We've seen the internet before. Yes, it's new in terms of technology, but it's not in terms of business. It's the most rapid and extreme form of deregulation ever, and we know a lot about the dynamics of deregulation. The great shakeout in e-tailing is following the pattern of airline deregulation, and business-to-business e-commerce looks very much like it's doing the same.
This is central to IT's planning ahead when it can't predict. IT needs to position its technology platform and core business-support initiatives for the next, not the current, phase of the deregulation tidal wave. But to move ahead, IT needs to think historically. If it views some element of technology as the next Something of the Future, then it creates three planning problems for itself.
First, anyone's prediction is as valid as anyone else's, and there's no way to pick between competing prognostications. In e-commerce, look at three recent forecasts of revenues in Latin America in 2003: eMarketer, $US15 billion; IDC, $8 billion; and Jupiter Communications, $3.7 billion. On which figure would you base a business proposal for e-commerce in the world's fastest-growing iternet market?
Second, the view that technology is all about the new ignores the hold history has always had on us. Internet commerce was initially lauded as "clicks" -- a new channel that would displace bricks everywhere. Now, clicks and bricks are the conventional wisdom. And many companies have learned, at immense financial and competitive cost, that to exploit the new technology -- the e -- they need to respect the old rules of process and sound business -- the c.
Third, the view of the internet as the future actually traps companies in the "now" of innovation instead of getting them to ask: What must we do today to be positioned for tomorrow? So, for example, the race to dot-com in the B2B and B2C sectors is overfocused on grabbing market share instead of building the relationships essential to survive the inevitable shakeout, and then to prepare for the consolidation phase brought on by deregulation.
The internet deregulates everything: industry boundaries (Autobytel.com is a car "dealer"), national trade protectionism and limits on customer choices. All this has happened in about five years.
The full impacts of deregulation may take 10 to 20 years to show up, but the pattern is consistent. First, nothing much happens because customers aren't fully educated about their new choices -- nor are they comfortable in making them. Examples are long-distance phone service, for which AT&T remained the default option for most, and e-commerce, for which consumers were first wary of using their credit cards.
Then there's a small surge of innovation that stirs everything up -- Southwest Airlines, Amazon.com and Ariba (the B2B leader), for instance. That's followed by a massive flood of new entrants, such as the hundreds of startup airlines, all the e-retailers and, more recently, the many B2B portals. Innovation grows. Then: shakeout! The underlying dynamics of commerce take over: pricing, customer base, advantages of scale and soundness of business processes. That's e-retailing today and B2B within the next year. It was the airline industry of the late 80s.
Next comes consolidation. The hundreds of airlines that came out of the innovation phase in the 1970s are now reduced to a handful of megaplayers and alliances plus regional carriers. The past year in telecommunications has seen the same global consolidation, with huge mergers and acquisitions. At the end of the process, there are five to 10 major brands left, several of which didn't exist at the start of the deregulation. The middle players are squeezed and business settles down to the megacompanies plus specialised players.
If your firm's IT strategy is defined by the current phase of its industry's internet deregulation, watch out. The real IT issue isn't today's innovation but being there at the end of the inevitable shakeout and a player in the consolidation. That won't be 20 years from now -- more likely, it will be 20 months, or even 20 weeks.