Switching channels

Failure to recognise that the Internet cannot change everything overnight is costing the IT industry dear

Failure to recognise that the Internet cannot change everything overnight is costing the IT industry dear

Martin Butler

Creating the global market that was the early promise of the Internet is proving harder than was originally considered. Despite all the warnings that were put forward as to why the Global economy was an issue that extended beyond the Internet, investors and companies continued to ignore good advice and pump money into ventures that were doomed to failure.

The reason why dotcom start-ups are having such a bad time of it, and the clicks-and-mortar companies are beginning to reap the benefits of the Internet economy, is because of the logical and physical infrastructure that already existed in the latter, and which was missing from the former.

The actual channel used to sell is a minor issue; the key to any successful business is having this infrastructure in place, which includes having the business relationships that will allow for true flexibility.

It is these business relationships that the new e-markets are threatening to disrupt. It is the creation of a 'supply and demand' economic structure that ignores every other element - including the worth of relationships - of true business economics.

Too much emphasis was placed on a single element of real-world commerce to the detriment of other elements, and with the ultimate effect that companies are failing at a frightening rate.

This stems from the oft-repeated phrase that the 'Internet changes everything'. This is patently untrue, and one of the more banal and simplistic statements to have appeared over the past few years.

No single element in business has the power to change everything. There have been many instances of major changes in business structure. The introduction of computers or the automation of the production line being just two examples. While both of these had major effects, and altered the way that business was done to a great extent, they did not change everything.

Similarly, the Internet cannot change everything, and it is the failure to recognise this that is costing the IT industry dear. Until we understand that business economics contain multiple immutable laws, we are all in danger of failing to bring the promised benefits of the Internet to fruition.

That this would be a major disaster should go without saying. Just as automation brought benefits that spread through the whole of society, so should the Internet. What has to be remembered is that the benefits of automation did not come easily, nor did they come without a price and a period of adjustment within the social fabric. This will be the case with the Internet - it is not a quick-fix solution that can be divorced either from other business issues or from societal issues.

Figures appear to indicate that the Internet experience over the Christmas period was less than might have been expected, and as a channel was less than would be acceptable for a more mature model. Whatever the final percentage of trade conducted over the Internet turns out to be, it seems that it will struggle to get much above 1%, which has to be a disappointment to those experts that have been talking of the Internet as the death of bricks-and-mortar commerce. At this rate it's going to a protracted demise.

A similar situation exists in the business-to-business space. Although B2B will be the major consumer of the Internet and Internet-based technologies, this will not happen overnight. Nor will it end up redefining each and every business practice and process.

Take, for example, the new e-markets. These will allow businesses to form new alliances and create new relationships (along with a greater number of relationships). This will not mean that businesses will use these new possibilities to browbeat their old suppliers/customers. No organisation, in its right mind, is going to throw away all the advantages that have been gained over many years in order to gain a fraction of a percentage point saving off an inventory item.

Business is not just about supply and demand, nor is it just about cost saving in financial terms. Business is about long-term strategic planning, which involves having in place relationships that can be relied upon to deliver when the going gets a bit sticky. It is about suppliers of goods and services that are prepared to go that extra mile to help you, because they value your business in the long-term.

This is the world of real commerce, and it is those organisations and businesses that get to grips with the use of technology and new technology-based models that will ultimately succeed - and succeed at the expense of those businesses that think that the Internet can change everything.

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