The Electronic B@zaar: Part 5 - eConstructing the Enterprise

** eConstructing the Enterprise **
There will always be sunrise industries, just as there will always be industries disappearing with the sunset. As we transformed agriculture, so we transformed mining, drilling for oil, manufacturing, transportation, distribution, and so on. History provides many examples of how the economy has shifted. Strange as it may seem, in the 1950s two of the 10 biggest companies in America were meat packers, utilizing the railroad and refrigeration technology to build healthy revenues. Their time has passed and the economy has moved on.

The internet is introducing a massive wave of automation that is going to destroy jobs and destroy businesses. At the same time, it is going to create jobs and businesses at a rapid rate. In all probability it will be an "even sum game." What it takes away with one hand it will give back with the other. However, this can be of no comfort to the businessperson who sees the efforts of a lifetime vanish in a few short years.

If you are in business, let me summarize the situation for you. Your fixed assets, your computer systems, the skills of your staff, the value of your brand, your channels to market, and your competitive position are all in a state of flux. In reality, all of your assets are probably declining in value, possibly at a frightening rate. Also, unless you are in an extraordinarily lucky minority, the barriers to entry into your market are falling. If it has not already happened, then you are soon going to be facing competition that does not suffer from some of the handicaps that the emergence of the electronic economy has placed on you.

There is great danger - but there is also great opportunity. In this chapter we explore what can be done. Much of the advice we will be offering derives directly from the experience of the management team at Bloor Research, who pushed the company through the kind of transformation that is being discussed here.

The internet invokes the Darwinian imperative: It calls for the survival of the fittest. So the question is: how can you be fit? Every bricks-and-mortar business that wishes to survive must work to satisfy three situations:
@ It must be able to prosper in the current bricks-and-mortar market.
@ It must be prepared for and be able to prosper in the period of migration, as its sector of the economy becomes increasingly web based.
@ It must have a strategy for operating effectively on the web.

In Darwinian evolution, the fittest are defined by characteristics that make them successful within their environment. It is no different for businesses in the new economy. Success calls for a combination of business talent, management talent, web savvy, design talent, IT skills, and vision. The need has increased dramatically for business leaders to understand the possibilities and limitations of the technology and the medium-for most, this will be the deciding factor in their success.

* Tactics for the Rearguard action *
It is said that only the best generals are good at fighting a rearguard action. Unfortunately, a rearguard action may be exactly what many businesses will have to fight. The word "rearguard" expresses the essence of what is required. An army is retreating in disorder and some of its troops must fight a stalling action while it reforms to choose a new battleground. In order to fight a rearguard action, you may need to divide your forces.

Two basic strategies can be pursued:
@ Metamorphosis: The company stays as it is and its operation is transformed directly so that it becomes an internet company.
@ Death and rebirth: The company divides into two. One part is the new internet company - a child that may grow rapidly. The second part is the old company that pursues a bricks-and-mortar channel strategy, trying to make the best of a declining bricks-and-mortar business sector. The second part has several possible destinies. It may dominate a business sector that never truly goes to the internet, it may be absorbed in a merger with the new company, or it may die.

Choosing which strategy to pursue is not necessarily simple, but it does need to done fairly quickly. The first strategy is best if the internet is not bringing about a severe restructuring of your business or business sector. However, the "death and rebirth" strategy becomes necessary if the internet team suddenly finds itself being constrained by bricks-and-mortar considerations. The easiest way to determine which strategy to pursue is to appoint an internet team that reports at the highest level and see whether its existence starts to give rise to conflicts in pricing or investment decisions or other areas of basic company policy. If it does, then split before it's too late.

Barnes & Noble provides the example that matters here. Its bricks-and-mortar business was unable to coexist with its internet business, so it went for "death and rebirth." Both halves have survived, and maybe both of them will thrive.

Whichever strategy is pursued there is a branding debate to conduct: Is the established brand suitable for the web? Inventing and establishing a new brand is not a simple matter, although it may be fun. The old brand should be discarded only if it is fatally wounded. Paradoxically, the stronger a bricks-and-mortar brand is, the more damaged it may be as a potential web brand-the consumer knows the brand and probably attaches bricks-and-mortar associations to it.

Technically, this is a matter of brand equity: What exactly does the brand denote? If the brand is strongly associated with abstract features, such as quality, dependability, or trendiness, then there is no reason that it should not transfer. Such abstract brand equity is an asset and in that case the web is just another medium. However, brands that are strongly tied to the physical nature of the service or specifically to a product have more difficulty in transferring. In the metamorphosis scenario the brand should probably remain the same, but in the "death and rebirth" scenario it probably has to change, if for no other reason than to avoid confusion between the two arms of the operation.

Either way, an investment is required to establish the internet brand, whether it is new or not. This is no small matter. Adopt the view that your brand currently has no value at all on the web, no matter how big it is elsewhere. You have to create that value.

'The Electronic B@zaar - part four': http://www.silicon.com/a38346

** Extracted from 'The Electronic B@zaar: From the Silk Road to the e-Road' by Robin Bloor published by Nicholas Brealey Publishing, £19.99.