IT, dot-coms and 'getting' business

You may not have noticed recent stories explaining why German book publishers are saying no to Google's -- and previously Amazon.com's -- requests to put German-language books online. But while it's easy to dismiss this as just another publishing industry story, there are larger lessons that continue to get too little emphasis.

Ever since the dot-com boom, there has been direct competition between pure-play Internet firms and established, pre-Internet companies. Which group has the advantage? Should the two sides try to coexist, or someday merge? Which would ultimately prevail? Ten years into the debate, we have an initial answer -- the newcomers are winning.

Consider the sectors where the dot-coms have triumphed, at least in consumer-oriented businesses. The music industry sued and dabbled only to have iTunes suddenly sweep past the old-line labels. Citibank experimented with Internet payment systems but was consistently outmaneuvered by PayPal. To compete with Expedia et al., U.S. airlines invested heavily in their own travel business, Orbitz, but eventually sold it off to Cendant. U.S. book publishers never really tried to compete with Amazon, which also easily routed Barnes & Noble. No established health care provider has really challenged WebMD. Google and Yahoo have smashed the best of what Disney, Time Warner and others had to offer.

Of course, there are some important examples on the other side. The grocery industry has moved aggressively into online delivery, and now Stop & Shop owns Peapod. Clearly, the major brokerage firms haven't crumbled in the face of online brokerages, and the Internet has made few major inroads into the insurance industry. Major League Baseball broadcasts its games directly over the Web. But these successes pale compared with the longer list of losses.

Many of these defeats are likely to have long-term consequences. It's becoming clear that if established players can't extend their success to the Web, their pre-Web businesses will eventually suffer. Apple's iTunes is already getting into the talent identification and promotion business, threatening the very lifeblood of the traditional music industry. The Internet is destined to become a vast infrastructure for purchases, mobile payments, gambling transfers and other transactions that the world's banks ignore at their peril. Similar risks exist in many of the industries cited above.

What's the situation in your business? IT professionals that really care about the companies they work for should be asking themselves questions such as the following:

- Where is new IT-based value being created in our industry?

- What is our company's share of this new value?

- Is this share rising or falling?

- If it's falling, what can we do about it?

These are the types of questions that business people routinely ask themselves but that corporate IT people, in my experience, only rarely ask. The questions aren't particularly hard; ballpark estimates will generally suffice.

We're always hearing about how IT must become more businesslike, but usually this refers to working better within one's own company. Truly knowing your business, however, means understanding the use of IT not just inside your organization, or even by your major competitors, but across your company's entire ecosystem.

The German book industry may or may not have the resolve and solidarity needed to fend off mighty Google. But at least it's asking the right questions and getting itself into the game. Are you?

David Moschella is global research director at the Leading Edge Forum, a Computer Sciences company. Contact him at dmoschella@earthlink.net.

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