Surveys Show Effect of Internet on Businesses

Executives from more than 300 “traditional” companies forecast a two-year tripling of e-commerce revenues, and large-scale shifts in the use of strategic alliances, business and management processes, and in customer and employee relations, according to the Towers Perrin Internetworked Organization Survey.

“Most companies recognize that they have made relatively modest changes to date in how they manage their business as a result of e-commerce,” said Peter Bresler, a Towers Perrin consultant and one of the survey’s architects. “However, they accept that large-scale changes are forthcoming and acknowledge the speed required for change in the next two years. It goes well beyond ‘business as usual.'”

According to the survey, e-commerce sales on average are expected to more than triple to 14 percent in the next two years compared to 3 percent in the previous two. It quadruples to 12 percent from 3 percent for those who foresee e-commerce becoming their main business over the next two-year period.

“The way companies work with external stakeholders also will change dramatically,” Bresler said. “Fully 46 percent of respondents expect to work jointly with customers in the next two years, while only 7 percent did in the past two years. Alliances and partnerships are expected to leap to 37 percent from 11 percent, and shared service workforces are also expected to triple to 24 percent from 8 percent.”

The extent of major operational changes forecast in the next two years in advertising, market and customer research, selling and account management, customer ordering and tracking, and after-sales customer service also range from triple to quadruple the changes seen over the previous two years, according to the survey.

While 15 percent of respondents have significantly changed their recruiting approaches already, almost half anticipate following these early adopters in the next two years, according to survey results.

“However, base pay and incentives aren’t the key answers to employer attraction and retention challenges, even though the numbers seeing major changes to pay, short- and long-term incentives, and retiree benefits over the next two-year term jump markedly,” said Brad Ivie, a Towers Perrin consultant and a survey co-author. “Instead, respondents believe that offering individual growth opportunities will be a key, with change here more than quadrupling. In addition, 40 percent see a need for much closer measurement of human capital investment and returns. Companies are looking beyond compensation to intrinsic job fulfillment and employer branding to solve recruitment and retention challenges.”

Major changes to management processes also lie ahead, with the two-year pace more than tripling for business planning strategy, business performance management, organization transformation and change management, as well as knowledge management.

“Companies have been changing strategic decision making, methods of risk assessment and the flow of internal communications as a result of the opportunities digital electronic networks give to work differently,” Ivie said.

While business processes may change, companies are choosing to keep customer-centered activities such as customer service, customer data management, order taking and tracking, and accounts receivable functions in-house; results indicate they will continue to do so. Technology services, the only key area for outsourcing today, is expected to grow only moderately.

With an increasing focus and growth of cross-functional, flexible teams and a fourfold increase in outsourcing of non-core activities from 11 percent to 44 percent, corporations are expecting major changes in their organizational structures.

“This suggests that while companies understand the need for change, they have not yet developed clear implementation strategies,” Ivie said.

Most of the respondents to the Towers Perrin survey were from large multinational companies, with a majority of located in the United States, Canada, or the UK, and the remainder in Asia, Australia or continental Europe. Thirty-five percent were in organizations with 1,000 to 5,000 employees. More than half responded online.

In a nationwide survey, trade association executives representing more than 50,000 companies across a broad cross section of US industries indicate that more than one-third of their members are currently conducting business with suppliers and vendors online. The “Internet-Industry Index,” sponsored by eSociety, Inc. and conducted by Crestwood Associates, also revealed the importance of the Internet for doing business is expected to increase three-fold over the next five years.

The survey is based on interviews with 100 association executives, who participated in a benchmarking survey of the transition from the traditional “offline” ways industries do business to how they’re incorporating e-commerce and the Internet as a business tool to interact and transact.

Among the findings from the Internet-Industry Index are:

  • 33 percent of association members are believed to conduct business with their suppliers and/or vendors or customers online
  • Current estimated member revenue from online sources is at 9 percent and is expected to increase to 34 percent in the next five years
  • 22 percent of association executives perceive the Internet as very important to its members today, but five years from now 66 percent anticipate it will be extremely important

While they see the Internet as very important to members, association executives currently think their members primarily use the medium for faster and broader communication; and, secondarily as a vehicle for commerce. Success factors that association executives perceive for their numbers are to gain more industry information, promote products and services and additional means of customer support, and communicating or selling to customers.

Sixty-six percent of association executives were able to estimate current online revenue for their members. Those same executives also estimated that the expected revenue growth from online sources will increase from 9 percent today to 34 percent in five years. Fifteen percent of executives believe that over half of their member’s revenue will come from online sources in five years, compared to only 4 percent now.

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