Are You Web Smart?

Would-be Web heroes are popping up everywhere. Thousands of companies, from door builders in Wisconsin to fabric cutters in Spain, are getting wise to the Web

There's a sharp dividing line between companies that cling to the past and those that invent the future. That line, increasingly, is no longer between older, established companies and spanking new ones. It's between those organizations that are capable of using the Web to spur innovation and those that aren't. Surprisingly, what distinguishes many of the most Web-savvy companies is not their technical prowess but their imagination. Everyone has access to Net technology. The crucial question is: Who has the brains, guts, and creativity to take full advantage of it?

Suddenly would-be Web heroes are popping up everywhere. While Silicon Valley outfits paved the way, this is fast becoming an equal-opportunity revolution. A second Web generation is emerging. Thousands of companies, ranging from door builders in rural Wisconsin to fabric cutters in a remote fishing village in Spain, are starting to get wise to the Web. They're using it to come up with whole new ways to make, sell, market, and move not just circuits and silicon but also Pop Tarts, insurance policies, chemicals, and cement. "The Internet is changing the very nature of industries in every corner of every industry in the world," says Web guru Adrian J. Slywotzky, a vice-president at Mercer Management Consulting Inc.

So the time has come to inaugurate BUSINESS WEEK's Web Smart 50. We've scoured the globe to find companies that are doing the most to harness the Big Bang of the Internet and blast away at the old world order. Rather than highlight the latest jazzy dot-com ideas, we focused on real, live revenue- and profit- producing companies that are changing the way they do business. We're most impressed by companies that already have achieved measurable results--costs cut, new products delivered, middlemen bumped out of the picture. But these are the early days of the Net, and a lot is still in the planning stages. In some cases, we picked as our champions outfits that shine a light on what might be possible.

We're no longer wowed by the no-brainers of the Net. Cutting clerical staffs and selling products on a Web site are oh-so-20th Century. The smartest companies are taking this stuff to a new level. They're bull's-eye marketers, product innovators, and miners of valuable knowledge from info-lodes deep within their organizations. Using the Web, they streamline tangled old business processes, turn customer service from a thankless task into a way to foster loyalty, and make the trains--and the goods--arrive on time.

Some of these companies have been leading the charge for years. Energy seller Enron, discount broker Charles Schwab, and PC kingpin Dell are doing for innovation what W. Edwards Deming did for quality. They're using the Web to set new standards for speed, efficiency, and service. Enron, a one-time natural gas pipeline company, has tapped the Web to create a completely new business. It trades not just electric power online, but Net capacity itself.

Others are just getting started. They're taking the deceptively difficult steps needed to cut costs throughout their companies and rewrite their business rules. At Miller Brewing Co., it's about slicing the number of defects from 100 per batch down to 2 at a bottling line in Eden, N.C. General Mills Inc. is reducing the times boxes of Lucky Charms are shipped in half-empty trucks. It's an idea on its way to being worth $800,000 a year on one test route alone.

The big leap. Still others are using the Web to shake up entire industries. Ever hear of Zara? The clothing design company, started two decades ago in a remote fishing village off the coast of Spain, is ripping up the traditional four-season fashion cycle. It's using the Web to help churn out just-in-time fashions every two weeks--responding immediately to the latest style crazes popping up in L.A. or Saint Tropez.

Among the pioneers, there's no debate anymore about whether or not to make the terrifying leap into cyberspace. It's so obvious. According to data marketer Forrester Research Inc., U.S. businesses this year will trade some $406 billion worth of goods over the Web. And we're not just talking pencils and tape. Think business-to-business--widgets and bolts, truck-shipping capacity, and power. In four years, Forrester Research says, that number will spike to $2.7 trillion--just over one-fourth of today's U.S. gross domestic product and 17.2% of all business trade.

The word from the Web-wise: It's time to pump up the volume. Forget about quaint old quality circles and cozy management retreats in the Adirondacks. Instead, think re-engineering times 1,000. According to Stanford University's Center for Electronic Business and Commerce, the Web is radically changing business standards for most companies--not just by a few percentage points, but in mighty chunks. Just ask some of our Web Smart 50. Errors in door orders at Weyerhaeuser Co. were cut by 50% to 60%, and earnings per customer go up in some cases twofold. New products, like Procter & Gamble Co.'s Swiffer dust cloth, come to market in as little as one-third the time. Elsewhere, delivery costs can go down by a factor of 10, and distribution costs by 100. At the same time, whole layers of management are being scrapped.

But how to begin? Sometimes with bricks and mortar. Webcor Builders Inc., a San Mateo (Calif.) construction company, is using the Web to put up commercial buildings two months faster and with only one-third of the previous management costs. Webcor creates a special Web site for each project. All plans and timetables are laid out for employees, subcontractors, and architects. If something changes, everybody knows it instantly.

For every dramatic tale of industry derring-do like Webcor's, there are stories about a crisis that forced a change in thinking. At Ocean Spray, it was three years of recession in the cranberry industry. Ocean Spray went online to keep growers from revolting over low prices. It set up a site that shows independent growers how they can deliver redder berries--which fetch higher prices--and also how to deliver the berries more cheaply, so growers can boost profits per load. One grower upped profits on his harvest by 5% last fall. Ocean Spray makes out, too. It got better berries and cut processing costs by upwards of 8%.

Sometimes it takes just one person to get the ball rolling. And, often, the catalyst is not the CEO but a middle manager who's tucked off in some far-flung outpost. At Miller Brewing, the catalyst was Patricia Henry, a 23-year-veteran of the company who had worked her way up from a brewing supervisor to become manager of Miller's Eden, N.C. beer bottling plant. While taking a shower one morning, she got an idea about how to overhaul the production lines. She added network technology that has helped cut waste and error rates sharply. And now the idea is spreading throughout the corporation.

Using the Web right the first time is harder than it looks. Plenty of projects disappoint--or turn downright sour. Chase Manhattan Bank had big plans for creating an Internet system to support its $75 billion-a-year mortgage lending business. No such luck. According to a lawsuit filed by Chase in Dallas District Court, the systems sold to Chase by Dallas-based Cybertek Corp. "did not work, were not timely developed and delivered, and did not meet Chase's specified needs." Cybertek, now called Mynd Corp., declines to comment. The case was settled June 9, but that's little consolation for Chase, now two years behind where it had wanted to be on the project.

Even companies that are years into their Web makeovers say they're still experimenting. It's hard to know what will pay off. General Electric Co.'s GE Aircraft Engines CEO W. James McNerney Jr. confesses that "we've figured out how important the Web is for our business, but there are no precedents along the way." He's not the only nail-biter. According to PricewaterhouseCoopers, 69% of CEOs surveyed say they worry they didn't think things through before embarking on their e-initiatives. And 34% say they worry those efforts could fail.

Still, the risk of forging ahead is much lower than the risks associated with doing too little. According to Gary Hamel, author of the seminal management book Competing for the Future, failure to take full advantage of the Web in the next five years could put many companies out of business. Sure, the recent dot-com fizzle gives folks a little more breathing room. But not a lot. Says Hamel: "Someone in some garage somewhere is right now making a bullet with your name on it. Your only choice is to out-innovate the innovators."

That will require smarts, courage, and imagination. But it's not too late to make some Web bullets yourself. Just because your company has been around for 100 years doesn't mean it won't thrive for another 100. But, play it safe? For the Web Smart 50, there is no such thing.