Exchanging views on the Net

Brian O’Rorke: (Management Consultancies Association) What I want to do today is give you three questions to discuss. The first is: “Is the Internet a commercial fad providing yet more unnecessary fuel to an information inferno already out of control, or will it assist business to be more efficient and, therefore, more competitive?”

The second is: “Will it provide management consultants with more client work or will it just be a medium for consultants to market their services, and if it’s the latter do we in fact need a code of ethics as to how consultancies conduct themselves?”

The third is: “In an information free-for-all how do you protect intellectual property or is copyright a thing of the past?”

Denise Fellows: (Sema Group Consulting) I’m going to sit on the fence on the first question – it covers both aspects. I see a lot of hype around the Internet at the moment. It’s being sold in a way which is not necessarily going to be helpful in explaining the bigger business benefits that firms will be able to derive.

Having said that, I’ve spent many years in electronic commerce: organisations tend to have altered the ways they have used IT, starting with quite localised exploitations within their own company using small systems, and they’ve gradually developed the way they use that technology until they’re using it in a business network environment. That’s one of the ways in which we’ll see competitive advantage being gained by a lot of organisations in using the Internet through expanding the networks they have.

Aubyn Howard: (The Merchants Group) If you look at the way the Web is being used today all you will see is more and more information being put up there for people to browse around. It’s becoming a flood of data and pictures and ideas which people will become overwhelmed by if we’re not careful. The key is to understand how the Web can become a tool for doing business better, to go beyond seeing it as an advertising or publishing medium but seeing it as a way of interacting with customers, a way of adding value to your customers, a way of reducing the cost of how you do things. Not as a channel or a medium in its own right but as something that you combine with your other channels and interfaces with your customers.

It’s a matter of looking at which way the information is going that is critical and seeing it as an interactive business tool rather than a way of putting out data.

Peter Gratwick: (Marketing Improvements Group) You have to look at it as a new medium: everybody’s waiting for somebody to come out with something that they’ll actually use. Companies are only going to find that by going through the process of setting up systems and finding out what works and what doesn’t.

Rhys Grossman: (Coopers & Lybrand) I would echo that. There is an awful lot of hype and there is an enormous potential for doing it badly. The other thing that’s slightly confusing about Internet and Internet-type technologies is that they can be used for a number of things.

I would slightly disagree with you insofar as saying it’s not a medium.

It is one and the marketing channel is very important, but it takes the right people to know what to do with a site and how to do it best. But the real potential for businesses is how it will affect their processes and how it will affect their relationships with their customers. There are very few examples of businesses that are using the Internet in the correct way. Perhaps one of the best examples is Fed-Ex. It has put its entire logistic system up on the Web and allowed customers to inspect it so if you want to know where your package is, you key it into the site and you can see where in the world it is. This has given it a great reputation on the Web, boosted its volume of business and saved it about #2m on its logistic systems.

Jeremy Dear: (Praxis/Deloitte & Touche Consulting Group) We see the Internet as a technology rather than a medium. The reason for this is that, in all the market surveys we’ve seen, the biggest take-up of Internet technology is going to be within organisations: someone described it “as pouring jet fuel on the flames of our IT infrastructure”.

Fed-Ex is a great example because the company did it originally as an intranet and then made it public.

Grossman: In the beginning the whole point of the Internet was that it was extremely cheap: a cheap way of setting up worldwide e-mail and getting access to a vast amount of information. The initial users weren’t even paying for the hardware they were using to connect to it. They were all in the universities and funded by various governments. Now there seems to have been a complete change in the ethos: how is that affecting peoples’ decision to become involved with it?

Fellows: Not a change so much as an evolution: it’s the progression of the Internet from being e-mail, to being a place for information publishing, to business applications and on to electronic commerce. As you move through that progression the cost of implementing the Internet solution changes.

Dear: It’s still relatively cheap. Within an organisation, one of the obvious tools is Lotus Notes. There are a lot of Lotus Notes things you can do on the Internet for significantly less money. As with all technologies, the cost of buying the tools is very low compared to buying the finished product.

Fellows: The Internet is both a technology and a media, depending on whether you are using it for media purposes for publication or whether you are developing the Fed-Ex type of application.

Gratwick: Things are stepping up in cost as people try to portray themselves as more professional. To start off with you would have had something basic, now people are employing designers and graphic artists, to get exactly what they want. From the consumer point of view the sort of Net device that’s coming is going to be an awful lot cheaper than previously – say, #200-#300. The key question is when the consumer market will be brought into the action. At the moment it’s mainly a tool for business to business.

Dear: The statistics of connection are interesting as well. We saw some research from IDC for December ’95 and about 95 per cent of the people with Internet access at the moment had it through corporate lines, through government or through academic institutions. So the home consumer is really quite a small part of the market at the moment and is likely to stay that way for some time.

Penetration is also interesting. I do a lot of my work in pharmaceuticals and they’re very interested in putting drugs and disease information on the Web. About 5 per cent of the US population has direct Web access.

But about 25 per cent of cancer patients have got information from the Web somewhere about cancer and if you talk to AIDS patients, 50 per cent of those have got information. So although they may not have it themselves, their children or their colleagues at work maybe, are finding that information across the Web for them.

To return to the point about cost, the technology is cheaper than in the case of groupware or Notes or Exchange, but what has happened is it has become professionalised. To have a page of HTML coded you can still find a student for #100 a day but it’s the value-added that lies behind that, it’s the graphics, it’s getting the interactivity right. If the look and feel is right it’s the wide strategic thought behind the page.

It’s how the page links into the business processes and systems of the organisation. There’s no point in spending the money if you haven’t done the thinking in advance.

Fellows: It depends very much on the size of the Web site. Sema Group was in charge of putting together the Web site for Euro ’96 and that was a very extensive thing, it was an extremely expensive Web site.

Howard: One of the key issues to do with that is who is actually controlling these budgets in the development of the Web site. I would assume at the moment that it’s being controlled by either the marketing department, or possibly the IT department. The real value comes when you look at it from a reengineering point of view.

Grossman: Initially it came out of IT departments and it was the so-called techies who were putting up pages. Technically they did it very quickly and efficiently but it just did not add any value to the organisation.

That’s switched now to the marketing departments who are using ad agencies and production companies to do sites. But those types of sites are frequently not linked into the business processes.

Dear: Does this not seem to be a call for a level of integration within client organisations that very few people have achieved yet? If the Net’s driven, let’s say, by the communications side then it becomes part of your organisation’s branding without any link to whatever market goals or strategies are being pursued simultaneously in other media.

Good Web sites obviously avoid that. Vauxhall used the feedback from the Web site to find out what people were most interested in and where it should provide extra marketing.

Fellows: Other organisations in the automotive industry are actually using the intranet facilities to enable people to order cars and pick out the colours and so on. They have taken it from being a publication into being a bigger application and an electronic sell. That’s the area where the management consultants are adding the value, in effect, and where we’re finding our client work is coming in.

Dear: One of the phrases we’re hearing constantly is disintermediation which is getting rid of the intermediaries. Fed-Ex for example: you don’t phone someone up and tell them the order, you type the order number in yourself.

Howard: Letting your customers do more of your work for you.

Dear: Absolutely. Customers like it as well.

Gratwick: The technology or medium lets you bring the customers into the organisation much more directly. You can grow and develop a much stronger relationship with the people you’re dealing with, whether they’re customers or suppliers.

Fellows: It is a whole new ball game in customer services, which is what a lot of the financial institutions are looking at.

O’Rorke: To what extent is it a management tool? Is the Internet a tool for business or is it being driven by technologists who say “Here is a new concept”, or is it being driven the marketing department who says, “Here is a cheaper way of splashing our name across the pages”, or is it being driven by the chief executive who says, “This is essential to the success of my company”.

Dear: I don’t think we’ve yet seen the Internet equivalent of Direct Line or First Direct. But I wouldn’t see it being be too long before that happens.

Howard: They have got that in the United States. There you can carry out full banking facilities and financial service transactions on the Web site.

Dear: Yes: get rid of the infrastructure of bank branches and insurance salesmen knocking at your door.

Gratwick: The French MiniTel system was provided as something to be used like the Internet. Many new businesses just sell through the MiniTel system, mail order firms, even banks. We will start to see that creeping up now with companies that will just trade over the Internet itself.

Fellows: The difference is, are organisations using the Internet to improve the processes which are already there or are they creating new processes out of it?

Look at American Airlines which is selling empty seats on its planes on the Internet at 20-30 per cent of the cost. It was concerned about whether putting that out to market would mean that the business traveller would use that service and reduce the number of seats that people were legitimately buying. In fact, that didn’t happen, because the business travellers can’t go on a standby basis, so it was helping the airline to increase business.

Grossman: It is a technology that enables some reality to be put behind a lot of the rhetoric of the customer-focused organisation. If you’re using it to allow customers to exert direct pressure on the working parts of the organisation then you don’t necessarily need a customer service manager. It’s not so much a management tool but a sort of tool for the elimination of management in many areas of the business because you’ve got this rawness of contact.

Dear: Pharmaceutical company Lilly in particular, is really good in having a site that tells you an awful lot about diabetes and how to control it.

It happens to have a large range of diabetes drugs but it also tells you about the trials and research that are going on with new drugs. People are going to their doctors and saying, “Well, Lilly is doing this and I want to be involved in this because this looks like it could help me”.

Gratwick: Isn’t that information to a certain extent tainted? Given the increasing cost of putting information on the Web, more and more of the information will come from somebody with a commercial interest in some use of it. It’s not like having The Lancet on line and translated into layman’s language.

Dear: It’s a marketing tool, absolutely, and that’s why Lilly is doing it, in order to get the mindshare of not only end consumers but the physicians and the other people in the chain as well.

O’Rorke: Can we now move on to my second question which is, is this a technology that will provide work for management consultants, or will it replace the need for them on the basis that anybody can put up a question on the Internet and a hundred and one people, whether they are qualified management consultants or not, will give you an answer?

Grossman: It’s perfectly possible to put a question up and receive lots of answers but, ask yourself, how many serious questions that your clients are asking could be answered by an e-mail?

Gratwick: Nobody’s really going to trust any information they get for free.

Howard: Lawyers won’t be under too much threat from this technology.

Gratwick: Ernst & Young have a service called Ernie. It’s not free, it’s $6,000 a year, I believe. If you have a problem that it can solve you subscribe to the system. You e-mail your problem, E&Y mail the appropriate person in the company worldwide who’s most suited to deal with that problem and then get back to you on it. Obviously, it’s expensive.

Fellows: One of the interesting things on that is how do you charge for this? At the moment the only people who seem to be making money out of it are the Internet Service Providers.

Gratwick: You can either charge by unit of information, or you can charge on a subscription basis, and with the latter you’re cutting out an awful lot of people who obviously won’t go for it.

Grossman: Pricing is at a very early stage. Coming back to that topic of disintermediation, a service like that could easily be imitated by direct alliances between clients. There’s a possibility for firms to band together in virtual learning networks and share expertise and share resources across the Web and cut out an area of consultancy work.

Howard: The other potential is for a move away from just advice, to management consultants taking a more active part with their clients in exploiting the opportunities that are out there. Part of what they bring to the party is the ability to see the opportunity and to manage situations and to bring potential partners together, and part of what the Web is bringing is an opportunity for new markets, new services, new ways of doing things and new ways of reaching people. The ethics of it may need to be considered but there’s definitely an opportunity for management consultancies to call people together to exploit this new market.

Gratwick: The less widely recognised impact is going to be that the Internet will decentralise organisations whether they like it or not. If every employee has access and can hold a relationship then every employee is dealing with more information and has more decision-making power .

Howard: Which raises another issue which is the power of the Web as an educational and learning tool and the ability for anyone to do an MBA in anything with any university in the world and the ability for people to take responsibility for their own education and their own development.

Grossman: Could this then lead to a split in the sort of consultancy mix and the consultancy offering it? If information as such is now not even a commodity, it is just an element freely available, then consultants who have a high information content, a high technique content, a high knowledge content, in their offering will begin to be superseded by people who have a much more practical and implementation-oriented offering, things that cannot in principle be provided down a telephone line or via e-mail where you need presence and the creation of teams and interaction.

Grossman: Physical contact with the client is very important. Something like 80 per cent or 90 per cent of the content of anything is non-spoken and you can lose an awful lot of what you learn about an organisation.

The work of management consultants is still going to be people focused, but the things they will be advising their clients about will involve more technology. The phone is a good analogy but phones in the ’30s were hugely expensive.

O’Rorke: Right. The third question has had the least amount of thought – the protection of intellectual property.

Grossman: The lawyers say that all current laws about publication apply but, of course the Web doesn’t work that way. It’s trans-national law rather than individual law. I don’t think there’s a technological fix to it, in the same way as the import and export of information can’t really be controlled these days.

Gratwick: In any digital medium there is obviously copyright involved: you can copy off the radio. Reports and books in digital format can be copied again and again and it’s going to be a perfect copy every time.

Companies dealing in information need to prevent those who haven’t paid from accessing it and then when people have paid for it making sure that they don’t give it to someone else. Obviously, there’s never going to be a perfect solution because I don’t think there’s been a perfect solution to anything.

Howard: There is a piece of intellectual property – and this comes directly back to the consultancy industry-that is not alienable, which is your brand name, your company name. Obviously, there is the issue of domain names being grabbed first but on the Net there is a value in promoting yourself and your site as Ernst & Young, Coopers & Lybrand, Deloitte & Touche, whatever. Yet, at the same time, it is possible to construct a virtual consultancy, linking together as many consultants as would make up a Big Six firm with as many disciplines, as many areas of expertise across the world but without the investment in headquarters, and infrastructure.

Dear: The Big Six and other mainstream consultancies have consistency, they have global reach and common working practices, they are able to pull together teams, they are able to demonstrate expertise in advanced projects and they are able to pull out the right sort of people for the right job. With the virtual teaming you were talking about it is much less easy to persuade a client that this team has the right expertise and the right balance of previous experience and methodologies. I would say that the branding of a major organisation may well be a front and behind that you have much more flexible resources.

Fellows: But that’s the same subtle difference as are you going for one of the known management consulting families or are you going for a group of people who have linked together over the Web?

Gratwick: It depends what you want to buy.

Grossman: If you can create – very cheaply – consultancy offerings that are 90 per cent as good as what you get from an established consultancy then you won’t have a problem. If they are only 20 per cent as good then there will be a great utility to people who can’t really perhaps play in the larger market but obviously not a threat at all. It doesn’t seem to me it’s a question of principle, it’s a question of how close can, say, Virgin Cola get to Coca Cola?

Howard: It’s just a market. The market of solving problems, gaining information you need. Increasingly you can go out there on the Web and you can find it so the role of the management consultancy has to become perhaps more flexible, has to become more aware of where and how it has value.

O’Rorke: A lot more refinement obviously has to be done and really the value of Internet is in converting available information into intelligence-analysing information. I don’t think it will replace the need for consultants but they can’t be complacent. It is going to change the way they operate.

Ten years ago sole practitioners could not compete with members of the MCA. They are now: by linking and networking. The same will be true about Internet. It will, in fact, mean the way in which you operate will be different. But, in the meantime, there is money to be made by teaching your clients how to operate it as an intelligence rather than an information tool.