Traditional firms feel pure-play e-com chill

Businesses that have been around for some time may be feeling a little uneasy about the overwhelming success of the new e-trades.

Results from a survey by Montreal-based Hewitt Associates of 130 North American companies indicate that almost two-thirds of Canadian and U.S. respondents believe their e-business activities are behind those of non-traditional competitors, such as dot.coms and start-ups.

“Those new companies are…not huge companies. It’s very easy for them to turn around quick and adapt to the new technology, adapt to the needs of the customer,” said Roger Duguay, leader of e-business strategy for the Canadian region at Hewitt Associates. “In the market, especially in the e-business world, you have to react fast. You have to change your business plans every three months. You have to be able to react to new needs and demands. Those traditional competitors aren’t used to that. They don’t have the thinking or the culture to react that fast.”

Duguay suggests that traditional brick-and-mortar companies might be able to get ahead if they restructure.

“If they want to play in the e-world, they have to reinvent themselves. That means re-engineering all their processes and the culture,” Duguay said.

According to Susan Savage, vice-president of Organization Initiatives at the Canadian Imperial Bank of Commerce (CIBC) in Toronto, it is not an issue of feeling behind.

“If you’re not in e-business, you’re not in business, especially in the financial world. Most of our client base is on the Internet and we have to offer our clients what they want and need,” Savage said. “We still operate in the old bricks-and-mortar world, (and) our electronic commerce is another business. The demands on our resources and time are not focused just on electronic business.”

Savage reasoned that most dot.coms are minuscule in size compared to large, established organizations, and are therefore able to adapt more quickly.

“It’s much harder to be flexible inside a business the size of this. It’s the dot.coms that are smaller pieces to move,” Savage said. “But we can’t abandon the traditional business. It delivers the largest part of our revenue.”

Steven Prentice, president of Toronto-based Bristall Morgan Group, said larger organizations are very set in their ways.

“Large, older firms may pay lip service to the new economy but in my experience there isn’t a full top-down endorsement in understanding these things. They give the e-commerce side, the Web site side, of their business to people in the IT department,” Prentice said. “The senior decision makers don’t have time to grasp what all this means. A lot of these companies are very risk averse.”

Prentice said the types of people who rush off to create start-ups are those who “get it.

“There are definitely two solitudes, those who get the idea of what the ‘net can provide and those who just cannot simply work it into their mindset. That may be a key milestone – that start-ups are populated by those who get it,” Prentice said.

David Bowden is one who got it. The managing director of newly-opened, a depot for e-commerce deliveries, said there are some types of retailers who would rather protect their existing channel and not look at new ones.

“Those are the companies that would be threatened by the pure plays that are coming on-line. You have to be extremely confident that what you’re doing in the real world in bricks-and-mortar is the best and the only solution,” Bowden said.

The Hewitt Associates survey also found that people issues are a top challenge in transforming organizations into e-businesses.

“Motivating and engaging employees is consistently important across any border in any industry,” Duguay said. “This is particularly true in the case of companies trying to transform into e-businesses. It is crucial for an organization to align its culture with its e-business environment for employees to remain engaged.”

Sixty-two per cent of Canadian companies and 61 per cent of U.S. companies said people are among their top challenges to achieving e-business success.

“In the U.S., talent retention is a huge issue. The market is so hot for the Internet world, the e-world, that you have a problem to recruit, retain and motivate your people. They get bored so fast,” Duguay said. “In Canada, this is one of the issues as well. People are struggling about who takes control, about the e-business strategy internally.”