E-DAY - electronic commerce - Statistical Data Included

Chief Executive, The, April, 2001 by Betty Spence

DESPITE PAST LOSSES, CEOS SAY THE NET IS A BATTLE THEY CAN WIN

B2C cut down in its first wild foray, and still e-commerce continues its inexorable forward march. This time, it's the old-line companies, titans armed with business-to-business firepower, that are stepping in to lead the charge.

The potential rewards are hefty. E-commerce was estimated at $210 billion last year, according to Forrester Research. By 2004, it is expected to top $2.7 trillion in the United States, $1.6 trillion in Asia-Pacific and $1.5 trillion in Europe.

Global 5000 companies, which have been marshalling their forces behind the lines, have doubled their e-commerce budgets over the past three years, noted Kris Tuttle, co-director of research at Wit SoundView, an investment banking group focused on the Internet and high tech. Bob Crowley, chief executive of e-enabler Bowstreet, said that some of his traditional clients have scaled operations over a hundredfold in 12 months and "are using the Internet as a weapon to hold their brand."

"The e-revolution is over, and 'e' has won," said Denis Nayden, chairman and CEO of financial services giant GE Capital, at the Chief Executive E-Conference, held November 28-29 in New York. His declaration won hearty approval from his peers. If you're not yet armed for the "Brand Battle of the Titans," it's time for basic training -- and maybe to learn a few new skills.

Surveying the terrain

The trashing of B2C and B2B and the vicissitudes of the Dow and the Nasdaq have given many chief executives pause about the direction of e-business. CEOs, analysts and other experts at the E-Conference analyzed the market and offered some insights that might relieve some angst.

Perhaps the most promising opportunity in e-business is B2B, despite a narrowing field of competitors. "Two years ago, in the multi-trillion-dollar Internet-based B2B arena, there were over a thousand companies -- in registration, being formed or public, "said Joseph Galli, who left the top post at VerticalNet for Newell Rubbermaid in January. "Now perhaps five blue-chip B2B companies will make it." Added Wit SoundView Chairman Robert Lessin: "Companies without a legitimate business model still have to be taken out."

"It's painful, but it had to happen because the excesses were egregious," said Walter Buckley, CEO of Internet Capital Group (ICG), which acquires and builds B2B companies. "Going public in the frenzy of six to 12 months ago was distracting to building great companies."

Genuity CEO Paul Gudonis works on e-business transitions with the likes of Mitsubishi, Canon and the Los Angeles Times. He attested to a gearing up of e-business, not a decline. "We're seeing the enterprise strike back now that the pressure's off due to dot-com failures," he said. "I see boards of directors pushing to be more effective on the make, the buy, the sell side. It's no longer a question of 'Do I do it?' It's 'How do I?' and 'Whom do I partner with?'"

In the business-to-consumer world, the situation is less a surrender than a cease-fire. Many companies have shifted their focus from B2C, some "because they can't take the cash burn [that]brand-building entails," said Lessin. That some dot-coms spent 40 percent of revenues on marketing was no surprise to the conference attendees.

Established brands dearly have the advantage, but online B2C won't work overnight. The dot-coms -- and many of the big guys, as well -- learned the hard way that online calls for instant gratification. Said Nayden, "You can build a transactional Web site in a matter of weeks, but getting people to use it takes a lot longer, and you have to deal with a tremendous range of customer knowledge."

One of the best-recognized dot-brands, Amazon.com spent several years developing its current site-- a worthy effort, said Galli, who at one time was Amazon's COO, because it "changed the way customers think about shopping. Amazon hasn't revolutionized P&L or ROI, but traditional companies can take a chapter from the way it has obsessed over customers and built a franchise in five years."

The experts counseled living with uncertainty and getting down to building basic infrastructure for B2C success. Don't be fooled by the economic slowdown into under estimating the power of technology, warned Galli, because "we've not seen 5 percent of what will happen on the Internet."

Gudonis placed the Internet today where wireless was in the mid-1980s: "Even with the hype, we're underestimating its potential. There's a new Web site put up every 1.5 seconds. We used to add 100 new DSL subscribers a month to our network; now we're adding over 1,000 a day, and it's going to be 10,000 a day in the next two years."

When it comes to e-business, chief executives do get it: the general tenor of the E Conference was that it's not a matter of if, but when -- and it had better be soon. Some CEOs find the Internet as essential and ubiquitous as electricity, while others admit they have been deterred by lack of information or false starts. So although 87 per cent of CEOs in a January survey by the National Association of Purchasing Management and Forrester Research said they need to do procurement on the Web this year, only 7 percent are over 40 percent toward the goal.