculated. Some of the clearest Internet-related benefits may come in cost savings rather than new revenues: as companies like Oracle and BT have shown, such savings can be huge.
The important point about these shifts in e-business thinking is that they do nothing to diminish the magnitude of the phenomenon. If anything, they merely make the challenge deeper and more pervasive. Governments should take note: as every business becomes an e-business, investment will flow to countries where such companies can flourish. The dot.com crash does not get governments off the hook of needing to provide a business environment suitable for the digital age.
©OECD Observer No 226/227, Summer 2001