The Prosperity Factor - Still Working?
Market Forces that Produced the 90's
Prosperity… and Beyond
Article by: James Webb, Stratus Partners
Galt Perspective, January 2002
The economic prosperity of the past decade had been enjoyed due to five
major contributing factors:
- Sustained economic growth
- Increasing corporate earnings
- Modest inflation
- Falling interest rates
- Relative global stability
In the year just past, three of those
factors were missing. The economy fell into a recession and corporate
earnings were down dramatically in many cases. The terrorist acts of
September 11th have sparked a global fear about the next potential target.
In addition, the economies of countries such as Japan and Argentina make
one wonder just where the bottom might be for those nations with a
questionable fiscal policy.
All in all, 2001 was a year many people would rather forget.
While some were reacting to the bad news of the present, others were
preparing for the promise of the future. The headlines were full of the
news of corporate lay-offs and worse.
The Dot.Com revolution is dead - or is it?
While many of the new economy companies are now either gone or the distant
memory of a burst bubble, many of the more forward looking companies were
able to apply that very same technology to generate efficiencies, cost
savings and increased sales. For example:
- AT&T bills nearly one million customers
online
- American Express increased the number of
cardholders significantly via their Web portal
- Alcoa used e-initiatives to help a major
metal fabrication customer double its inventory turns
- Caterpillar has more than half of its
dealers sell parts online
- Citigroup has more than 14 million
online customers
- Coca-Cola's online promotion in Britain
attracted 100,000 teens
- Disney's ESPN.com is expected to turn a
profit in 2002
- DuPont is helping small business
customers through industry specific portals
- Eastman Kodak acquired online photo
company Ofoto in April
- Exxon Mobil is rolling out a cashless
payment system at gas stations using speedpass.com
- General Electric's Global eXchange
Services has more than 100,000 trading partners
- General Motors web-based productivity
improvements reduce costs and improve productivity
- Home Depot's e-tail site offers 20,000
items
- Honeywell saved 28% on the purchase of
forgings for aircraft engines
- International Paper is pumping fresh
money into the Web, even as its overall tech spending decreases
- Johnson & Johnson re-launched
BabyCenter.com
- Merck's online pharmacy delivers where
drugstore.com failed
- Kraft's Interactive Kitchen Web site
dishes up online recipes
- SBC Communications is the second largest
warehouser of electronic data in the U.S.
- Wal-Mart brings e-tailing mainstream
We could go on, but these examples of how
some of America's largest companies leveraged web technology while others
proclaimed the end of the Dot-Com era is noteworthy.
Perspective
What remains an important lesson from these companies, and the demise of
many of the Dot-Coms, is that the strategic focus of the business must
remain paramount.
Generally speaking, the companies that failed to properly leverage
technology were those that implemented technology for technologies sake.
That is, they became enamored with a technology solution and began
searching for a problem to solve, rather than examining the business model
first and determining how technology may be leveraged toward the
improvement of the business.
The Chief Information Officer of Alcoa admits: "When the Internet frenzy
started it was almost a test environment. There was a frenzy to invest,
and we were no different than any other company." (Source: Barron's)
The trend is to examine three major areas of your business for technology
potential. On the front end is Customer Relationship Management. Inside
the company Enterprise Resource Planning is continuing to find
improvements for manufacturers. And on the back end Supply Chain
Management is reaping some significant gains for companies looking to
better manage their suppliers.
As the pendulum swings back toward performance enhancing investments, now
may be the time to search more diligently for your next competitive
advantage. Many of America's finest companies (as mentioned above) have
certainly been doing so.
