The Internet is killing your business, Part II

Taking advantage of that Internet thing

In Part I we looked at how the Internet changes everything. This is how you can take advantage of it.

You probably underestimate what you can automate

The Internet empowers you to reduce your marginal costs close to zero. This doesn’t happen by itself however.

Automate everything you can. Relentlessly. Ideally, you don’t want to need people at all to make and complete a sale. From order to fulfilment should use as close to zero people as possible. You still need staff of course, but they’ll be focused on making that process as effective as possible, strategy and marketing.

A common objection is “but we need staff to do …”. A smart Internet business will find a way to circumvent that problem:

• We need staff to quote
  Are you sure? How much business do you lose by not quoting fast enough? How much more would you make if quotes were 100% automated? What if you offered fixed price standard offerings, and sold them in volume? What if you had a questionnaire which asked your sales questions online, and emailed the customer a PDF quote – to a far higher standard than your manual ones – instantly?
• We need to call our supplier/customers
  Could you email them instead? What if they could login and view your requests online, accept or decline them, query all the relevant details themselves? What if you automatically proxied between your customers and suppliers?
• We need a physical presence
  Sometimes this is true, for example with clothing or cars. How much of the remainder of your operation could be automated? Is the Internet getting people excited enough about what you do that they are coming to your physical locations to buy?

Things that you can probably automate most include: accounts receivable, pre sales, order taking and after sales support. If you’re in the right industry: fulfilment.

You probably have no idea what this costs

The truth is some things you think are hard are ridiculously easy. A lot of things you probably don’t even know exist are very hard.

A college dropout could write code which sends you a text message in about 5 minutes.

Automatically sending an email? 2 minutes.

Automatically sending a graphical email that doesn’t get spam filtered, and works consistently for lots of different email software? Potentially a week, and several people. And your maintenance is way higher, as email changes all the time.

The danger with this is that if you don’t understand what makes things difficult, or what is important, you’ll pursue high cost paths without considering vastly lower cost alternatives. Startups have an advantage: they don’t have much money, so they optimise better. It’s no coincidence that most of them don’t use graphical emails, but that big lumbering corporations tend to insist on them.

You need smart people who understand the technology to guide you, and they need to be empowered enough to make decisions. The person least qualified is usually the technophobe at the top.

What Internet businesses look like

Internet companies are usually much smaller, spend less and earn higher margins. Many are profitable with only a handful of staff.

Because the technology is so important, a large portion of resources go into developing that technology. If you’re Google you need to write that search engine before you have a business. Amazon is nothing without a great website.

Conversely your traditional workers are likely far thinner on the ground. There’s much less need to have people answer the phone, handle accounts etc., as these processes should be automated.

Generally there will be more highly skilled workers, and their skills will be leveraged far greater than before. Improving a part of your process can result in huge gains for minimal manpower, but it takes real skill to know what to change.

Most successful Internet companies are lead by people with a technical understanding. People without these skills will struggle to compete against those with them. Just ask your granddad to race an 8 year old: find me something on the Internet.

Because highly skilled people are harder to find, they are usually treated well. Great offices are a smart move to help keep them. Culture becomes far more important than ever. This is not indulgence. With information workers, flexible hours and other perks pay back more than they cost.

What can you do right now?

There are three options.

1. Look at what you can change with your business
2. Fund a new spin-off business
3. Await extinction

Sometimes small incremental changes to your own business are enough. If you’re an established bank, supporting online banking was a no brainer – essential for your survival. In these cases, the easiest strategy is to outsource to external talent.

Founding a spin-off is another approach. When British Airways realised they couldn’t compete with ‘no frills’ airlines like Ryanair without destroying their own business, they founded Go (now part of EasyJet). This allows you to circumvent what is probably your biggest liability – internal politics. For a lumbering giant to change their website can take 12 months and 500 stakeholders. A five man team can dance circles around them. They’ll take a fresh look at everything, and probably find a far better way than you will.

The best people tend to be highly entrepreneurial, and they thrive in an environment where they have high autonomy. A spin off gives you the chance to create that culture afresh. Right now, it’s likely they won’t even apply to work for you.

Done correctly, you can leverage your own strengths to this new company (experience, capital, brand recognition) and take full advantage of the Internet revolution.

Just don’t do nothing.