BUSINESSWEEK ONLINE : MARCH 22, 1999 ISSUE
BUSINESS WEEK E.BIZ

Log On, Boss
Executives at companies large and small are learning they'd better get wise to the Web--or else

Dennis M. Kubit, chief executive of Trans-General Group, a Pittsburgh insurance outfit, used to be like most executives in his stodgy industry. He rarely surfed the Internet, and his company's Web site was little more than a shingle emblazoned with the corporate name and a list of services. But last year, customers and brokers began asking about the insurer's Internet strategy. Banks, for instance, wanted to sell Trans-General's products over the Web. So, six months ago, Kubit decided he had to get wired--and fast. Now he spends one to two hours a day online, checking out rivals' Web sites and surfing for industry news. ''We felt we were behind and we needed to catch up,'' he says.

Kubit isn't the only one. Even as electronic commerce is poised to bring sweeping changes to virtually every industry, fewer than one-third of CEOs in the U.S. consider themselves Web-literate, according to a PricewaterhouseCoopers survey of more than 800 CEOs that was released in January. Only one in four surf the Web regularly, and 69% describe their Internet sophistication as fair or poor.

Here's the problem with such Luddite behavior: The vast majority of these same chief executives say that electronic business will be central to their future. Will top execs be able to learn how to navigate the cyberworld without getting their fingers dirty on a computer keyboard? Don't count on it. CEOs who don't get down to some serious, hands-on Net prowling may soon find themselves with little else to do. Says Thornton A. May, vice-president for research and education at Cambridge Technology Partners Inc.: ''We're living in a brand new economy and some of these guys are still in the Middle Ages bleeding patients.''

ONE-ON-ONE. Mindful of the threats posed by Web-centric rivals, companies are scrambling to bring their most senior executives into the Information Age. At Visa International, at least 30 high-ranking officials have been treated to ''Web tours'' to learn everything from checking stock quotations to buying golf clubs. Visa also has offered these tours to senior executives in the banking and retail sectors. Visa is so serious about the Web that it has made online commerce one of the company's top five strategic initiatives and has cut a series of deals to promote Visa on the Net with the likes of Web pioneer Yahoo! Inc. and eToys. ''You need high-level support to get an entire organization to embrace E-commerce,'' explains Joseph A. Vause, vice-president for electronic-commerce, who has been dubbed Visa International's resident ''dot com.''

At Trans-General, Kubit might be considered the house ''dot com'' these days. Since the fall, he has hired a chief information officer, Charles Klein, and gotten himself some one-on-one training to learn how the Web might be used to lower costs, provide better customer service, and conduct research on competitors. Starting this March, Kubit began requiring top lieutenants to spend an hour a week in ''nerd training'' to make them cybersmart. ''People wonder if I'm really embracing the Internet or just sitting there not walking the walk,'' observes Kubit.

Beyond mastering the Web's ABC's, Kubit is overseeing the launch of an extensive corporate intranet, while weaving technology into all his strategic thinking. For instance, the company's market researchers routinely use the Net to check out other insurers' products and prices before Trans-General's sales force pitches new business. The company's tech staff regularly meets with senior executives and quarterly with the company's board of directors. Trans-General has even established a high-tech advisory board to ensure that the company stays on the right track--and doesn't cede any territory to startups that are creeping into the insurance industry.

NO, THANKS. To be sure, many chief executives don't believe they need to be the one combing the Web. George L. Engelke Jr., the 60-year-old chairman, president, and CEO of Astoria Financial Corp., a $20 billion thrift in Lake Success, N.Y., has no computer in his office and doesn't plan on getting one. Engelke says his job has nothing to do with the nuts and bolts of opening accounts or processing mortgages. Even voicemail, he says, is overrated, since it's far less customer-friendly than a real person. For tasks that require technical assistance, Engelke says his computer-savvy aides or a calculator he picked up for free 15 years ago are more than adequate. ''As an executive, your biggest role is being a devil's advocate,'' says Engelke, who keeps an old Mercury 2300 adding machine in his office. ''Devil's advocacy isn't on a PC. It doesn't have that key.''

Although honchos such as Engelke are still in the majority, most experts and Net-smart CEOs say they won't be for long--not if they hope to survive in the coming decade. ''How can you lead your company into this new era if you're not conversant and comfortable in this new technology and able to envision its opportunities?'' asks David S. Pottruck, co-CEO of Charles Schwab & Co.

Pottruck knows firsthand how important Net experience is to corporate leadership. In early 1998, the company decided to move its Internet business from a separate operation into the core of Schwab's financial-services strategy. Initially, the move was painful--the company's stock and revenues started to sink as it cut trading fees. But the gambit worked. Today, 54% of Schwab's trades are done online--a key reason it's one of the fastest-growing companies in the country. If senior management had not personally understood the Web and its potential impact on the brokerage industry, Pottruck says, Schwab (SCH) could have been left in the dust.

Levi Strauss & Co. doesn't want to be left behind. It's going through an entire reorganization. In February, the giant jeans maker started assigning a technology manager to business-unit executives to help them grapple with techie issues that arise. ''There's a fundamental technology level of literacy that people have to have to operate today,'' says Thomas M. Kasten, vice president of information technology for Levi Strauss Americas.

That's what Henry's Marketplace, a 14-store grocery chain based in La Mesa, Calif., is finding out. Top execs there admit that they are still struggling with basic technology issues, let alone sophisticated uses of the Internet. In the past, some of the top brass didn't even check E-mail routinely--and missed out on critical notices such as the agendas for board meetings.

HIGH PRICE. But Stanley A. Boney, the chairman and CEO at Henry's, has had enough of that. He learned that more than a third of his customers are regularly surfing the Web. With a little help, Boney says, he has begun to understand how to use the Internet to lower inventories of specialty items, serve up information to his customers, and expand Henry's beyond Southern California. The transition, however, has been difficult. ''We weren't brought up in the computer generation, so we weren't computer literate,'' Boney explains. ''Even though the Internet isn't that much of a threat to us at this point, we know it's coming and we've got to prepare.''

There's still time for Boney and other CEOs to get Net-wise--but not a lot of time. Those top execs who continue to relegate Web responsibility to their information systems staff, or to hide behind their calculators and secretaries, will pay a high price. ''You either get on to technology and into E-commerce, or you probably get out of business or have a shrinking business,'' says San Diego consultant Gerald W. Faust. That may be bitter medicine. But better to take it before it's too late.

BY LINDA HIMELSTEIN
Contributing: Gary Silverman

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