Leap into cyberspace

With the fear of getting left behind by technology hanging over businesses, many feel they are stuck between a rock and a hard place. But why is now the time to draw up your e-strategy? Jane Lewis reports

It might be argued that, short of winning the Lottery, the only way to make real money quickly these days is to exploit the Web – and certainly the recent proliferation of fresh-faced young e-millionaires goes some way towards proving the point.

But the real question facing most UK firms, as they set about emulating these paper tycoons, is where on earth to start? Is it just a case of launching wholesale into cyberspace, or is something altogether more sophisticated required?

The Government is certainly not in the mood to hang around debating the point. Its message to small business is stark: get on-line, or risk going out of business. “If you don’t see the Internet as an opportunity, it will end up being a threat,” Tony Blair told a trembling audience recently. To demonstrate commitment to the electronic revolution, he has created a new post to drive it, appropriately called the e-envoy. Yet there is already clear evidence that cyberspace is proving no easy passport to big profits for the majority of Net entrepreneurs.

“It’s a question of being between a rock and a hard place,” admits wine dealer Mark Badenie, who quit his job with a traditional merchant to set up AmiVin, which he claims was the world’s first on-line wine retailer. “If you are not on-line, you stand the risk of going out of business. If you go on-line, you also risk going out of business, because it can suck your resources dry. There is a real myth that going on-line costs nothing. If you build a proper web site and continue to develop it, it costs an absolute fortune, and will continue to.”

Cut-throat business

The world of e-commerce can also appear startlingly cut-throat to those grounded in the more sedate world of bricks and mortar. Badenie claims the greatest challenge now is “the risk of being overtaken by a monster, who will blow your business out of the water.” The main threat to him comes from established giants now looking to trade over the Web, “and they have millions of pounds behind them.”

From the point of view of small operators like AmiVin, the positive side of net-trading is the scope of the potential market and the creative way it can be addressed. “It does allow for much more creativity than a shop can possibly allow, and you are not restricted by geography, so we have a completely global business,” says Badenie. Nonetheless, business has been disappointingly slow. Although on average 7,500 people visit the web site each month, only a small proportion – 5 per cent at the most – actually buy. The threat of credit card fraud is still cited as a real deterrent. Badenie remains confident that business will pick up in time, but to date he has spent £250,000 and gained little in return. “It’s a bit like racing horses. You know one is going to win, but you don’t know whether it’s going to be yours.”

And some companies have already backed the wrong horse. When the record label New State Entertainment set up on-line to sell dance music it sold fewer than 70 CDs in a year and the label was forced to fold. Its driving force, Tom Parkinson, also blames continuing fears about security for its collapse, but also believes the shop-centric buying public in the UK was not yet ready for it.

Some experts maintain that these disappointments are inevitable in a Net culture that has so far concentrated on selling to the consumer at the expense of improving wider business relationships.

“People should stop being obsessed that the Internet is about selling books, music, etc to people in their homes. E-business is also about firms buying, selling and working with each other,” says IBM’s e-business manager, Peter Barnes. “Companies should start looking at how they could use the Net to communicate better with suppliers and business partners – those are the areas where we are seeing the most immediate and most successful return on investment.”

IBM draws a semantic distinction between e-business, which is concerned with these business relationships, and e-commerce – which is about selling goods direct to the public.

“The great thing about e-business is that you can integrate the whole of your supply chain – it is not just what’s happening within your company, it is your relationship with all your suppliers,” adds Andrew Forest of the Industrial Society. He believes that the potential for both e-commerce and e-business is “staggering” if properly tapped.

“People don’t have to be IT wizards: they can quickly get the basics, and there is a lot of free help available. People should go and talk to their Business Link, Chamber of Commerce, or the Training and Enterprise Council,” says Forest.

In the current rush to go on-line, the e-companies cleaning up are those majoring on web site design and strategy. Stuart Lawley’s start-up, oneview.net is typical. Since its launch last January, it has grown to be worth £20m. Lawley advises customers to take a modular approach to going on-line, perhaps investing no more than £20 a month at first and then upgrading facilities as time goes by. “Our market research shows only 10-15 per cent of small businesses have any kind of Web strategy at all. But using the Internet is very much part of a cost mitigation exercise, as well as promoting new business to new customers.” The most important first step, he adds, is to register your domain name at the earliest possibility.

Maintaining values

Forest recommends that every business considering a leap into cyberspace should focus on two main propositions. “Think about what is special about your business and stick to that. Second, [assess] your values and make sure you and your staff really live those in every transaction.” So should every company start dreaming up an e-strategy now? “Yes, that’s what it amounts to,” he concludes.

This article was extracted from Radio 4’s Nice Work programme.

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