PS Consultants - ideas & solutions

The eTortoise and the eHare
August 1998

The move from traditional forms of business to "net-enabled" business is causing a lot of debate about the likely future for traditional businesses with what was once thought to be a handy thing called “established Track Record”, but is now being ever more frequently perceived as “dangerous baggage”.

"Baggage" mostly means entrenched attitudes, unnecessary premises, surplus staff and uncertainties about Y2K IT issues. Some or all of which are increasingly inappropriate for online economy. Indeed, any IT hardware and strategy that is more than 24 months old is a serious millstone that most traditional industries cannot or do not accept as not just worthless, but dangerously worthless.

An eHare like eToys appears, and same day as it floats on the NASDAQ stock market,  is worth more than ToysRus! And this is only one of many such examples where the US markets are suggesting that established businesses are worthless dinosaurs when set against the first online brand that looks like establishing in their sector(s).

There is even a widely voiced opinion that these ratings are there to encourage the e-businesses to use their paper worth to absorb the traditional businesses that simply don't have the management and desire to cope with the "new paradigm".

It costs relatively little to set an eHare running. Typically there are no barriers to entry into online markets. The eTortoise takes a more studied approach, with the benefit of the first full year of US eTrading to guide them, and perhaps in many cases to provide the nerve for those who initially wondered if they were right to declare "paradigm shift", when so many wise heads espoused the conventional wisdom that the Internet is "just another channel".

So why did ToysRUs (which has had a web site for ages) fail to cut it with the markets when an eTortoise came whizzing past..? The ToysRUs website has apparently outsourced its design and commerce engine, and there is very little apparent "soul" of their business apparent in its execution. The ToysRUs management have displayed that that they are still focused on "leveraging their present assets" - huge volumes of real estate, traditional advertising and legions of staff.

This is a very typical "gesture response" to online trading that many larger established feel is doing their bit for them. Their web presence appears to have been outsourced in a cosily familiar way to IBM or another "safe pair of hands" outfit that knows how to talk to the IT department in terms of reference that they understand, and it is virtually an interface to their accounting system software, not a genuine eCommerce proposition in the spirit of the net.

eToys also dares to suggest that parents  really don't enjoy taking their kids to stores and having them throw tantrums and cling onto the displays when they can't have everything they want. ToysRUS marketing is largely predicated on the idea of getting the kids to pester their parents to take them, with an almost "McDonalds" style of family marketing. As any parent will probably agree, this is questionable thing.

Most competent web-savvy designers can  cobble together a site that would look superficially the same (or better) as something ground out by the MIS division of a £100m company. Whether or not it operates smoothly in terms of database integration and scalability doesn't even really matter until the action on the site is sufficient to pay to get those things taken care of "properly".

In broad terms, it costs less then the price of fitting a single high street Dixons store. The running costs are negligible - 2 people at most would be required in "front desk" roles to manage sales.

Now there is only one issue left: marketing, and that has amplified the importance of brand in the minds of many. But is brand synonymous with "globalisation"..? I don't think so. There is still no evidence to suggest that net has anything to offer that must change the habits of the past 5000 years where people trade 80% of their goods/services in a 20 mile radius of where they live and work.

Despite the best efforts of politicians to defy nationalism (and if you saw the Eurovision Song Contest voting, you will realise that there is no such thing as impartiality in the EC) the scale of business in Europe is still done mostly on a country-by-country basis, and the much vaunted concept of globalisation is probably just limited to very simple brand marketing - witness car sales across Europe today.

In fact be grateful, it all makes work for the workers, because if the US continues to embrace the notion of a single central “warehouse” web site in every main consumer commodity, there is going to be a problem working out how to employ the legions of displaced workers from the traditional retail and channel businesses.

So perhaps the UK and other Eu countries present a range simpler and more manageable route to online than in the US. This raises the question if we actually need to really worry about the issues facing US companies when servicing a market some 10-20 times larger..?

Blue Smoke
So how come IBM - of all people – appears to have made the jump to the new paradigm..? It appears to be a new company to all the word, and a jolly successful one, too.

One answer is to this conundrum is that they have not actually changed anything, and that this new eFacade magnificent example of smoke and mirrors: IBM has basically been doing what it does best - selling the same technology over and over to its traditional marketplace.

Anyone who imagines that its large corporate users at places like Sainsbury have been provided individually tailored eBusiness systems are kidding themselves. IBM does this by taking their age-old CICS transaction management system (a cosy comfort blanket for many senior MIS staff) and other elements from its library of already configured software, and gluing a few javascript web pages around them. Perhaps this leopard has changed its spots to e-spots by simply adding the "e-"

Sainsbury has done nothing revolutionary by paying IBM or another of the big “systems houses” to connect their legacy systems to the web, and thus they have actually changed very little. And they are probably congratulating themselves at how smoothly it’s all gone and how little disruption there has been to their traditional business.

However, the US experience suggests that they have probably just slightly postponed the evil day when the likes of and will rule the roost.