Academic journal article
By Ulrich, Dave
Human Resource Planning , Vol. 23, No. 2
E-business has arrived. Users on the net went from 2,000 in 1983 to over 250,000,000 in 1999; in 1999 there were a billion pages on the Web with another 500 million expected to be added in 2000 alone. Much has been written and anticipated (although not all delivered) about how technology and the Web will change the game of business. Less has been written about the implications of the Web-based economy on organization and HR issues. This article helps the HR executive dialogue with those creating Web-based business. It synthesizes the new rules of Web-based competition so that the HR executive can converse about the concepts and language of the new economy and suggests three areas where HR executives should contribute thought leadership to enable companies to win the new game. The article fills the void of enthusiastic rhetoric and hope about the new Web-economy with suggestions for conversations and actions HR professionals should pursue to win this new game.
New Rules of the Web-Based Economy
Many predict that the new Web-based economy will transform the nature of business as evidenced in dozens of outstanding articles, books, and magazines. Understanding these rules and their implications helps HR professionals converse about how the Web will change business. The essential rules of the emerging Web-based economy may be illustrated using the following simple scenario:
My 16-year-old son has size-16 feet. He has a hard time finding shoes that fit, particularly for his diverse interests (hiking, basketball, school, church). To find shoes, he needs to visit many stores, only few of which generally have a shoe he likes. In a Web-based economy, the rules change.
1. From market share to customer share. Traditionally, shoe companies worried about their market share of sports-oriented teenage boys and created brands to attract this market segment (e.g., Air Jordan). In the Web-based economy, the shoe company measures success not by market share of a consumer segment, but by the percentage of shoes sold to my son over his lifetime. If they figure he goes through three pairs of shoes a year at $100 a pair, they calculate that in the next 50 years, he represents a $15,000 revenue stream. The successful shoe company will measure its success by the percentage of the $15,000 it receives. Customer share as opposed to market share is made possible primarily through the customized service provided through the Web. Share of customer may occur with book buying (Amazon.com), automotive and related services (eGM), financial services (e*trade), and other businesses focusing more on customer share than market share.
Key words associated with this rule include: share of customer, personalization, disintermediation, customerization (Siebel, 1999, at 181-198).
2. From market research to customer intimacy. The Web-based shoe company, to get a high percentage of my son's $15,000 lifetime shoe budget, will work to form a personal connection and relationship with him. This may mean knowing his birthday, sports he enjoys, and shoe style preferences. The shoe company will also have access to my e-mail (or that of other significant people in my son's life) and contact me a few weeks before his birthday or Christmas to encourage me to show affection for my son by buying him new, hard-to-find shoes. Customer intimacy means firms will know the personal lifestyle and buying patterns of current and potential customers because of the data accessible through the Internet and will try to use this information to build more intimate relationships with their customers. USANET's slogan is "I want to have an intimate relationship ... with two million people"; Amazon.com is able to refer book buyers to other books based on what others who buy the original book have also bought; and eB ay collects behavior-based data on those who buy and sell from their Web-auction services.
Some words in the new economy include: Web branding (Schwartz, 1999, at 32), prosumption (Tapscott, 1999, at xxi), customer value proposition, virtual middlemen (Siebel, 1999, at 200-202), individualized configurations (Evans and Wurster, 1999, at 84); segment of one (Evans and Wurster, 1999, at 149), business of one (Tapscott, 1999, at 57-59), "stickiness" of the customer relationship. …