The competition is outpacing me - Nightmares - Technology and the CEO: Nightmares, Daydreams, Solutions

Chief Executive, The, Feb 15, 1998 by Meryl Davids

These days, nothing strikes quite as much fear in the heart of a CEO as the knowledge that a competitor has made or is planning a major IT investment. "Technological advances can lead to changes in entire business designs, and that is scary to a CEO in a competing company," says Erich Almasy, a Mercer Management Consulting vice president who has followed the technology industry for 25 years. Consider Amazon.com, which created a whole bookstore on-line, fundamentally altering the bookselling business. Or Land's End, which used its' massive customer database to personalize service and sales pitches. Or the insurance company that integrates wireless technology with a number of databases so claims can be adjusted in hours instead of weeks.

"We always worry that new technology could make our competitors stop running after us - and we start running after them, instead," says Pierre Lescaut, vice chairman of L.K. Comstock & Co., Inc., an electrical supplier for transit companies based in White Plains, NY. "To try to stay ahead, we are vigilant in scouting what's out there and have arrangements with technical partners around the world. When an innovation comes out, we purchase it quickly."

This worry is - and, consultants say, should be - especially pronounced when it comes to the Internet, where innovations have begun altering the competitive landscape in ways corporate chiefs are only just beginning to understand (see "Net Nightmares," page 28). To the Toronto-based Alliance for Converging Technologies, a think tank that focuses on how the Internet should alter business strategy, the change is going to be bigger than big. "For the last centuries, the firm has been the form for creating wealth, but that is finally about to change," says Don Tapscott, the Alliance's chairman. "In the future there will be 'e-business communities' instead."

In the view of the Alliance, the rise of electronic commerce will force companies to redefine just how they create value for their customers. "To compete in this environment," Tapscott says, "companies must 'disaggregate' the value proposition, disassembling the old in order to identify what its new forms of value could be, then 'reaggregate' in the new world of e-business communities." For example, he believes that one day travel agents will not be able to be compensated by the industry "for pushing the same four buttons that their customers can push at home." To succeed, these firms will need to create new value for customers and be paid by them, instead. One such company, he notes, has already moved beyond booking flights and hotels for conference participants to working with a network of companies to manage every aspect of the conference, from logistics, speakers, and printed materials to traditional travel arrangements.

According to Tapscott, e-business communities - which he defines as being modular in structure, highly malleable in design, and capable of quickly responding to customers, technological shifts, and competitive threats - can be created by traditional corporations, but in many cases will not be. "Traditional firms are in an awesome position to become successful e-business communities because they have wonderful assets such as consumer trust and loyalty'. But old ideas die hard and many of these companies are going to fritter these assets away," he says.

But even Tapscott acknowledges that this shift isn't going to happen tomorrow. In the majority of industries right now, technological investments - on the Internet and in other areas - have not brought the huge advancements companies have hoped. The technology often doesn't live up to its promise, consultants agree, and integrating it with all-too-human employees is a tremendous challenge. "Where there is smoke, there isn't necessarily fire," cautions Mercer's Almasy. So CEOs who have read or heard about the huge leaps their competitors are making may do well to stop their panic and breathe easy - at least for now.

"In the majority of cases, the reality of what the technology brings or even how it is working is nowhere near the hype about it," Almasy says. "Companies like to tout their great achievements to influence customers or Wall Street. But what is actually going on right now often is not even close to the buzz about it."

Companies of nearly every size and industry are finding that when they make a large investment in technology, their productivity often dives downward. "Employees can waste a lot of time surfing the Web and wading through hundreds of e-mails," says Roger Kay, a senior research analyst at International Data Corp. (IDC) "In many areas technology does not enhance the quality of office life." That fact hit home for Kay when his own employer recently installed a company-wide database to computerize.its pen-and-paper system of documenting customer inquiries. "The idea is good," says Kay, "but you have to manually enter some of the elements, and the system is really slow, so most people aren't even using it, and those who do may find that it is not as widely read as they might hope."