The newsletter of
Second Chance for e-Business
March 2003
In this issue
 
THE MANAGEMENT COMMENTARY
Second Chance
for e-Business
by Jean-Pierre Felenbok
   
Turning to Family Firms
for Inspiration
by Louis Amory
 
Getting Back to Basics
Guest interview with
Baron Paul Buysse,
Bekaert
Despite the busted companies
and business fall-outs resulting
from failed speculation,
online activity continues to
accelerate. This trend signals an
opportunity: in a tough, cost
cutting climate, e-business
can still deliver efficiencies
that boost productivity. Of
the 451 senior executives
Bain surveyed, most wanted
to benefit from e-business
to improve their business
operations, yet 62% felt their
companies were still not
taking full advantage of the
Internet. Clearly, the Internet
is here to stay. So how does one
tackle its “Second Coming”?
Jean-Pierre Felenbok
and maintain momentum
without investing blindly. They
adopt the venture capitalists’
approach: sifting for best ideas
and assembling strong teams to
manage the activities they choose
to support. They set tough but
realistic targets, then drip-feed
funds based on results, and act
quickly to adapt or kill off initiatives that aren’t working out.
Bain research reveals that the
companies most successful
with e-business stick to two
key principles, and pursue two
pragmatic practices.
Practice 1:
Use the Internet to slash costs
e-Business exemplars play to
the Internet’s strengths -cutting
costs and streamlining operations. In purchasing, GE
expected savings of as much
as $600 million in 2002 as its
locomotive unit got suppliers
to bid via web-based exchanges.
Dell computer saved $50 million in parts inventory -reducing 13 days’ worth in 1997 to
5 days’ worth in 2002- just by
allowing suppliers to peer into
its factories through a web window. Oracle used web-enabled
business processes to add
$1 billion to its profit margins.
Principle 1:
Put thought before technology
Leaders in e-business know what
their core businesses are and
understand how the Internet
affects them, but they don’t let
technology fads cloud their
thinking. Only once they’ve
determined their business
strategies do they start planning
how the Internet can strengthen
or accelerate the growth of
their core businesses.
Principle 2:
Do as the venture capitalists do
Leading companies that
successfully exploited the
Internet know how to generate
Bain & Company
·
Amsterdam
·
Atlanta
·
Beijing
·
Boston
·
Brussels
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T M C
Practice 2:
Use the Internet
to build new assets
For all the hype surrounding
e-business, the Internet still
has the ability to create brand
new products that are valuable
to existing customers and attractive to new ones. GE created a
new service using the constant
streams of information about
how its customers use its huge
installed base of equipment.
Customers now pay GE for
real-time comparisons between
the performance of their
machines and that of similar
equipment run by other GE
customers. The service is profitable and the database itself
becomes a reason to purchase
new GE gear.
In the Internet’s Second Coming,
leading companies are redesigning their systems to exploit
it. The same phenomenon
occurred a century ago when
business leaders realised what
they could do with electricity.
Before long, e-business initiatives such as online purchasing
of components or employee
Intranets will become commonplace. The winners will be the
companies who understand
both their own core businesses
and the Internet’s potential well
enough to identify hidden gems
among their intangible assets
-their networks, databases,
brands and market shares.
Jean-Pierre Felenbok, Partner
Bain & Company Paris
Chicago
·
Dallas
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