Extra cautious about e-commerce: Companies are dragging their feet on Internet deployment

Many U.S. companies hesitate to implement an Internet strategy despite realizing its potential benefits, a recent survey of 400 senior executives in mid- to large sized U.S. companies concluded. The survey, conducted by Chicago-based Diamond Technology Partners, found that many companies would rather react to competition than be at the forefront of e-commerce.

"A lot of companies have convinced themselves that they should not be on the leading edge--sometimes called the bleeding edge--of technology," said Paul Carroll, a Diamond Technology Partner and the survey's editor. "Instead, they would rather act quickly when the time comes."

According to Carroll, employing a "fast follower" strategy may not be a bad idea, but too many companies are not even taking the necessary steps to be prepared to react when needed.

"Companies essentially told us that they think the race is to be the first to be second," Carroll added. "Based on how little they are doing, they are more likely to be second to be third, or even worse."

David Malfara, board member and director of the executive committee for the Competitive Telephony Association, agrees that U.S. companies are being too cautious about the Internet.

"Prudence is probably a good idea in certain cases," said Malfara, who is also president and chief executive officer of Pace Communications, a supplier of Advanced Intelligent Network equipment. "On the other hand, you should be doing your best to understand the technology. I don't think people are doing that now [with the Internet], and the reason is the technology gap--the difference between developed technology and deployed technology."

Ironically, most executives are very optimistic that they can make money over the Internet. According to the Diamond survey, 60% of respondents expect Internet-based business to produce "significant earnings" by 2000, and 41% think that their companies will be earning a significant amount of money via the Internet by 1998. Further, four in 10 executives "feel strongly" that the Internet will be important to their competitive position by the end of 1999.

In many cases, however, executive enthusiasm has not translated into concrete activity. A surprising 30% of total respondents, for instance, do not yet have a Web site. Even among the 104 respondents who say they plan to begin direct sales to consumers over the Internet by mid-1998, 32% have not developed a Web site.

Also surprisingly, only one in four respondents feels strongly that a Web site or Internet-based advertising would enhance the company's corporate or product image. Companies are confused about how well advertising works on the Web, according to Carroll. They have looked upon the Internet as "brochure-ware"--no more than a publishing or broadcast medium at best.

"This is a very narrow view of the Internet," Carroll said. "The vast majority of companies are still looking at this as a way of publishing whatever they have lying around on the shelves rather than figuring out how to interact with customers in a way that really gives better service, sells products better or develops brand image.

"Organizations by their very natures find it hard to move," Carroll added. "Companies tend to only be very motivated when somebody is whacking them over the head."

Two-thirds of the study's participants fall into four categories

t -- The Fat and Happy do not experiment with new technologies because they are secure about their businesses.

t -- The Valkyrie mistakenly think they are far ahead in employing new technologies and thus safe from competitors.

t -- The Confused understand the fundamental influence of digital forces but don't know how to strategically apply technology.

t -- The Whistlers in the Dark also understand technology's potential but express no fear of it affecting them.

FELLOWS TAKES NEW ASSIGNMENT David M. Fellows, senior vice president of engineering and technology for MediaOne, last week accepted a new title--chief technology officer for U S West Media Group. He will guide important technology decisions and will report to Chuck Lillis, Media Group president and CEO. Fellows will live in Boston and commute to MediaOne headquarters in Denver as needed.

INSIDE TRACK PointCast Inc. has added 10 new special editions to its PointCast Business Network. To form its Industry Insiders editions, the company formed partnerships with KPMG Peat Marwick, Coopers & Lybrand, InteliHealth and other industry leaders to offer in-depth news to its customers. Government and Healthcare Insider were already available.