Read an Excerpt
Advantages of the Cutting Edge
* Improving internal communication
* Working with your suppliers and vendors
* Reaching out to old and new customers
* Broadening your market share
Wired for Business with the Internet
A business is made up of many separate parts: administration, production, sales, marketing, and so on. For a business to survive, much less thrive, it must connect internally as well as with outside entities--suppliers, distributors, wholesalers, retailers, and finally, customers. Throughout history, businesses have made increasingly more efficient connections between their internal organization and these external entities. From the earliest sea going trade routes to the latest satellite communication, each era brings a better way to transact business.
Overall, the Internet is the most efficient business communication medium in existence today--not because it's the fastest mode of communication, but because it's the fullest, offering the capacity for a complete exchange of information from all parties involved.
FAQ: What's the difference between the Internet and the Web? Technically, the Internet preceded the World Wide Web by several years. Originally the Internet was a text-document-only medium, and the Web first brought images online and later, multimedia. However, the two terms are used interchangeably today.
To some, making a business and Internet connection means putting up a Web site--or at most, an online storefront. Although these are beneficial and, in some cases, extremely lucrative, a Website is only one aspect of an all-encompassing Internet strategy.
* To learn more about establishing a Web site, see page 245.
* For the inside scoop on selling online, see page 287.
If your business is not taking full advantage of the Internet, you're history. A few compelling examples demonstrate its importance:
* In six months of operation, Boeing Co. sold over $25 million in airplane parts to its established vendor base--through the Internet.
* Covering both retail and business-to-business, computer manufacturer Dell pulls in over $3 million in orders per day from its Web site.
* Web-based bookseller Amazon.com reports that 55% of its sales are to repeat customers.
* In addition to raking in over $250 million in its first year of operation, Cisco Connection Online, a major manufacturer of networking equipment, saved another $250 million in product literature distribution and staff time.
* Columbia Healthcare/HCA Healthcare Corp. screens cold calls from vendors through the Web by having medical supply houses prequalify through an online form.
* Independent truckers can log on to Volvo Trucks North America's Web site and customize and purchase a $120,000 Volvo cab online.
If your competitors have not taken full advantage of the Internet, you can bet it's only a matter of time. What makes the Internet so strategically vital is the degree and type of communication it makes possible--internally, business-to- business, and with your customer base.
The Internet can centralize your communication system regardless of how far flung your operations may be. Three key areas where the Internet can benefit your company's internal communication are
Email is often considered the killer application for both intranet and Internet use. Email can be reviewed more quickly than voice-mail, sent to multiple parties, and forwarded and incorporated easily into other documents. Moreover, email can act as a courier for the transportation of other documents--and even other media. But messaging isn't just about email. Messaging is the ability to share information to a select set of people, whether it's one person or a hundred thousand people.
FAQ: What's the difference between the Internet and an intranet?
The Internet is the large public communication network that links computers around the world. An intranet is a company network that enables access out to the Internet--and sometimes access in.
Case Study' BC Telecom
BC TELECOM is Canada's second-largest telecommunications company, with approximately 2.5 million customer access lines. The company's net earnings for 1997 were $286.7 million. BC TELECOM is listed as BCT on the Toronto, Montreal, and Vancouver stock exchanges and maintains a Web site at www.bctel.com.
BC Telecom, whose home page on the Web is shown in Figure 1.1, deployed a state-of-the-art intranet and messaging infrastructure to replace its aging mainframe system with its separate applications for email, calendaring, and human resources. The company is highly diverse, and its new messaging system manages over 60 internal newsgroups accessed by about 5,000 people. The newsgroups provide an ongoing discussion that can answer frequently asked questions.
BC Telecom uses a certificate server to authenticate users from within the intranet and to allow outside callers access through the Internet. Employees can check their email no matter where they might be. The certificate server can also handle encrypting sensitive email and emailed documents.
Like many intranets, BC Telecom standardizes on a particular browser for all its users' systems or clients. Most browsers maintain a common look-and-feel for the different messaging applications, which saves considerable expense in information technology training.
Any office needs to keep in constant touch with all its employees. The advent of the intranet has opened up a hotline of communication. Now, for instance, instead of Human Resources distributing memo after unread memo, the information can be published once on the company intranet and accessed as needed. More importantly, updates can be handled by altering a single source, rather than republishing and redistributing to the entire organization.
Case Study: AT&T
AT&T is the world's leading voice and data communications company, serving more than 90 million customers, including consumers, businesses, and government. With annual revenues of more than $51 billion, AT&T provides services to more than 250 countries and territories around the world.
AT&T uses the Internet to connect its global intranet system and communicate with its 300,000 plus employees. AT&T's system includes the following innovative features:
* To facilitate the various business units working together with multiple budgets and expense transfers, AT&T has instituted a universal currency system that uses "digital cash." This intranet e-commerce system enables AT&T to stay decentralized while eliminating the overhead expense that usually accompanies decentralized billing systems.
* Ordering office supplies is a necessary but time-consuming chore. AT&T has adapted its global procurement organization with a Web interface to its internal ordering systems so that employees can order supplies online--and check for stockroom availability, as well.
* The first component of AT&T's intranet was an internal contacts database with employee phone numbers, addresses, titles, and business units. With the browser-based interface, users can find contacts up and down the organizational ladder by pointing and clicking.
As you might suspect, AT&T has invested heavily, financially and corporately, in the Internet. And the investment is paying off. AT&T uses the Internet to access, work with, and distribute information throughout its vast organization.
It's one thing to give your employees around-the-clock access to corporate documents; it's quite another to give them the power to publish key departmental information on their own. Empowering employees in this manner helps keep the most current information available to everyone from a centralized source. Ideas are shared across divisional or even international lines; staffs can easily adapt existing documents to be Web ready; and both time and money are saved on distributing publications throughout the enterprise.
Case Study: Ciba-Geigy
Ciba-Geigy AG is a leading worldwide pharmaceutical and chemical company that provides products and services for health care, agriculture, and industry. The company is headquartered in Basel, Switzerland and maintains a Web site at www.ciba.com.
Ciba-Geigy needed to find a way to coordinate communication among its 80,000 employees in 50 countries. Faxes and email placed the burden on the staff to take on additional duties, such as filing and sorting; still, employees were unsure whether the information was the most current available. The answer was the centralized source made possible by the Internet.
FAQ: How difficult is publishing on the Internet?
The basic language of the Internet and intranet alike is HTML, which, although relatively easy to learn, is not a required skill for basic Web publishing. The latest word processing software offers a Save As HTML feature whereby any document can be stored on the Web. More complex documents can be built from answers supplied on a form and then submitted for processing and publication. Bottom line: although it's not a nobrainer, it's not difficult to put up basic text. However, establishing an entire site requires much more skill, both in design and programming.
As new product information emerges from the development labs, it can be published directly to the internal Web for dissemination to the sales and marketing departments. The centralized information source also helped Ciba-Geigy leverage its international connections because employees in different countries could share problems and solutions at the press of a "publish" button.
No business is an island. Without suppliers and distributors, you can't leverage your growth potential into something real. The Internet opens a whole new channel of communication between your business and your business partners. An intranet that has been extended to include a company's business associates is referred to as an extranet.
Whenever a company opens its internal affairs to outside eyes, security has to be addressed. Modern Internet technology lets you set the level that various external companies can reach in your information infrastructure. Generally, the more information that can be shared between business partners, the faster both can complete their transactions. Opening up your extranet can effectively remove layers of middlemen.
* To find out more about what it takes to protect your Internet connection, see page 17.
Case Study: The Boeing Company
With assets in 1997 of $45.8 billion and a recent merger with McDonnell Douglas, the Boeing Company is well positioned to serve three principal aerospace markets--commercial, military, and space. The company has an extensive global reach with customers in 145 countries and operations in 27 U.5. states. Worldwide, Boeing and its subsidiaries employ more than 238,000 people.
The Boeing Co., whose home page on the Web is shown in Figure 1.2, maintains an inventory of 410,000 parts for a wide range of airplanes. Airline and aviation repair shops require a speedy delivery for ordered equipment. Boeing has implemented an extranet to facilitate the straightforward purchasing of repair parts. Valued customers are registered and given a password to gain entry into the Boeing extranet.
Using the extranet, customers can check inventory during the ordering process to avoid back orders. After a part is requested, it's removed from inventory and shipment is guaranteed within 24 hours. Customers are emailed a separate confirmation of the order and the tracking information. The extranet allows ordering around the clock with no additional staffing requirements. Because the Boeing goods are of a known and respected quality, no personal inspection is necessary, and the availability and price quoting are handled without middlemen.
One method of building brand loyalty is to establish ongoing communication with your customers. The Internet can give your customers a central information source that can be easily updated and maintained by your office. In addition, online customers can receive special sales bulletins directly in their email inbox. By opening up the information flow with product information and related value-added data, a business can broaden a customer's comfort level and reinforce the bonds between itself and its customer base.
Sales information, in exhaustive detail, can be posted on an online storefront for easy customer access. Customer support can also be directed largely through the Internet. Moreover, online ordering allows customers to circumvent lengthy back-order delays, while simultaneously informing management of requested, but unavailable, items.
* To see how your company can cut down on back orders, see page 108.
Case Study: KinderCare Learning Centers
KinderCare Learning Centers is the largest preschool and child-care company in the United States. As of 1997, the company operates more than 1,150 child-care centers in 38 states and the United Kingdom; it has more than 23,000 employees, and enrolls approximately 126,000 children.
In addition to product-specific information, the Internet allows a company to attach a wide variety of value-added information and services to its Web site, thus becoming an identifiable resource in the minds of its customers. KinderCare Learning Centers, for example, a chain of child-care centers in the U.S. and the United Kingdom, offers parents a central resource for parenting information, as well as links to child-oriented activities. In addition, the KinderCare Web site allows parents to search for the nearest center--and even provides them with directions and a map. KinderCare plans to expand its Web site to include center-specific information such as staff profiles, education, experience, and accreditation data.
Technology improves customer communication
Customer communication can even take advantage of cutting-edge technologies. A rival child-care facility offers the "baby-cam," which allows parents, after entering a password to keep out prying eyes, to remotely view their children at the center through the Internet. The picture is updated every 15 seconds and made available on the Web.
Expanding the Customer Base
What would you say to a store that is open 24 hours a day, 365 days a year, is available to almost any customer on the planet, and requires only minimum staffing? Storefronts on the World Wide Web offer all these advantages and more. The Web gives companies a global opportunity to attract--and sell to--customers.
Internet access is approaching a truly worldwide reach with all manner of consumers coming online. Fears of e-commerce security are going by the wayside as more customers buy products over the Internet without incident. A wider range of payment options--from traditional credit cards and checking accounts to digital cash solutions--is now available. Products targeted to a narrow market don't have to be placed in a mall to assure enough traffic because the world is your new marketplace.
* To find out more about the various Internet payment options, see page 313.
The Internet doesn't just bring a world of potential new customers to your storefront, it can also enhance brand loyalty and redouble marketing efforts for your offline products as well. The Internet can help your business-customer relations in three primary ways:
* Reaching new customers
* Retaining prior customers
* Upselling and cross-selling current customers
Reaching New Customers
Expanding the customer base likens any business to a shark--it's got to keep moving or it dies. Selling online gives your company an opportunity to broaden your base without regard for geographic or even temporal boundaries. And if your business is a small one, customer expansion is extremely important. One method is to run an online store and use some of the marketing bullets in your Internet arsenal, such as marketing surveys and direct contact with established customers through email.
One small business, Dog Toys of West Chester, Pennsylvania, found that it can enhance both its direct sales and its retailer connections through an online store. Dog Toys, with its specialty market of toys for pets, would have a hard time making a go of it in a traditional storefront. Selling online opens up the possibility of an almost limitless customer base--Dog Toys reports selling to clients in Germany and Singapore. Furthermore, the high-rent, high-maintenance storefront required by a mall in a major traffic area is neatly side-stepped with the virtual store.
Dog Toys finds more new customers by developing toys requested in online surveys. By partnering with high-traffic, related sites, Dog Toys can conduct valuable market research in exchange for product. In addition, email gives the company an easy method for responding to product queries. As any salesperson can tell you, after you establish a rapport with a potential buyer, you're one step closer to a sell. Prompt email responses can have a definite impact on increased sales.
Retaining Prior Customers
The only thing worse than not getting any new customers is losing the ones you already have. All businesses must devote resources to preventing the erosion of their customer base. A complete Internet strategy can make your company leaner and more competitive, thus providing basic customer incentives such as innovative products and lower prices. In addition, the Internet can help you earn your current customers' brand loyalty. One tactic is to simplify the ordering process.
At present, online ordering involves filling out a series of forms with customer information, such as shipping address and credit card information. Savvy online stores, such as bookseller Amazon.com, maintain an account for each online customer that stores the vital information on its secure server. To access the account, a user name and password are required. (Should a different shipping address be desired, Amazon.com requires the credit card information be re-entered, further protecting the customer.) With policies such as these, it's no wonder that Amazon has a 55% return customer rate.
The Internet can also be used to provide a feedback mechanism for current customers. Ford's Web site gives the customer access to a high-level executive, the Group Vice-President of Marketing, Sales & Service, to foster the sense of responsiveness and community. In addition to binding the customer closer to the company, direct response is valuable information in and of itself.
Companies with technical products use the Internet to provide another route for customer support. Computer products, both hardware and software, are ideal for multi-tiered support systems. Microsoft, for example, has a searchable knowledge base in which business partners, consultants, and end users can find solutions to existing problems--or report new ones. The company's Web site also has a trouble-shooting "wizard" to help diagnose specific system difficulties. In addition, Microsoft uses the Web to market its premium support opportunities in which response time is tied to the charge--the more the customer pays, the more quickly the problem is solved.
Upselling and Cross-selling
As any salesperson worth his or her salt knows, after you've got your foot in the door, it's time to see what other products the customer is interested in. The Internet offers several innovative methods for creating the upselling opportunity, far beyond the "Want fries with that?" approach.
As online customers make purchases, their buying habits begin to leave a trail for companies to follow. Certain e-commerce software can tailor upsell offers to take advantage of both the customer's desires and the company's needs. If, for example, a customer just bought a new pair of brown shoes, the vendor could offer a shoe-polish kit at a special low price while the customer is still online. I once placed an order for a radio-controlled UFO from Hammacher-Schlemmer's online store, only to be offered a deal on extra helium tanks as I completed the checkout form.
Moreover, additional product selling doesn't have to be so directly linked. Cross-selling can be much more subtle--and effective. The major search engines, such as Yahoo! and Excite, attempt to offer context-sensitive advertising. Put in an entry for "scanner" and you might get a banner ad for a new Xerox product that promises to do more with your scanner. Or you can click the Amazon.com link to look for books based on your search request.
Microsoft recently purchased Firefly, whose intelligent agent technology recommends other products that customers might like based on their current orders. Firefly and similar technologies are very effective in online music and book stores, where the customer is likely to be open to trying something similar but unfamiliar. It's also possible to apply the technology to unrelated products based on consumer buying habits.
FAQ: How does Recommending Software work?
Firefly uses a technology it refers to as Automated Collaborative Filtering. Sites employing the Firefly system make recommendations to customers based on what other people with similar tastes buy. If, for example, you purchase a book by the latest, top-of-the-charts mystery author, Firefly searches its database for other people who bought the same book. Then it examines what else they bought; if Firefly finds a significant overlap with many people buying the same book, that book is offered to you.
Netscape commissioned a study on an intranet's return on investment from the International Data Corporation (IDC). Whereas most financial managers look for a return of 20 percent or better on technology investments, the IDC study found that the typical company achieved a return of 1,000 percent or better--one company's return reached an astounding 1,766 percent!
The other significant find was the short payback period. The payback period is the time it takes for the project to return enough money to cover the investment. IDC found the payback period for a fully integrated intranet project to range from six to twelve weeks, indicating that an intranet project carries an extremely low risk of not recovering the investment.
Where do the savings come from? Overall, three main areas are considered:
* Training. Because Internet/intranet applications rely on one central interface--the browser--to handle all applications, training time (and costs) are significantly reduced; fewer outside trainers and less class time are needed.
* Productivity. Centralizing information increases productivity across the board. Multiplying even a small fraction of the time saved per employee results in significant savings.
* Communication Costs. The implementation of many intranets leads to the wholesale slashing of costly publications, such as newsletters, employee manuals, and directories. Additional savings are derived from using email to transmit messages almost instantly around the world, in contrast to reproducing and overnighting documents.
To better understand how an intranet project can impact on a company's bottom line, let's take a look at a typical return-on-investment (ROI) worksheet. The worksheet shown in Table 1.1 is taken from the IDC intranet study and details return-on-investment information for Booz, Allen & Hamilton, Inc., an international management and technology consulting firm.
The return on investment for Booz Allen was typical of the study: 1,389 percent with a payback period of .19 years (about 12 business weeks). Most of Booz Allen's savings came from the elimination of fax, overnight deliveries, and telephone calls ($130,000), and the centralizing of information leading to a significant savings in a consultant's time to find and access accurate employee information ($6,969,600).