July 2001

The return to real business

By Fred Crawford
By Robert G. Hagstrom
By Matthew Friedman
By Roger D. Stephan
By Randy Charles Epping
By Julie Bick
By Edited by Kunreuther
Review by
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Lou Gerstner, the CEO of IBM, was recently asked on CNN's Lou Dobbs' MoneyLine to explain Big Blue's strong showing in the stock market. "IBM, fortunately, never chased the dot-com phenomenon very hard, and so we missed it," Gerstner said. "We have stayed true to our focus, which is that e-business and the Internet are about real business. It is not about simply putting up a Web site. It is about transactions, it is about transforming your enterprise, and those expenditures are still going on." No, this isn't a column on the enduring legacy of IBM, nor on the collapse of the Internet bubble. This month we look at books that echo Gerstner's optimism and describe what works in "Real Business," a strategy that says great businesses do more than post a Web site and wait for business to come surfing in.

One of the pioneers in Internet retailing was, which started off selling only books. I'll admit, I liked the company then. The customer service people loved to talk about the books you were buying, and your order arrived in just a few days. Can Amazon now succeed by selling everything from cars to tools? I don't know, but The Myth of Excellence: Why Great Companies Never Try To Be the Best at Everything by Fred Crawford and Ryan Mathews argues for a return to the old days when businesses operated to meet customer needs. In the introduction to this thought-provoking book the authors make a cogent argument that today's consumers may be more affluent but they aren't necessarily living better than their parents did. This recognition means American values are shifting, and those values are showing up in consumer surveys and attitudes. After years as consultants for global retailers, Crawford and Mathews thought they knew everything about consumer attitudes. But a survey of 5,000 consumers disproved much of what they assumed was true. People want "honest, consistent prices," not just low prices on a given day. They want to be treated with courtesy and respect, not entertained by customer service. In this must-read book, Crawford and Mathews write a blueprint for the Real Business of the future.

If anyone knows what a Real Business is, that person is Warren Buffet. In The Essential Buffet: Timeless Principles for the New Economyby Robert G. Hagstrom the principles of the Oracle of Omaha are organized to help investors sail through the New Economy and avoid the siren's call of get-rich quick technology investments. Hagstrom acquaints the uninitiated reader with Buffet's main investing maxims, then walks a tech stock through the Berkshire-Hathaway chairman's analysis process. Hagstrom says Buffet chooses not to invest in technology, but the underlying reason "is not that we don't understand a technology business or its product. The reason we don't invest is because we can't understand the predictability of the economics ten years hence." Buffet's internal goals for Berkshire-Hathaway pre-empt the use of technology stocks. As I read The Essential Buffet, I determined to re-examine my own portfolio for the long haul and to apply Buffet's principles to my technology stocks. My own motto: only Real Businesses need apply.

I am often asked, what's B2B? If you don't know, now is the time to read Understanding B2Bby Matthew Friedman and Marlene Blanshay. B2B stands for Business-To-Business technology. Essentially B2B is the online transformation of traditional business interactions. In the past a salesperson for a medical supply company may have written up an order for hospital supplies, then transferred those orders to a sales clerk who entered the order into the company's order processing system. Now many companies can enter standard orders online, saving valuable supply and sales time without sacrificing service or cost. In the realm of Real Business, the Internet can and does offer invaluable ways to streamline business transactions. Understanding B2B provides a useful explanation of the many ways B2B plays a part in international commerce. B2B is the future as Lou Gerstner envisions it for the remaining major players in the technology industry.

Our last book this month makes a strong case for the future success of the Internet if businesses learn to use it well. Customers Rule! Why the E-Commerce Honeymoon Is Over by Roger D. Blackwell and Kristina Stephan highlights retailers who succeeded on the Internet and tells us why they've prospered. The authors also detail the embarrassing strategic mistakes many e-retailers made. (No, none of those e-ventures are still in business.) Blackwell and Stephan found most e-retailers did not understand how or why consumers use information, i.e. Internet sites. They found most consumers go to the Internet to get more information on a product, not to buy it. Are you looking for a new washer and dryer? Consumers may search the web for products and prices, but most of us will march down to Sears for the final sale and delivery. Customers want back up; they want service.

Web sites are the equivalent of catalog sales, Blackwell and Stephan say, and the profit margins are about the same. Online sites are just one way of enticing customers into a store or solidifying an already existing relationship. For example, Sherwin-Williams, the paint company, uses its Web site to devise strategies that will satisfy and retain loyal customers. In the end, a Real Business knows its customer and uses the web to enhance the relationship.

Briefly noted

A Beginner's Guide to the World Economyby Randy Charles Epping, is a revised and updated version of the perfect gift for recently graduated scholars. In engaging question and answer format, Epping covers the 81 world economic concepts he says most people run across in their daily lives. Topics include everything from the World Bank and net worth to economic sanctions. Epping leaves complicated theories and explanations to people with Ph.D.s; this book is for the rest of us.

The Microsoft Edge: Insider Strategies for Building Successby Julie Bick has been released in paperback, making it a great summer item to tuck into a briefcase or beach bag. Bick crisply and humorously relates how the software giant got big and stayed that way through business practices any corporation or small business would be wise to duplicate.

Wharton on Making Decisions, edited by Stephen J. Hoch and Howard C. Kunreuther. Summer is a good time for quiet reflection on upcoming decisions and their impact for the future year. This summer, for the price of a book, you can get help with your decisions from one of the most formidable teams in academe. The Wharton School reveals the latest academic insights in decision-making with cogent and timely essays on the topic and supplies the tools needed for strategic decisions.

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