Written on 22 October 1999
Strategic Issue
Why is the Internet a Strategic Issue?
Every time you pick up a newspaper or magazine there is an article about the Internet and how it is a strategic issue, not just an IT or Marketing issue. At first glance it is not at all clear why a website or a new type of computer network (Intranet) should be strategic, so it is tempting to dismiss the claim as the ploy of salesmen trying to get access to the deeper pockets of top decision makers. Unfortunately, this time it is the real McCoy and you ignore it at your peril.
The Internet is not just an advert on a computer screen, it is a brand new channel to market. At its best it will enable your business to reach a much wider range of customers from all round the world. At its worst it will destroy your existing channel to market or dissintermediate you from your supply chain (sorry, I have not found a better term for the ‘cutting out of the middle man’ effect). In any event it is likely to entirely alter the way in which your company adds value over the longer term.
The Intranet is just another computer network that uses the same technology as the Internet, but applied to your closed company network. Ask an IT manager whether you have an Intranet and he/she is likely to tell you that you can have one wherever you wish. The issue is not the technology of how your computer systems talk to each other; it is the application you run and how they add value to the business.
How are you going to significantly increase customer service and/or reduce costs, by using this technology? The first use of an Intranet is often to publish a telephone directory or the canteen menu. Obvious applications, but hardly world shaking.
The true potential is different. Integration of information systems can enhance JIT production, enable integration with supplier and customer inventory systems, streamline quotation procedures, improve financial reporting and/or empower branch decision-making. The results may enable you to significantly reduce office overheads, increase sub-contracting of non-core activities, and reduce the time to market of new products. As if that weren’t enough, the US trend of share trading over the Internet is about to reach Europe, and that will change forever, the way in which businesses raise finance.
So the Internet has to be a strategic issue, and as such it should be taken into consideration with every long-term business decision and every new capital investment. A good start is to give some consideration to creating an ‘Internet Strategy’ for the business, and its likely effect on the whole business sector in which you are involved. Then designate one person on the board to take responsibility for reviewing all future decisions from that perspective.
In general, I would try to avoid making your IT director the Internet champion, he/she is normally pre-occupied with delivering services within the company and therefore needs to have an inward looking perspective. What this role needs is a person who is very clear about what customers outside the company would like or need, and the way in which the technology will enable the company to deliver it to them.
Companies of best practice seeking competitive advantage are setting the trend. But they will be followed by all those that wish to survive.