Five years ago, the managers of established, old-economy companies concentrated on running their business well: making cars, perhaps, or selling life insurance. They had to contend with constant change, of course, but normally of a fairly predictable kind: costs had to be cut, new products launched, mergers and acquisitions dealt with. Now life has become much more difficult. Change has not only become more rapid, but also more complex and more ubiquitous. Established companies are no longer quite sure who their competitors are, or where their core skills lie, or whether they ought to abandon the particular business that once served them so well. Behind this new uncertainty lies the Internet (which in this survey is used as shorthand to include the whole cluster of technologies that depend upon and enhance it). In the past five years, this has begun to transform managers’ lives.
Why is it causing so much trouble? After all, the Internet as now used by many companies performs familiar functions, although more cheaply and flexibly. The e-mail is not really so different from the memo; the electronic invoice looks much like an on-screen version of its paper predecessor; the intranets that companies install to connect different departments resemble the enterprise resource planning (ERP) systems that many companies bought in the 1990s; even the networks that link companies with their suppliers had their electronic predecessors.
But new technologies often begin by mimicking what has gone before, and change the world later. Think how long it took companies to realise that with electricity they did not need to cluster their machinery around the power source, as in the days of steam. They could take the power to the process, which could even be laid out along a production line and set in motion. In that sense, many of today’s Internet applications are still those of the steam age. Until they make the next leap, their full potential will remain unrealised.
Yet even what the Internet has already achieved is puzzle enough for many managers. Why should it cause more bewilderment than, say, the arrival of the mainframe or the PC before it?
The answer lies in the Internet’s chameleon qualities. It is not simply a new distribution channel, or a new way to communicate. It is many other things: a market place, an information system, a tool for manufacturing goods and services. It makes a difference to a whole range of things that managers do every day, from locating a new supplier to co-ordinating a project to collecting and managing customer data. Each of these, in turn, affects corporate life in many different ways. The changes that the Internet brings are simply more pervasive and varied than anything that has gone before. Even electricity did not promise so many new ways of doing things.
At the root of the changes is a dramatic fall in the cost of handling and transmitting information. Almost every business process involves information in some form: an instruction, a plan, an advertisement, a blueprint, a set of accounts. All this information can be handled and shared far more cheaply than before. That has its drawbacks, of course: a fall in production costs is all too likely to lead to an increase in supply, and plenty of managers now feel that they are drowning in information. But it also brings immense advantages.