Articles

When companies first plunged into e-commerce, they thought success meant cutting out middlemen. That approach didn’t work, in part because e-businesses misunderstood the role of intermediaries. Middlemen are not costly, necessary evils. They solve problems for customers and, in so doing, they enable sales and create value for producers. INSEAD’s Philip Anderson and Erin Anderson show how intermediaries are helping smart companies realize the promise of the Web. They explain intermediaries’ nine ways of adding value, suggesting that three will change, three will survive in a new form, and three (reducing uncertainty about quality, preserving customer anonymity and tailoring offerings to customer needs) present growth opportunities. Middlemen can co-opt the Internet by offering services that would be too difficult for individual producers to provide. However, the authors caution, intermediaries must be open to new ways of doing business with suppliers and vice versa. The Web transforms but does not eliminate the advantages of the middleman’s central lookout position. But what was once thought of as a straight distribution channel from supplier through middleman to customer is now more accurately described as a service hub. The player that takes the customer order & #8212; possibly a Web site & #8212; occupies the center and interacts with many partners. The authors specify appropriate, fair incentives (for example, because Ethan Allen has quasi-independent furniture stores that customers browse before buying directly from the manufacturer’s Web site, the company automatically gives the nearest retailer a 10% tip). And they describe service-hub management that will generate enough trust to permit producers to get closer to customers & #8212; indirectly.

The answer to the question, "Who are we?" is complex, elusive and can confound strategic change.

Walking the fine edge between efficiency and consensus.

IT professionals may be uniquely positioned to see and affect a company's "big picture."

To maintain growth, a company muståÊlaunch disruptiveåÊnew businesses whenåÊits core units are strong.

During the dot-com frenzy of the late 1990s, most large, traditional companies had trouble finding successful e-business strategies to fight off aggressive new challengers. Many turned over their Internet efforts to the CIO and the information-technology organization. But that was not always a good idea, say management thinkers Glenn Rifkin and Joel Kurtzman. Enlightened corporations, they say, have made the Internet work for them by assigning e-business efforts to senior-level executives who know the business side intimately & #8212; and by getting the most out of technology-focused CIOs in the role of partner. They contend that someday all business will be e-business, so even in an economic downturn it’s important for companies to keep moving forward by integrating e-channels with their other business channels. The authors maintain that a downturn offers laggards a chance to get back into the game. Thus large companies with ineffective Web presences should take advantage of the current window of opportunity to make improvements. That means resisting the temptation to fob off e-business onto the IT department and instead treating it as a long-term, strategic, integral part of the enterprise. The authors report on the rare traditional companies that offer these valuable lessons: Integrate the new channel with other channels, build on your strengths, don’t let technical considerations be the tail that wags the dog, find a CIO who thinks like a business leader, and have a business expert head the operation. As Meg Whitman, the president and CEO of Internet star eBay, has said, “You can teach the dot-com stuff quickly, but you can’t teach the business quickly, so hire someone who knows the business.”