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CEOs Who Get IT

CEOs Who Get IT

Brambles Industries is one of the leading players of the old economy. In his address at Brambles' 45th annual general meeting, chief executive officer John Fletcher said that the organisation had spent the last five years transforming itself into an international company in a fast-changing marketplace. But, as he asked: "In the new millennium will Brambles need to become a company different from what it is today?

"Well, the answer is yes and no."

Fletcher explained his equivocation thus: he acknowledged the need for change; for true internationalisation and the need for more global rather than regional management; and the requirement for powerful global information technology systems that would interface with international customers. But he noted that the company needed to continue its role as a business-to-business service provider; and that it would attempt to improve its core business and value its people.

Fletcher's challenge is one facing most traditional businesses - the need to embrace new technologies and techniques, while preserving the good business and solid revenue streams of the past. He also has to satisfy his shareholders - not an easy task for a company which seems unable to match the stratospheric growth of dotcom shareprices. Brambles has of late roundly condemned the share market for its apparent tolerance of the flaky balance sheets of new dotcoms while failing to properly reward the solid performance of traditional industries.

Unfortunately, it is not possible to bring further details of Fletcher's plans for Brambles, because he only speaks to the media twice a year, when the financial results are released. It is not an unknown phenomenon among traditional industry chief executives. However, in the New Economy, where strategic changes are happening daily, a six-month hiatus with no news released about corporate strategy - particularly its e-strategy - is a long wait between drinks. (Under stock exchange regulations the company cannot speak to financial analysts without simultaneously briefing journalists.)And in the new economy time is the scarcest resource of all. According to Professor Kathleen Eisenhardt of Stanford University, who addressed delegates at the World Economic Forum in Davos earlier this year, there has been a sea change in the distinguishing features of corporations. "Twenty years ago companies were big versus small. Then it was David versus Goliath. Now it's the quick versus the slow," she said. It is a sea change with which the captains of industry must come to terms.

Writing in the Andersen Consulting journal Outlook, Rudy Puryear, managing partner of the firm's e-commerce line of business, and associate Richard Melnicoff, note that "Senior business executives, like military generals, are often chided for always being well prepared to fight the last war. In the face of new economic phenomena and trampled traditions, it will not work to redouble your efforts, essentially aiming to do all the same things you've always done but better. Meeting these new challenges means beating the new entrants at their own game."

Puryear and Melnicoff recommend senior executives ask themselves seven key questions:

* What do consumers ideally want to buy?

* What business should the company be in?

* What is the most effective value proposition in the short, medium and long run?

* What roles should the company make, sell or service, and who are the customers?

* Who are the competitors and how should the company be positioned?

* What is the operating model?

* With whom should the company partner or network?

"Your answers," they claim, "if they are guided by a deep understanding of the economic implications and opportunity of the e-economy, will produce a very different picture of your company from the one you see today." What then is the new e-economy?

Joel Kurtzman, lead partner of the global thought leadership program at PricewaterhouseCoopers, attempts to describe this new economy thus: "Technology has enabled CEOs to manage their inventories, their manufacturing, their retailing and their marketing on a global scale. They are shifting risk around the world, shifting the burden of production from one plant to another, coordinating the use of materials and services globally.

"Business leaders can see that by linking companies and markets, technology has created an environment that doesn't banish business cycles, but smoothes them out, shortens then, and converts a cycle into something more like an upward spiral." An added advantage, he notes, is that "companies and markets are now so integrated that recovery can be quicker."

If and when the dotcom share market bubble bursts, Kurtzman will have a fitting test of his hypothesis. If not the business consultants and professional gurus, then history will reveal in time the nature of this new economy. Business, however, cannot wait, and must experiment with it today or risk being sidelined by nimbler competitors.

First in Line

In Australia, financial services is one of the first sectors to be undergoing profound change, thanks to the e-economy. Up against new entrants, which have no bricks and mortar baggage, the traditional banks are looking to cut costs and to offer innovative services to lure new customers and secure the loyalty of established ones. One strategy is to reduce costs by merging, and that is a significant element in the current play for Colonial by the Commonwealth Bank. Another is to embrace e-banking.

David Morgan, chief executive of Westpac, believes that e-business-enabling any organisation is not an option but a requirement for survival. "Quite simply, all businesses will have to be e-businesses to succeed. It is the biggest game in this town and on the planet," he says. Morgan does not advocate banks abandon the bricks and mortar banking strategies of the past, but that they at least begin to recreate themselves. That requires more than technological know-how; it requires savvy management.

"It needs to be understood that the critical skills for a successful transition are not primarily technological, but rather strategic and executional. They become manifest in a business culture which values strategic insights, intellectual capacity, speed, responsiveness and adaptability. To acquire and develop these skills the right performance and equity remuneration structures must be in place," Morgan says.

Speaking at an online conference in March, Morgan said that banks also needed more entrepreneurial management, more flexibility, and responsiveness to the opportunities and threats of the new economy. "Rather than being dinosaurs, languishing in the frozen world of the old economy, those banks that successfully re-create themselves around the new paradigm and business models represent one of the best e-plays around."

Rabid About Change

Carol Rozwell is the Boston-based research director of the GartnerGroup's e-business intelligence service. She has seen a lot of new and old companies grappling with the new economy; some successful, others not. "One of the things that I've learned in what makes a successful strategy is that the CEO has to have a clue, the CEO has to have a plan and be almost rabid about the need to transform the enterprise," she says.

In her January report, "CEO and CIO Update: Critical Success Factors for E-Business", Rozwell identifies five factors which are important for management to consider when they are adopting e-business strategies. These are compression, collaboration, speed, service and flexibility.

In essence, she claims that companies need to embrace e-commerce to somehow compress the steps and time involved between customer demand and customer fulfilment. They should be prepared to work closely with trading partners in the new economy. Technological infrastructures should be established to support round-the-clock and round-the-world trading. The quality of service should be paramount. And they should accept that nothing lasts forever, and change will be a constant in the new economy.

"Management has to be very committed," Rozwell says. "The senior managers, the divisional managers, the general managers and the functional managers all have to realise that they are going to be giving up the old way of doing business and they have to espouse the new ways of doing business in a net economy."

Aseem Prakash, chief executive officer of e-business consultancy Interactive Knowledge Online (IKO), believes that the single largest barrier to successful transformation of companies into e-businesses is a lack of senior management education and commitment. IKO, in collaboration with Compuware Asia Pacific, in April started shipping its primer on e-business-enabling corporations, called "Bricks to Clicks: Recharging the Enterprise. The document is intended as a corporate planner for business-to-business e-commerce in particular.

Prakash says that the document provides a framework, which allows companies to swiftly develop an e-business action plan. He stresses, however, that companies cannot simply expect to go out and do e-business, they have to transform themselves into e-businesses. There is some urgency about this, he says, claiming that from 2000 the window of opportunity for transformation will rapidly narrow as competition from all quarters intensifies.

"Chief executive officers, or chief e-business officers, have to recognise that a dotcom is in their backyard," Prakash warns. Even if a company decides to stand firm in the old economy with traditional business methods, the new economy will have an impact, he says, as a company's supply chain will be affected by e-business, whether it likes it or not, as soon as even a single member of that supply chain is impacted. He stresses that it is imperative for chief executive officers and corporate stakeholders to become e-sensible and then progress to develop an enterprise-wide blueprint which would transform a company into an e-business, and could then be used to guide online initiatives.

The ball then seems firmly in management, rather than IT's hands. Now it has the ball, can management make the hard yards?

Changing the World

PricewaterhouseCoopers' chief executive officer, James Schiro, believes there is a simple choice for senior management. Presenting the results of the firm's survey of 1020 chief executives from around the world at the World Economic Forum in Davos, Schiro said that in the e-business revolution "stewardship of a large enterprise at this time is also a serious responsibility".

"We can change the world together and for the better, or we can let the dynamic forces created by Internet technologies play out in ways we have not mastered and do not fully understand." Changing the world might appear a lofty ambition for any single CEO (although a handful of the less modest might consider themselves capable), but certainly the changes wrought by a generation of CEOs across a wide spectrum of sectors could well change the world.

The 1020 CEOs who were surveyed by PwC expressed an "optimism tinged with uncertainty" about the new e-business era. More than nine out of 10 CEOs said they were extremely or somewhat optimistic about the growth products for their business in the next three years, which was a significant improvement over the 83 per cent a year before. That optimism appears to be linked directly to the level of planned growth in e-business.

Of CEOs in banking and telecommunications, nine out of 10 believe their entire competitive landscape will be reshaped because of the advent of e-business. More than half of all the CEOs expected to face competition from non-traditional Internet-based enterprises. Yet fewer than half of all the CEOs questioned said they were good or excellent navigators of the Web. Of course, you don't have to know how to lay bricks to be a successful property developer either; but the PwC report demonstrates that "as a group the CEOs are neither ignoring e-business nor are they by and large its most fanatical advocates".

Keith Perkins is the chief executive officer of the book retailer Dymocks. He has embraced the opportunity of e-commerce, but maintains that at present it represents $1 out of every $100 of revenue for the company. Growing at 70 per cent a year, however, ensures that it is a stream of revenue which is not ignored. "My role is to try and visualise e-commerce as a channel of trade; not a channel that will cut across our traditional business, but rather be complementary to it," he says.

Perkins says that for any retailer there are three available strategies to grow the business: to be a niche player, to be the lowest cost player, or to be a differentiated player. Dymocks, he says, fits in the latter category, offering a wide range of titles, a convenient way of accessing the range, a knowledgeable staff, and good pricing. Just as these factors have differentiated the Dymocks shops on the high street, Perkins hopes they will apply equally to the Dymocks presence on the Internet.

In terms of competing with other online bookstores, Perkins says Dymocks can offer a broader range, particularly when it comes to local titles. It makes itself accessible by having hyperlinks to high traffic sites such as the ASX, he says; and it can compete on price with overseas bookseller dotcoms, thanks to the generally lower freight costs of posting goods around Australia rather than from overseas.

Perkins, though enthusiastic about e-business, probably does not fall into Carol Rozwell's "rabid" category. He is, however, the sort of CEO who has historically achieved results, which Rozwell believes is important.

She believes that the successful CEOs of the new economy "are not just the CEOs who woke up yesterday and said 'Ooooh, e-business', but the CEO who has historically always been on the leading edge in the past." Rozwell says that to identify a CEO primed for success in the new economy, first find one who has been successful in the old economy.

Rozwell also believes that it is critical that the CEO maintains a critical eye and acts rapidly when an e-project fails to take off. "There should be no sitting round and waiting three months for the board to make a decision. There should be none of that junk. The CEO should be willing to say: 'That was a mistake', and cut it off."

Tim Koogle, chief executive officer of Yahoo, agrees. Speaking at the World Economic Forum this year, his advice for CEOs experimenting with e-business was to "try something. If you fail, fail fast, modify it and make the next change." Rozwell agrees and adds: "The other thing that is somewhat implied is that the new-age CEO should not cling to the old and outmoded set of economics. The Web allows them to do something different."

That might, for example, mean looking at new marketplaces which were previously out of reach, or building a trading community, or changing the traditional selling mechanisms. The CEOs installing successful e-business strategies, she says, are those "who understand, at gut level, e-value. They really feel there is an opportunity. They are definitely not saying: 'There are my competitors; if they do something, I will do something.' They are not following, they are leading, and they are looking at best practices regardless of the industry."

In the Beginning . . .

Trevor Amery is one of the early adopters. He is the managing director of Subaru Australia and has been practising e-business in various guises over the last few years. It all started with the fax machine, he says, allowing information and quotes to be created more quickly. Then came electronic banking, which underpins the car supply chain of distributors and dealers. Adding the Internet into the equation lends additional impact, Amery says.

"I have no doubt that this is already causing a fundamental shift in the way people and business interact. How it all plays out in the end, though, I'm not sure," he admits.

Subaru customers have, Amery says, proven to be fairly intensive users of the Web. He claims Subaru's Web site was one of the first in Australia. "We've developed the Web not just as a catalogue but more of a two-way interaction." Over time he believes that interaction will allow customers to track their ordered vehicle along a production line, and to organise service and parts directly over the Internet if they so choose.

Amery believes one of his advantages as a CEO is his age. At 47 he is comfortable with technology. His son is a computer science graduate, and for years his home environment has been twinned with the Internet. But he is far from a power user.

Amery recalls that the moment when he really started to speed up his thinking about the opportunities and threats of e-business and what that meant to Subaru came a few years ago. He heard business commentator Robert Gottliebsen speak about e-commerce and that it would have a revolutionary effect comparable to that of the printing press. But Amery is quick to say that there is no point in a CEO sitting down and creating 100 per cent of an e-business strategy and then sticking with that the way a traditional CEO might stick to a traditional strategy.

"This is like jelly: you grab some and it moves," warns Amery.

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