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Q&A on Intranets July 15, 1999 Intranets: A Revolution in Corporate Culture Top E-business consultants John Parkinson, Adrian Slywotzky, and Glover Ferguson talk about how internal electronic networks are redistributing power Intranets -- internal communications networks -- are being used by more and more companies to cut costs, compare prices, and get more choosy about customers and suppliers. According to International Data Corp., 52% of large companies now have intranets. As they mature, they're being extended out to suppliers and customers. But not all companies have been able to use intranets successfully. Business Week's Technology Strategies Editor Marcia Stepanek talked recently about intranets in separate interviews with three top E-business consultants -- John Parkinson, Adrian Slywotzky, and Glover Ferguson. Parkinson is Ernst & Young consulting's chief technologist. Slywotzky, of Mercer Management Consulting, is author of Profit Patterns, a book about how different companies are using the Internet to survive and prosper. Ferguson is co-director of Andersen Consulting's worldwide E-commerce practice. Here are some excerpts from those interviews. BW: The concept of intranets isn't new, but what patterns are emerging in the way companies are using them? Slywotzky: That good management is key. Intranets are simply tools to help managers realize a new value proposition. Smart companies tend to think digital first, then they install intranets to help them accomplish new efficiencies. And most importantly? Let them grow from the ground up. Intranets aren't supposed to be top-down management tools. They're supposed to foster the relationships needed to operate faster, better, more efficiently, and more creatively. Management flexibility is key. Ferguson: Outside the company, intranets are putting pressure on the distribution network. Ultimately, in some cases, wiring up the supply chain will knock some middlemen out of the way. However, in many cases, it might also redefine the role of the middleman. Automation, in some cases, can free up distributors from doing what they used to and inspire them to get creative about how they can survive by adding value in new ways. Middlemen will have to figure that out if they hope to stay on as middlemen. Parkinson: The assembly line is changing. That's really the bulk of what intranets are all about. Every manufacturer is trying to reassess its relationships with distributors and end customers. Some are saying, "Do I really need that distributor anymore?" or "Is it really easier for me to put my stuff online and let people order from me directly, or do I really need a distributor for some reason?" Companies are also questioning their relationships with their customers. "Should I take over some of their manufacturing?" Inevitably, the Net makes it easier to create a marketplace. Before, of course, you needed to get physical goods together. That used to be important. Now you don't need that. So distributors who make a business out of information and pull that information out of the manufacturer will be the ones who survive and prosper. BW: What are common mistakes that companies make when they try to implement intranets? Parkinson: You have to have both the technology and the cultural changes to make this technology work. You have to step up to breaking the back of the old culture that advocated hoarding knowledge. This technology demands teamwork, and managers must work to foster that environment, beyond just giving it lip service. And companies have to stick to the goals of what they hope to gain from the technology, and get everyone involved and on the same page from the beginning. Intranets also have given many companies a big case of information overload. More information about everything than they know what to do with, in more cases than not. And companies are finding that intranets unearth all sorts of problems inside the company, worse than most people would admit to, and cleaning it up costs much more than most companies anticipated. Putting discipline into the company as a result of these intranets is a lot of work and takes a lot of time. The software works OK, but the cleaning up of the data and practices and figuring out how to get the best out of a much more sophisticated infrastructure is much harder than just putting the technology in. A lot of CEOs went into intranets expecting them to be a silver bullet. But it's not that easy at all. BW: Beyond that, how have intranets changed the culture of a company? Parkinson: What's happening with a good intranet is that connections are being made between people with similar interests inside their work. That would never have happened before -- because they were too far away from a position of power or the organizational structure would have prevented an easy discourse. In the beginning, you use an intranet to get cost out of the processes inside the plant, all the obvious quick-hits -- benefits enrollment, the way you administer your 401(k) plan, for example. The initial habit of electronic participation, by the way, is real good training for giving the staff a feel for how customers must feel when they try to get information from the company. Information flow throws out all sorts of unintended benefits. Workers who used to complain about their job can now complain and get listened to. They can point out things wrong in some processes, and managers can see how these things influence the whole operation. Things can be done to change a situation when workers feel they're being heard and managers can see that workers aren't just complaining to complain. With a free flow of information, all sorts of things are going to happen, and smart companies will let those things happen and use them to their advantage. BW: In your view, what's the single-most important influence that intranets are having on individual industries? Slywotzky: At companies that are using them successfully, they're triggering a shift in power between manufacturers and distributors. Manufacturers can wield more discipline over internal operations -- but also can use added information power to more accurately set prices for products. And perhaps somewhat controversially, to discover which customers and suppliers are adding value, and which are simply costing a company money -- and why. BW: Yes, for the first time, some companies are using their intranets to do the unthinkable -- rate their suppliers and customers based on detailed information about price, purchasing volumes, and overall value to the corporation. How big is this shakeout through industries? Slywotzky: It's a new trend in productivity and efficiency. Before intranets, some data was nearly impossible to get. You had to take people's word for something and trust long-term relationships. Intranets give purchasing departments, for example, some facts to work with. In many companies, it has been controversial. Customers that previously might have been thought of as being profitable are not, in fact. Banks and financial institutions have been among the first to experiment with this type of thing. As for the trend, it's just beginning, really. But most organizations don't have these so-called customer profitability systems in place yet. But in cases where they do, some managers make a mistake because they define profitability in the near term. It's important for companies to assess customer and supplier profitability and value over the long term -- before those decisions are made. And it's important for companies to share information with their customers and then give them a chance to improve. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					PREVIOUS Q&As Amazon.com's Jeff Bezos eBay's Meg Whitman MIT's Michael Dertouzos Authors Jerre Stead and James Belasco Diamond Technology's Mel Bergstein Motorola's Les Shroyer Author Clayton Christensen Venture capitalist John Doerr