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The Almighty Buck

The Economist on E-Business 37

Anachronomous Chowder writes " The Economist has a smashing issue devoted to E-Business. Andy Grove: In five year's time all companies will be Internet companies or they won't be companies at all. "
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The Economist on E-Business

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  • by Anonymous Coward
    WalMart, BurgerKing etal, and grocery stores with the UPC ordering will go web crazy. Even the mom and pop stand alone stores will be affected.

    My brother had a sales route and territory covering a chunk of the state. He would drive(!) from store to store getting orders, recording them in his handheld, picking up checks, and smoozing. This was before the web.

    Then, one of these wholesalers put their order entry on the web, sent letters to everybody elses customers on how they could save 25% by ordering through them, and get their stuff by UPS. Lost his customer base in three months. Fortunately, he got a job installing this system. The small stores that didn't use this system got pushed out.

    You can see it today for yourself with Quill Office Supplies. Their order system is so with it, it's easier for me to connect and order, rather than run downtown. Just a $45 minimum order. It's murdering our local suppliers.

    This web thing is a killer app.

  • Anybody waiting to see the next wave of email viruses/t-horses wipe these guys out? Some people just never learn.....
  • I don't think so. OK everyone will be on the net but that does not make you an internet comapany. Anymore than having a phone makes you a phone company. In 10 years GM will still be making cars, and I would bet most of them will still be sold at the same type of dealerships.
  • I've subscribed off and on to The Economist and TNR over the past 20 years. While much of The Economists news is wire service and stringer work, it does cover the world. Time, Newsweek and USNews (Do any of them know that there are countries other than the US?) regularly devote more copy to Hollywood than the rest of thw world.

    It doesn't hurt that The Economist is a fun read either, but I get most of my foreign news from the net nowadays.
  • Bah!

    For large businesses that sell high-interest products such as computers or cellphones, I can pretty much agree with the article. But most of the money in the world is still in common household supplies. In food. In drinks. Gas. Toilet paper.

    It will take a long time before that stuff converts to Internet for business. I find it very hard to believe I'd use the net for everything I buy. I mean, most of the time I don't know when I'm home for someone to deliver whatever I've ordered.

    What information technology is giving us, in the means of email, cellphones, pagers and estores is freedom of movement. We don't need to arrange things anymore in advance as much as we used to. Which has made us even more dependant on people and businesses who do plan, such as the local store that nicely holds it doors open long in the evening so that I buy bread if I come home late.

    From a cafe or shopping in a small store that specializes in something I want to touch before I buy. Something I wouldn't dream of getting from an estore.
  • Which is why I said I agree it makes sense to larger corporations (who quite often mostly do B to B).

    I guess I didn't make it clear enough I was criticizing the "business going to the web" hype in a broader sense; if you read the article, you probably noticed it does hint at all business going to the net at some point.
  • Seems to me that a significant part of the increase in business over the Internet will be in business-to-business inventory management. Beef up the company intranet, so that current inventory is tracked up-to-the-minute. Arrange sole-source supplier contracts. Ensure that they have a quality processes system in-place. Connect your intranet to theirs using the Internet.

    Lower inventory levels, lower carrying costs, lower prices, high quality, etc.

    Big business in that.
  • Cisco making money is not interesting. What is interesting is that when the market stop exploding, which must happen one day, the work they have put into their supply chain management will help support their already dominant position. What Cisco has done makes it hard for competitors to catch up with them now, and in the future will help retain their dominant position.
  • I recommend you read the rest of the review, especially the bit about Cisco. Any company trying to compete with them is going to have to adopt the same strategic thinking.
  • Then you should go read the article. It says very clearly that internet commerce is no big deal for consumers - just like telephone ordering only different. What the editorial, and to a much greater extent the review section, are saying is that business to business commerce will increasingly occur over the net.
  • The custom protocols currently used by big companies to bully (sorry, communicate with) their suppliers are being displaced by open
    internet standards. That was the main point
    being made in the review.

    Purchasing departments will still be necessary. They'll just be allowed to concentrate on the interesting parts of their job. The economist has written many interesting articles, includign a recent review section, about changing patterns of work and the problems they present. If you are really interested, I suggest you go look at the web site again.

  • They talked a lot about "visions" and "explosive growth", but completely ignored the effects of global data warehousing on privacy and anonymity that will transform this society.

    I too subscribe to the economist, and have been using it to kill insects since the age of eight, though never mice. I thought this was one of their more clueful articles about technology, to be honest.

    They talked mostly about business models, and admittedly some of it was 'visonary' (ie. purely hypothetical), but they also talk a great deal about real examples of supply chain management (eg Cisco) and new-style 'infomediaries' (ick).

    They didn't talk about data warehousing or about privacy concerns, because these were not the subject. Privacy was covered in another review a few weeks back. Admittedly the issues connect, but they were writing a review of business-to-business commerce on the internet, not business use of consumer information.

  • Oh, yeah. The New Republic. Definitely an unbiased commentator on weekly news reporting. Uh huh.

    To be a little more serious: the economist is often wrong. Last time I checked, only god was expected to be prescient. The British are only expected to pretend they always knew what was going to happen. Since I disagree with almost everything in their editorial position, I read it primarily to have something well informed to disagree with.

    Finally, I would like to point out yet again that the article is not about consumer to business commerce. It is about business to business commerce.
  • I'm not sure Cisco ever did reinvent themselves. They've always worked much that way AFAIK, and their business is in no way a natural monopoly like Intel's or Microsofts. Hence the need for efficiencies.

    I agree, they're a bad example of how to transform a Company, but they're and example of how the thing can work. GM will certainly have a lot more issues in trying this kind of thing, but I'll bet you they will try. One of the big car manufacturers once redesigined the whole door of a model to save 3c per vehicle.
  • Hmmm. First I assume you are neither a Jain nor a Buddhist...but there is little else of substance in your comments.

    The emphasis of the survey was on reducing the cost of business and the spin off effect of Darwinian economics...a bit like Freidman's "Lexus and the Olive Tree".

    It'll happen, much as they describe...the mechanisms are there. eCommerce lowers the cost of business, just as does Open Source...but...if you had payed attention to the article...the emphasis was on business to business transactions, not on personal secrecy...

    Companies like Acxiom...and all the rest...have busted your personal, financial security long ago. They haven't needed eCommerce to do so.

  • What arrogant John Bircher pap!

    1."Research by Forester...Go figure!" How rude!

    It insults both the reader and declares the Economist as plagaristic.

    2. Probably true. The Economist does stick its neck out about prediction rather than being safe in reportage...but what's your point? That your apartment is littered with old copies of right-wing porn and photos of Margaret Thatcher in congress with Reagan? Or is it that you are the true guardian of the public economic morality?

    Scenarios often don't work out duckie...they are intended to stimulate thought rather than reactive

    3. Just wait. You're wrong. Dead wrong...and so is your business.

    Finally, your rudeness, your phrases..."let's remember"...and admonitions of "keep in mind"...don't win friends...neither does your logic...albeit not all companies will need big investments in directory or infrastructure, but many (even John Birch small) could advantage themselves of cheap computers and Open Source...
  • I've been an Economist subscriber for a few years now, and despite some problems I've been pretty impressed with it, particularly it's technical reporting. So I've been submitting Economist stories to slashdot off and on (because I'm sick of all the pointers to zdnet, cnn and msnbc)... I thought about submitting this one, but it looked like pretty lame business-think stuff to me, so of course, this is the one that made it. Whatever.

    However, it is true that they can be a bit naive about computers (e.g. I remember a particularly funny article about how wonderful Object Oriented programming is because of all the code that gets reused, thereby saving oodles of programming dollars).

    Anyway: the primary strength of the Economist is that they really do report on global news (unlike, say "US News and World Report", where the "world report" half of their title typically refers to one page). The Economist, on the other hand has lots of stories about things like competing consititutional conventions in Zimbabwe (have you heard about that one? Why not?).

    It's a bit misleading to call it a "conservative" publication, because it's British and it has different biases than American conservatives do. They're rabidly opposed to the right to bear arms, regard the death penalty with suspicion, and they're opposed to the "War on Drugs". They're also nowhere near as hostile to the UN as American conservatives... and they're positively in love with the IMF and the World Bank (I would guess that the average American doesn't even have a clue as to what the IMF does.)

    Just for the hell of it, some links on that subject:

  • Goddamn it. Punched "Submit" on my way to hit "Preview".

    Here's what the links should have looked like:

    And now slashdot can't handle my html (though, Netscape 4.5 has no problem with it). So you've got to cut and paste those last two: ary/index_special_collection.html

    (Slashdot's alpha-quality is pissing me off today. They sold this shit?)

  • I subscribe to The Economist and it's the most useful mag I've ever subscribed to - with one rolled-up issue I killed a mouse roaming my apartment (plus, of course, some Wall Street Journals to trap him in the bathroom).

    But this e-commerce "supplement" was the most useless circle-jerk I've seen - even worse than the "supplements" touting investments in some unstable desert or tropical semi- or barely_past- dictatorships. They talked a lot about "visions" and "explosive growth", but completely ignored the effects of global data warehousing on privacy and anonymity that will transform this society.
  • The article mentions a Forrester report without mentioning it is available
    direct from Bill Gates's "Business at the speed of thought" server.
    That report is quite wrong regarding the European growth perspective because it neglects current (recent) government impetus, the advent of free ISPs, and very cheap computer + internet deals which have been extremely successful in the past 6 months (after the report was written).
  • I think the issue is less where you as an individual buy things, but where the companies you are buying from buy them.

    Imagine a world where the local coffee shop buys the toilet paper for its bathroom from some toilet paper vendor on the internet, and has a device in the closet that automagically re-orders when there are only three rolls left (or some such). Or a supermarket inventory system that knows when it has fewer than six cases of budweiser left in the store it's time to submit an order to the anheuser-busch distributor web page, and does it for the store, without any human intervention.

    For businesses, this could be a godsend. The consumer won't even notice ... but that's sort of hte point, isn't it?
  • Cost of change is an issue. My hausmate and I were talking about this last night, in particular about how purchasers can use customized software to talk to software that distributors are using --- it looks like a few years down the line (two or three) there will be standardized interfaces of some sort for this type of thing, driven largely by the big companies demanding that their partners use what they want to use, and forcing all of the small companies to go along.

    What I'm concerned about, and the economist didn't mention this (They wouldn't) is this: all of this internetworking in the business world means efficiency gains, but it also means that the people currently doing by hand the things the software will do faster and better have to be retrained for something else. Who is going to retrain this army of purchasing department bureaucrats, and to do what?
  • the prospect of an entirely electronically commercial (or at least regarding the sale of merchandise) economy is an interesting one... it amplifies the ambiguity of a 'national economy' as the internet itself transcends these bounds and it also decreases the potential difference between present market environment (present demand and supply) and future market environment which decreases the necessity for companys to try and forcast what is going to happen when a product 'hits the shelves' (will it become an anachronism?). i don't, however, believe that concrete merchandise (everyone still wants to touch what they're buying and play with it) will lose its hold on the global economy until e-commerce becomes more effective in its online showrooms (it still amazes me how few harware products, compact discs, software products, and really anything which can be acquired online have both adequate descriptions [technical specs] and pictures of the merchandise) by increasing the effort to make good information availible online. it's always fascinating to see what people can make of ones and zeroes.

    -soft error

    probability? egads!
  • I agree that before internet shopping will become a reality for most people, the companies will have to get their acts together and sort out their deliveries: ETAs accurate to the hour or half-hour; evening deliveries as well as daytime deliveries; no extra charge for weekend deliveries; the ability to check up on where it is and being informed if it`s going to be late. These are all things that they should do, and don`t.

    I ordered a printer yesterday, which will arrive today `sometime before 5:30`. I can`t wait around at home all day on the offchance that it`ll turn up in time for me to then come into work: it`ll probably arrive while I`m out, and hopefully be taken in by my neighbours. I have friendly neighbours, so this is an option for me. For many people, it isn`t, and this is a hurdle that internet consumer shopping is going to have to cross.

    Another problem may well be delivery costs. The supermarkets are all starting to do web-based ordering; it hasn`t reached my area, though it will by the end of the year. Because I live on my own, the (fixed) delivery charge they apply would be a considerable percentage of the cost of my shopping. So, convenient though it might be (if they get the delivery times thing sorted) it would not be at all cost-effective for me. For large families, where someone is in the house most of the time, it might be different.

    And yes, there will always be real shops. There are some things you just can`t tell from a webpage. And a lot of things aren`t nearly so tempting if all you can see is a picture on a screen.
  • But cisco are in a market which is exploding. It would be hard for them not to make money at this point! Car manufacture or something is a bunch more interesting.
  • The feature is kind of interesting, but it fails to mention some of the downsides. A couple of obvious ones are

    • cost of change. They say that e-commerce will `transform' business, and that the rate of change will be enormous. Yet change is expensive, and rapid change is very expensive. It's already seriously hard to keep up with the rate things are changing, and this looks like yet more `let's reorganise!' fever. Completely transforming the way you work means completely reeducating most of your employees, and education is not cheap. And people don't actually like spending their lives racing to keep up.
    • Immaturity of technology. None of this existed 5 years ago; everything they are talking about has been written in a huge hurry by people desperate to ride some wave of fashion -- the least stable program I use is netscape, and I wonder how good all the other stuff involved is. I wouldn't trust my business to anything netscape wrote, and I'm sure all the other people pushing stuff are producing similar quality systems, because they are in such a tearing hurry.

    I think The Economist is touchingly naive about computing-related issues, and this is a good example. Somewhere in the feature the author suggests that the internet will finally be the silver bullet that brings all the productivity improvements that computers have promised, but failed to deliver, for so long. I doubt it.

  • Sigh, yes it *is* interesting: it is exactly because they are in a hugely profitable business that they can afford the large costs involved in reinventing themselves to be an e-business. Of course (as the feature says, talking about lucent), it also helps that they are a relatively new company and so have little history to throw away.
    Cisco are about as bad an example as you could pick of what e-commerce means for most companies.
  • Indeed. A few things worthy of note here:

    1. The numbers are most likely coming from Forrester Research [], a company that was founded to make projections about how technology impacts business. And they're traded on nasdaq. Go figure! It's like asking a Ford dealer what the best make of car is.

    2. The Economist isn't always right. I've been keeping their projections for the future issues onhand for about five years now, and they simply don't do all that well. Apparently I'm not the only one -- the cover story from the June 14th issue of the New Republic [] ran a pretty sizable expose on it. Check it out.

    3. The numbers are still pretty damn small. First, e-commerce: currently 8 billion out of 242,239 billion in consumer expenditures. A tiny fraction, seems about right. Forrester's saying in five years half of what's bought will be over the internet. ("Todd, we're out of milk... Can you hop online and order some?) Seems a little high to me! On the business to business side, I couldn't get the numbers -- if you wanted them you had to order a cdrom from the census bureau (but you couldn't order it online --the irony did not escape me). But total business reciepts were (breath!): $16,654,636,336,000. So do the math and make a rough calculation.

    Lastly, let's remember that not that many people can afford computers. Also keep in mind that the vast, majority of businesses have less than four employees (no numbers handy, eek). Census dept gives us roughly 10 out of 11 as having under 20 employees, though. The cost of a comprehensive net presence isn't going to be worth it for most companies.

    "the INTERNET ... revolutionizing the way you obtain porn."
  • I certainly didn't mean to come off as arrogant, self-righteous or rude. I was just trying to phrase things lightly. I can certainly see how it would be percieved as such though, yeah.

    I don't see TNR as unbiased reporting -- just the flipside of the more conservative Economist. Hence, like a lot of people, I read both. But I used to give the Economist a *lot* more weight. But maybe it's just me.

    I realize the focus is e-commerce. Like I said, the straight numbers for business to business wern't free, so I couldn't point to them.

    I'm not accusing the Economist of plagiarism -- they quote the Forrester study. Again, I was by no means attempting to insult the reader... Just pointing out where the numbers were coming from.

    I'm not sure where the John Bircher stuff is coming from (especially after ref'ing TNR!), but I assure you I'm not a right wing radical, nor do I look upon the 80s with great nostalgia.

    I agree that everyone can benifit from an internet presence of some sort. But e-business hype is targeted at larger business -- they're the ones who'd most benifit from the centralization, and that's where the money is for everything from infrastructure to consulting. I'm just saying if you add all the little guys up that's a sizable chunk of the market that might be overlooked, whatever.

    Again, I apologize if I came off rudely.
  • Oh dear!

    Cost? Well of course it costs, dearie...but is it cost-effective. My conservative oil-company seems to think so and has invested it's main IT finance in eCommerce and directory/security services.

    The information is there already set up in DB2 and SQL silos...and that has been the major cost. What we have to do now is to add XML processing scripts to our directory to add to digital signature and the daisy chain the silos of information with controllable web scripts (and access) to be used by our business partners. It's the fun stuff, less costly than the original silos of information and more productive in reducing the cost of doing business. This IS the payoff...but in DCF terms it's a no-brainer. I just hope we use Open Source rather than the Redmond muck.

    Re your "immaturity of technology" remark, what can one say...yes XML is "early adopter" usage right now...but give us a break. The difficulty with XML and Encrytption is not in the technology itself but in the way it is organized and administered in a large corporation...that's where directory comes in.

    My opinion is that the Economist is far from naive. They may not be as informed in depth as Burton, the notoriously conservative Gartner, Forrester or, come to it, maybe yourself...but they do touch all the bases.

    I would prefer my management to do their research using the Economist at airport check-ins than most of the stuff available!

  • I still think them saying everyone will be an internet company is jumping the gun alot. My father is a roofing contractor and I can tell you right now there is now way in hell he's going to ever buy his materials online. It's too easy to get duped if you cant see the product in person. His business rides on the quality of his materials, there's no way he'll ever buy them blind.

    Beyond that, the importance of the web to small business is over-emphasised. Just becasue you see it in TV commercials does not mean it's already happeening. Things that lend themsleves to catalog style purchases will probably go the route of E-business, but there's a ton of stuff that people wont buy from catalogs. Sales forces exist for a reason, to asses the individual needs of a buyer and cater to those needs to create a relationship of trust which will bring repeat business. You dont get that from a website or catalog. Big ticket items will probably always be sold by people. A web site wont make you confident in what you just bought. A salesperson will. Trying to pigeonhole a buyer into a pre-defined demographic is a great way to scare off potential business.

    Look at a company like Compaq. Do you think they're the largest computer company in the world becasue they sell direct over the internet? Oh wait. That's right. Until recently they didn't even sell direct. They sell computers with a well oiled global sales organization, something that Dell is just starting to build.

    You cant test drive a truck online. You cant see the knots in a piece of wood online. You cant feel how substantial a tool is online. You cant taste a food product online. These are just a few examples.

    I think the net will become the most important communications medium in the future, but it's ability to sell products is only important in produts where sales organization does not add value to the relationship. For example the IBM commercial where the japanese businessmen are buying products from some guy sitting in front of a PC in texas is absurd. Those men would not make a decision like that without being flown to Texas and shown the product, not mention they would have been wined and dined.


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