Successful Business Leadership

By Alan K Rudi

“In the early 90s, the Internet introduced a new wave of innovation that drove productivity, business models, and entertainment for more than a decade. Today, we’re in the second phase of innovation. The network will become the platform, delivering all forms of communications, and will usher in new innovation that our children invented—collaboration and social networking powered by Web 2.0 technologies. We believe that this second phase will be dramatically bigger than the first. It will be the most powerful change in IT, allowing IT to truly enable business goals.” – Cisco Systems.

At the Web 2.0 2007 Conference, Morgan Stanley made the following key points:

• The US share of world internet users has declined from 37% to around 20% in 2007. While the US is the largest absolute user of the Internet, it is China, India and Russia who are key drivers of increasing international usage and strongly influencing future applications.

• The market for online video is poised for significant growth with audio search becoming increasingly popular.

Internet retail trends include:

• Consumer confidence in the Internet is on the rise in the U.S. and Japan, but declining in the United Kingdom, France and Germany. In the U.S., survey respondents who view the Internet as being “very safe” increased to 53% in August 2007 from 45% in February 2007. Japan experienced an 18% increase in consumer confidence and perceived safety of the Internet, to 27% in August from 9% in February.

• The expansion of product categories illustrates a larger evolution in comparison shopping sites. Much has changed since comparison shopping engines emerged as a way to let shoppers find and compare prices for the same product across multiple online merchants. Retailers now must work harder to attract customers as shopping engines increasingly attract the attention of the consumer. Comparison shopping engines are search tools specific to retail populating their shopping-only indices by direct feeds from merchants’ product databases and web crawlers. The engines charge retailers a fee whenever a visitor clicks on the retailer’s listing in search results.

• Technology developers see opportunities to improve online shopping for both merchants and shoppers. E-commerce technology provider Art Technology Group says retail customers are asking about how to incorporate user-generated content not just into the online buying process, which already happens in the form of customer reviews, but also into the merchandising process. ATG is exploring development possibilities including one that would let users create and display their own favorite product catalogs on a site.

• The Information Sciences Institute at the University of Southern California says “As Internet use becomes wide-spread; we are running out of Internet addresses.” Institute researchers recently completed a census of the Internet and found 2.8 billion IP addresses - the 10-digit addresses - out of a possible universe of 4.3 billion. By 2010, the remaining addresses will be taken. The Internet Engineering Task Force, the technical body that manages the Internet, has anticipated a shortfall of addresses since the 1990s and has designed a new protocol, IPv6.

• A telephone poll of 1,009 consumers in early November 2007 by Consumer Reports found 42% of adults plan to shop on the web, up from 40% who said they did so last year. 41% of women said they planned to shop online this year, versus 37% who did so last year, while usage among men was flat. Convenience was the most important reason for shopping online, cited by 48%, followed by avoiding crowds (17%), better selection (12%) and better prices (11%). Security remains a big concern for those who stick to buying in stores.

• E-retailing remains the fastest growing channel in the U.S. retail industry, reaching total sales of $109 billion in 2005 and growing at a rate of about 25% each year.

In Cisco Systems report – Foresight 2020 - they reached five broad conclusions about the future business environment (that will also drive growth in networking applications):

“The next 15 years will bring further massive changes to the shape of the world economy, to the landscape of major industries and to the workings of the company. The trends identified in this report include the following:

• Globalization. It’s too early to talk of Asia’s century, but there will be a redistribution of economic power. Emerging markets, and China and India in particular, will take a greater slice of the world economy. Non-OECD markets will account for a higher share of revenue growth between now and 2020 than OECD economies. Labor-intensive production processes will continue to shift to lower-cost economies, which will still enjoy a massive wage advantage over developed markets. The pace of globalization will be arguably the critical determinant of the rate of world economic growth.

• Demographics. Population shifts will have a significant impact on economies, companies and customers. The favorable demographic profile of the US will help to spur growth; aging populations in Europe will inhibit it. Industries will target more products and services at aging populations, from investment advice to low-cost, functional cars. Workforces in more mature markets will become older and more female.

• Atomization. Globalization and networking technologies will enable firms to use the world as their supply base for talent and materials. Processes, firms, customers and supply chains will fragment as companies expand overseas, as work flows to where it is best done and as information digitizes. As a result, effective collaboration will become more important. The boundaries between different functions, organizations and even industries will blur. Data formats and technologies will standardize.

• Personalization. Price and quality will matter as much as ever, but customers in developed and developing markets will place more emphasis on personalization. Products and services will be customizable, leading firms to design products in a modular fashion and, in the case of manufacturers, assemble them in response to specific customer orders. Customers and suppliers will be treated in different ways, depending on their personal preferences and their importance to the business.

• Knowledge management. Running an efficient organization is no easy task but it is unlikely on its own to offer lasting competitive advantage. Products are too easily commoditized; automation of simple processes is increasingly widespread. Instead, the focus of management attention will be on the areas of the business, from innovation to customer service, where personal chemistry or creative insight matter more than rules and processes. Improving the productivity of knowledge workers through technology, training and organizational change will be the major boardroom challenge of the next 15 years.”