End Your Internet Anxieties Now - business on the Internet forcing companies to change

Nation's Business, April, 1999 by Tim McCollum

The booming Internet-based economy is forcing businesses to adapt and is spawning entrepreneurial firms that threaten the survival of many established companies.

Intuit Inc. is among the most successful software companies of the personal-computing era, but its executives are uneasy about competition on the Internet. So much so, in fact, that they're betting Intuit's future on a radical reinvention of the company under way at Intuit's campuses in Mountain View, Calif., and San Diego.

Intuit's 3,500 employees worldwide are racing against time to complete the company's transformation and, according to the headline on Intuit's World Wide Web site, "revolutionize how people manage their financial lives."

Intuit already has revolutionized financial management for millions of people, starting in 1984 when founders Scott Cook and Tom Proulx launched a software program called Quicken.

Today, three software products--Quicken, now in its ninth version; a similar small-business accounting program called Quick-Books; and a personal and business tax-preparation program, TurboTax--dominate their respective categories. Each commands more than 80 percent of retail sales in its segment of the market, according to market-research firm PC Data in Reston, Va.

For its 1998 fiscal year, which ended July 31, Intuit's revenues reached $592.7 million, up 13 percent from a year earlier, and its net earnings were $46.7 million, 38 percent more than in the preceding fiscal year.

So why are executives at Intuit and other companies fighting their anxiety by retooling? The answer is that both new and established firms must adapt to and capitalize on the Internet to thrive. Even market leaders such as Intuit won't survive if they can't compete in an Internetdriven economy.

The rapid development of the Internet, especially the graphical, userfriendly Web, threatened to make Intuit's core products irrelevant. After all, why would people buy financial software if they could bank, invest, and do their taxes on the Web for free?

"The Internet is such a dramatic change that you have to change your whole concept of business and your role in it," says Intuit's Cook. "In our business, it's a fundamental change that's at the root of what we do and at the root of what we can do."

But the impact of the Internet certainly is not limited to financial-management services or even to the software industry. In fact, it has dramatically changed the rules in practically all business sectors.

In the space of just a few years, the Internet has penetrated virtually every aspect of the economy, forcing companies of all sizes and types to make sense of new competition, new business opportunities, and new operating problems. It's the fastest-growing marketplace in the world economy, spawning new businesses, transforming existing ones, and creating enormous new wealth, opportunity and risk.

About $50 billion in commerce was conducted on the Internet in 1998, according to International Data Corp. (IDC), a technology-research firm in Framingham, Mass. Internet commerce has become so pervasive--and so significant in volume--that in early February the U.S. Department of Commerce announced that it would begin reporting annually on the impact of online shopping on total retail-sales activity.

Looking ahead, IDC forecasts that electronic commerce will total more than $400 billion by 2002.

The New Entrepreneurs

The booming Internet-based economy is not only forcing established companies to adapt, it's also creating a new generation of entrepreneurial firms to challenge them. Web-savvy companies such as New York City-based advertising firm DoubleClick Inc., commercial-printing broker iPrint.com in Redwood City, Calif., grocery and personal-services firm Streamline Inc. in Westwood, Mass., and countless other firms around the world are taking on established companies such as Intuit in traditional and new lines of business. (See "Competitors From Cyberspace," Page 26.)

"Across all these new businesses there are these new 'infomediaries' that are creating new value by bringing buyers and sellers together," says Evan I. Schwartz, author of Webonomics (Broadway Books, $13) and the forthcoming Digital Darwinism. "They're totally disrupting almost every industry."

Rather than fight these new Web entrepreneurs, Intuit is seeking to join them by leveraging the capabilities of the Web to help people manage their financial affairs.

Intuit's work force is creating new finance-related content and services that will electronically match consumers with their choices of financial-services providers, ranging from banks and brokers to insurers and lenders. Moreover, Intuit engineers are building a technological infrastructure designed to ensure the security and reliability of online financial transactions.

"The Internet is the next new thing for us," says Bill Harris, who became Intuit's president and CEO in August and who has been the chief architect of Intuit's re-engineering project. "And the great thing about it is it's not just one thing--it's a whole host of things that span our entire business."