If you look at the fate of the companies who were loaded up on venture capital ready to blaze this new trail you would be right to think this was true.
However two years on, the reality is the opposite. The internet and associated technology has profoundly changed the way companies do business in the most unlikely of quarters. In fact, now it is delivering on all of its promises like never before: it is bringing businesses closer to their customers, improving service, opening up new markets, streamlining business processes, reducing costs and bringing greater efficiency to day-to-day tasks.
Smart companies who have latched on to this and invested accordingly are already cashing in on these benefits. But there are still plenty of people who are averse or apathetic when it comes to change. For a growing business, that's a big opportunity missed. Companies like yours are uniquely placed to take quick and full advantage of the internet to accelerate the growth of your business. You don't believe us? Then read on. Over the next eight pages you'll read about six ordinary businesses who have achieved extraordinary things by bringing ebusiness to the heart of their companies.
BRINGING TOGETHER BUYERS AND SELLERS IN A FRACTURED MARKET
It should be a simple equation. ‘X' is a hotelier with rooms to fill, ‘Y ‘is a traveller in a search of a place to stay and ‘I' is the internet, the electronic matchmaker that brings the two together. In theory, an online reservation system should result in higher revenues for ‘X', while providing ‘Y' with an easy and convenient means to find and secure a room. In practice, however, the hotel industry still has a long way to go if it is to catch up with the seamless reservation experience offered by airlines. Cambridgeshire-based Active Hotels is attempting to help hoteliers to narrow this gap.
Travel is one of the success stories of the internet. According to Active Hotels CEO Andrew Phillipps, the market is set to grow to a value of £10bn over the next three years, with hotel booking systems accounting for a quarter of that.
However, unlike the airline industry, where internet booking is facilitated through a relatively small number of portals, such as Expedia, Opodo and Travelocity, there are literally thousands of websites acting as online booking agents for hotels. This is confusing for the public and potentially time-consuming for the hotelier. For instance, if an owner advertises rooms on, say, 20 relevant third party internet sites, it means administering 20 relationships and paying the same number of commission cheques every month. For their part, the agents potentially have a booking and billing relationship with thousands of clients, each with their own reservation systems. Some of these will be manual-sometimes little more than a book in reception- while others will be tied in to databases that allow real time booking. The result for the weary traveller is that booking a hotel online is nowhere near as straightforward as booking an airline ticket.
Active Hotels was founded in 1999 with the intention of making life easier for hoteliers and agents by rationalising the booking technology. "We thought there was an opportunity for a middleman," says CEO and founder Andrew Phillipps.
To this end, Active Hotels has spent close to £2m developing a database and booking system designed to sit in-between individual hotels and chains and the various third party agents. The idea is this. Hotels and agents link to the system via an ‘extranet' basically a private internet channel. On a given day, enquiries on room availability that once might have arrived independently from half a dozen agents are channelled to the hotelier through a single system. Replies are then sent back through the same system, making the administration process much simpler. Phillipps says Active Hotels will tailor its service to fit any booking process operated by an agent or hotelier. Unless there is any bespoke systems integration work to do, set-up costs are zero and hotels pay 15% commission on all bookings, which is split between Active Hotels and the agents. "It's much simpler for the hotel," says Phillipps. "They pay us just one cheque every month rather than having to deal with a lot of agents.
Phillipps argues that Active Hotels has made it more costeffective for independent hotels to offer online booking facilities, a contention that is underlined by the company's market share profile. "In the big cities we have about 20% of the market. There is a lot of competition there from sites such as Expedia that have relationships with the big hotel chains. Outside the capital cities-where there are a lot of independents- we have very little competition."
REDUCING COSTS THROUGH ONLINE BUSINESS
We have blown away the market." Andrew Riley's appraisal of what his business has achieved over the past year is frank if not full of swagger. But putting the internet at the heart of his business when he was starting out in 1998 has paid dividends for executive car hire and chauffeur company Burgundy Global.
When it started operations in 1998, Burgundy Global clocked up a creditable average of 1,500 bookings a month, with business confined to the Thames Valley area. Five years on, that figure has risen to 30,000 individual trips in 180 cities around the world.
"To some extent we use the internet in a conventional way, as another channel. But you really begin to grow your business when you use it to redefine your business processes."
And the numbers certainly bear that out. On the back of a total investment of £5m in the system, turnover hit £1m in year one. This has since risen to £15m for the current year and should step up to £25m next year.
Riley says he always saw technology as core to building his business and in 1998 the internet provided the solution. Its origins may have been dotcomesque-they started by putting the front end on line so clients could use the internet to book-but technology has since shaped the whole of the business. This started with the back-end to allow people to see what they were paying and continued until the whole business was on the net. The system now handles everything from the initial booking through to invoicing and Riley says the company's feverish growth is down to it 100%.
Burgundy's system now allows its users to reserve journeys anywhere in the world, by internet or by phone. Once a booking is taken, the cost is worked out and details are automatically sent to one of 250 dispatch centres. Cars and drivers are then deployed accordingly. The costs are transparent and billing is handled by the same platform. If a customer books by phone, Burgundy's own reservation staff uses the same system as internet users.
It's a classic case of the internet breathing efficiency into a business and allowing it to compete more keenly. Riley cites much higher driver-to-administrative staff ratios than competitors and lower overheads as a prime example. Quite simply he can run the same business but more cheaply. Going forward Riley sees the company's IT system rather than cars and drivers as the element that defines the business and as the key driver of the company's future growth. The plan is simple, Burgundy will operate the bookings and billings and they will leave it to other partners to operate cars, thus decreasing the number of cars and reducing the company's costs further.
"We own about 60% of our vehicles at the moment with the remaining 40% being affiliates. In the future we see ourselves owning about four key cities and having 60-70% of the work done by affiliates."
GETTING SEASONAL PRODUCTS TO MARKET
Founded in 1998, by American expats, Alyssa Lovegrove and Caroline Clark, Great Little Trading Company has a turnover of around £14.5m. While the company was launched primarily as a mail order catalogue business, internet sales have grown steadily and now account for a quarter of the total.
Joint managing director Alyssa Lovegrove describes the company as a ‘department store' for families with children under 12 years old. The goods on offer range from clothes to furniture. From the outset the aim was to provide parents with an opportunity to buy products that might otherwise be hard to find.
"As parents we could see that there goods that were difficult to get. We are both Americans and we knew that there were things that were available in the US that were absent on the UK high street. We saw a gap and we started the business."
While the mail order catalogue still accounts for the bulk of the company's turnover, Lovegrove stresses that Great Little Trading Company has been transacting on the net since 1999. However, it has taken some time for online sales to rise to their current level. "At the moment, we do about 25% of our business online, that's up from about 15% a year or so back," she says.
While noting that the rise of web sales has matched the decline of postal (as opposed to phone) ordering to something close to zero, Lovegrove does not believe that the increase in online activity simply reflects a shift in traffic from one channel to another. "There is some element of transferring across, but I think the online business has grown because of the things that we can do on the internet."
For instance, while the mail order catalogue has to be created months in advance of publication and is static, the internet is dynamic. "During the heatwave, we were able to focus on summer products on the website and that boosted sales," she recalls.
Lovegrove also sees the internet as a customer service tool. Buyers can track and trace the status of their orders, whether ordered online or off. This highlights the need for an integrated stock control and fulfilment system. "You have to have an integrated system across all the channels," she says. "One thing that drives people nuts is if they place an order online and it isn't in stock," she says.
Great Little Trading Company outsources the fulfilment side of the business, meaning that much of the technology is the responsibility of a third party. Nevertheless, Lovegrove estimates that upgrades to the site itself tend to cost around £50,000. While she expects online business to grow, she admits that the company could yet do even more to boost online sales.
"To date, we haven't tried to recruit customers online. We want to do more of that through techniques such as affiliate marketing," she says.
CUTTING THE COSTS OF DEALING WITH QUERIES
Alun Davies might justly be described as a gamekeeper turned poacher. Having begun his working life in the employ of Her Majesty's Customs and Excise department, he now runs Bell Davies, a consultancy that provides advice and guidance to companies navigating the choppy waters of international trade. In most ways Bell Davies is a traditional consultancy. It sells the specialist skills of its staff and managers to its customers. But the introduction of an automated tool dubbed ‘E-customs' is helping the company to win business outside its pre-existing customer base.
Moving goods in and out of the UK is not a straightforward business-the amount you pay in duty often depends on how you prepare your declaration to Customs. If you don't get the paperwork right then the Chancellor of the Exchequer stands to receive a nice little bonus at your expense. "A lot of people delegate the customs management to freight forwarders," says Davies. "The problem is that they won't necessarily have sufficient knowledge of the goods that are being shipped to ensure that there isn't any overpayment."
Working on the assumption that the importer/exporter will have more relevant information about the goods in question than the freight forwarding company, Bell Davies' e-customs tool allows companies to enter details of shipments into a centralised customs management system. This data is then formatted in compliance with Customs and Excise rules and forwarded to the relevant authorities. While customs management software is not new, Davies claims that many companies have been put off managing their own documentation by the cost of buying and maintaining an expensive package. "The advantage of our system is that you don't need an inhouse customs management facility," says Davies. "You access our system via the internet and we charge on a pay as you go basis"
While he won't be specific about the figure, Davies says that e-customs cost hundreds of thousands to develop. The payback is that ecustoms is winning Bell Davies revenue from clients who would probably not have used the consultancy. "A significant number of multinationals are using our CMS service that wouldn't have come to us before," he says. To facilitate these bigger clients, who may be moving thousands of packages every week, Bell Davies can integrate e-customs with their computer systems to allow the relevant information to be flowed seamlessly into e-customs.
Davies says that while customs management is not currently the largest division of Bell Davies, it has the potential to become so, particularly if the company fulfils its vision of providing similar services for non-UK tax regimes.
CUTTING THE COSTS OF DEALING WITH QUERIES
While the stock market frenzy that once surrounded the telecommunications sector is a thing of the past, the fact remains that modern economies run on phones, faxes and the internet. That means even in relatively subdued economic times, telecom companies are pitching their goods and services in a marketplace that is both potentially lucrative and very, very competitive. The fact that the products on offer have grown ever more complex in recent years sharpens the competitive edge.
As Will Morey, marketing manager of Crane Telecommu- nications points out, buyers now expect enhanced customer service as standard.
Crane found a niche in the market as a value added distributor. In rather plainer English, this means that the company uses equipment supplied by manufacturers such as LG and NEC to put together off-the-shelf telecoms that are then re-shipped to resellers. A major part of the company's business is in providing dealers with a huge amount of technical support.
That's where the web comes in. Crane has invested in a selfservice customer relationship management system which aims to provide comprehensive support that is also cost effective. For instance, many of the questions from resellers crop up time after time. When the clocks change in spring and autumn, Crane can safely expect dozens of calls asking how to change the internal clocks in its telecoms system.
This can be hugely time consuming-hence the company's strategy of diverting as much of this traffic as possible to the web through a dynamic ‘frequently asked questions system.'
It works like this: the answers to the most common questions are posted on the company's web site and customers are 54 encouraged to seek the answer online. When a question comes by email or phone that hasn't been answered online, the query and answer are added to the website. The more common the query, the higher it is on the FAQ list.
By doing things this way, customer concerns are captured in a central system rather than being locked in the head of an individual member of the support staff. "By using the internet in this way, we add knowledge to the organisation," says Morey.
Crane's commitment to knowing its customer doesn't stop there. Using another tool, the company carries out customer satisfaction surveys focusing on specifics such as the impact of staff attitudes. In addition, the company has given account customers access to data from their own accounts. As a result clients can now look up details of their credit limits, invoices and the status of orders across the internet. "This has revolutionized the way people work with us," says Morey.
However, he admits that it is an area where it is hard to stay ahead. "These days, it's hard to get a competitive edge through technology. To do that, you have to ask clients what they want and tailor the solution to their needs," he says.
A TRANSFORMATION IN CUSTOMER SERVICE
Higher productivity, increased turnover, improved stock control and better order processing. You have to pause for breath when you hear Nigel Williams talk about the benefits the internet and new technology have brought to his business.
Windsor-based Healey Williams was founded 17 years ago, supplies promotional merchandise to, mainly, blue chip companies. Acccording to Williams, its approach to technology investment was always open-mindedprovided there was a clear return.
"We have always looked to applying technology- if we can find a benefit and if it is affordable," he says.
At the core of the operation is a £50,000 stock control and order processing system designed to ensure that customers can make purchases online safe in the knowledge that if the system says an item is available, it will be. While the cost of developing the system was significant, Williams says the company has reaped the benefits in terms of higher productivity. In fact, the company estimates that the ability to offer online ordering has boosted annual sales to the tune of £200,000. For Healey Williams, transaction online is now about more than just their main website. While it is possible to order direct through the main website, Healey Williams offers its clients their own microsites, containing goods that that are specific to them in terms of range and branding.
"You might have a dozen or so offices around Europe, each buying a certain number of pens. Because they're buying centrally it can be treated as a bulk purchase, so they get a better deal," he says.
While the site is bespoke to the client, ordering fulfilment and billing are handled by Healeys. As Williams points out, this can be particularly useful to multinationals with operating a number of offices, each with its own corporate merchandise requirement. So although each office can make purchases independently of the others, a centralised facility keeps costs downs.
Old-fashioned steam email also plays an important part in the operation. When clients ask for quotes through this channel, Healey Williams can mail back mock-ups of the merchandise in question. "We can show people what the email will look like within a matter of minutes," says Williams.