|Changing the Rules, Albert A. Angehrn|
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So far, the Internet has had limited impact on how most large companies operate. Essentially, it has done little more than facilitate access to consumers worldwide, and speed up certain processes through disintermediation. Overall, its strategic impact has been weak. However, once it fulfills its potential, the cumulative influence of the Internet within the four virtual spaces may produce a different order of change altogether. The full exploitation of the communication and transaction spaces, in particular, may upset a lot of our basic strategic assumptions - about how best to absorb, process and leverage information.
This assertion is based on what remains a little documented phenomenon - the emergence, thanks to the Internet, of a new breed of firm - the global start-up. The most embryonic start-up becomes a multinational company, at low cost, simply by virtue of setting up a Web site. As the joke says, "The great thing about the Internet is that no one knows you're really a dog." But many of these new entrants are not dogs at all. The Internet has done much more than magnify their visibility. It has also provided them with a low-cost distribution network, with a way of searching for business partners, and of collecting critical information about distant markets and resources.
The Internet does more than simply let new entrants compete on a par with established companies; it can sometimes give them the edge. Consider the challenge of accessing resources. The China Internet Company, backed by the Xinhua News Agency, has established a network of Internet sites for 40 industrial cities [Booker 1995]. This is accompanied by a complete catalogue of Chinese laws relating to trade and export, a translation service, and news. Given the paucity of a physical infrastructure for information about exports, the Internet will quickly become the key channel for companies wishing to do business with Chinese suppliers.
Similarly, where companies are offering a specialised product or service, the Internet serves to trawl for customers worldwide. It has the capacity to transform former niche markets into mass markets. Moreover, the low cost of distribution on the Internet makes it viable to serve whole new market segments. For example, online newspapers have created a new readership among expatriates living in remote locations who were previously neglected.
The Internet also allows small companies to conduct forms of market research which would previously have been prohibitively expensive even for big companies. As already mentioned this can be done by tracking the behaviour and preferences of "visitors" to Web sites. But the Internet also allows companies to conduct cut-price surveys which are much more effective than phone or mail surveys in that they allow branching (that is, different questions based on different responses to previous questions).
So the new economics of doing business in a virtual marketspace create new business opportunities. At the same time, much of the conventional wisdom of business is threatened [Scott Morton 1991; Venkatraman, 1994]. For example, the size of a firm will no longer be much indication of the scope of its geographical activities. The traditional concern with "where to do business?" is superceded by the concept of "how to do business?". A well established network of physical assets may no longer be of much use - indeed, it may even get in the way of speedy strategic reconfiguration. The key competencies embodied by a company will no longer relate to products but rather to processes - and particularly the capacity to link up quickly and effectively with different types of network.
Of course it raises a new set of practical issues: How do you build up trust and commitment without face-to-face contact? How do increase the motivation to share information where the outcome is uncertain? How do you anticipate the key networks and make the right learning connections?
Companies hoping to leverage the potential of the Internet will also have to create new roles or even whole functions: a scanning function to monitor and influence Internet opinion; a new service development function to think up new ways of creating value for customers; liaison roles to support networks of remote members; usage analysts to perform market research on Web; and archivists responsible for keeping track of content generated on the company's Web sites.
The winners will be those companies which organize themselves to capitalize on the Internet's capacity to increase sensitivity to resource and market opportunities worldwide and to share knowledge and experience internally.
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