Let's Get Back to Basics, Folks!
During the Internet boom, the Web philosophy of many companies could be summed up in one sentence: Let a thousand Web sites bloom. Today, though, under the weight of a deteriorating economy, Corporate America is applying some weed killer to its digital gardens.
Companies short on patience and shorter on cash are stepping back and trying to figure out what has worked and what hasn't in the online world. Out are all the willy-nilly Web sites started up by department heads and individual staffers for projects that didn't advance the company's overarching goals. Forget experimental Web projects that have not yet shown a return on investment. Wave goodbye to glitzy marketing sites where the trappings were so gaudy that a Web surfer couldn't find a simple search button.
Instead, executives are demanding to see proof of future returns before deciding to keep projects going. Top management wants Web initiatives tied directly to core business goals, such as better relations with customers and more emphasis on brand-building. "People are going back to two things: What is the strategic rationale for getting into this, and what is the return on investment?" says Tim Byrne, a vice-president at Mercer Management Consulting.
Three companies have spent considerable time figuring this out. Their sagas hold lessons for any business now struggling to untangle its snarl of Web sites.
Few companies blew more money trying to build independent Web divisions than Citigroup (C ), parent company of Citibank, Salomon Smith Barney, and Travelers Insurance. In 1997, it launched e-Citi with high hopes and a big task. E-Citi's job was to keep all of Citigroup on its toes--partly by competing with the very bank, credit-card company, and other businesses that made Citigroup a $230 billion giant. There was to be an e-Citi bank called Citi f/i and a financial portal called Finance.com. The maverick unit soon had 1,600 employees and more than 100 U.S. Web sites. The idea: Cannibalize your business before someone else did.
The only thing e-Citi gobbled was money. Citigroup's Web effort lost over $1 billion between 1998 and 2000. In online banking, for example, Citigroup was so determined to make Citi f/i an independent operation that customers of the online bank couldn't use Citibank branches. That turned off depositors. The online bank drew 30,000 accounts, vs. 146 million for the rest of Citigroup's banking operation. By March, 2000, word came down from Citigroup Chairman Sandy Weill: Web initiatives must be part of the existing business, not self-appointed upstarts trying to overturn them. "At the beginning of 2000, people were dreaming that you could take e-Citi public," says Deryck C. Maughan, Citigroup's vice-chairman. "I looked very carefully [and asked], could it make a profit? Not in our lifetime."
Still, Citigroup wanted to keep ideas flowing and innovation humming. So last year, the company formed an Internet Operating Group of top execs to help Citigroup units share Web technology and to ensure that they all have a common look and feel. Innovation is still bubbling along: Citibank is making a big play in the online-payments business with its C2It service, which lets consumers e-mail money to each other for a 1% commission.
A year later, the results are easy to see. The number of online customers are up 80% because Citibank and Citi's credit-card operations are pushing Web services themselves, instead of leaving that mostly to e-Citi. Citigroup now serves 10 million customers online. E-Citi has been scaled back to 100 people, who implement projects the operating groups propose. The 100 Web sites have been trimmed to 38. The reported loss for online efforts in the first half of this year was down 41%, to $67 million, from $114 million a year ago. And counting savings from moving procurement, human resources, and other back-office functions online, Citigroup says Web technologies will cut $1 billion off annual costs by next year. "I promise you, we are going to be saving a lot more than we are spending," Maughan pledges. Now, Citigroup has a chance of seeing profits from its Web efforts in Maughan's lifetime.
RYDER SYSTEM, INC.
Almost daily, Ryder System (R ) executives want to curse those yellow trucks. You know them--the can't-miss-'em rental vans. Ryder sold that business five years ago to concentrate on leasing commercial trucks and handling the transportation and logistics needs of other firms. But the company still gets regular queries--many via e-mail--about moving vans.
At least one Ryder executive thinks of the yellow trucks as a beacon in the night. John Wormwood, the company's director of e-commerce solutions, credits them with alerting Ryder to its Web muddle: It was consumers seeking to rent a van who pointed out what a mess the site was. "We got feedback from [would-be renters] saying `the Web site is unusable, difficult to navigate,"' says Wormwood.
About 10 sites had sprung up, some without a link to Ryder.com, the corporate site that explains the company's business. Although Ryder sells used tractor-trailers, for instance, buying them online required a visit to usedtrucks.ryder.com. "It was really a patchwork quilt of navigation, colors, and styles," says Wormwood.
Ryder needed to unravel the threads. In late 1999, it created an e-commerce group, including staff from all its major divisions. They agreed that Ryder needed a common look and produced a style guide to lay out where logos, photos, and text should go on all Ryder Web pages.
A renewed focus on customers, and on making it a snap for them to use the Web, has driven the $5.3 billion company's e-strategy ever since. In a year when many companies are cutting their tech budgets, Ryder upped its spending 15%, to $100 million. Of that, $500,000 went toward a Web-site makeover this year. Before the redesign, it took 10 clicks to track a shipment. Since the new site was launched in July, the function is just one click from Ryder's home page. Before, there was no search mechanism. There is today.
These and other improvements have helped Ryder attract new customers, including Northrop Grumman (NOC ). The defense contractor hopes to cut its transportation costs by taking advantage of better rates Ryder gets through bulk buys of cargo space. Northrop is pleased that it can electronically track the shipments every step of the way, so that it can adjust to any possible snafus. "We're able to pull out a lot of manual processes that sometimes introduce errors," says T.W. Scott, director of supply-chain management systems. And when parts arrive at a Northrop factory, you can be sure they won't be traveling in a yellow truck.
DEERE & CO.
When the e-commerce craze hit in the mid-1990s, managers at equipment-maker Deere & Co. (DE ) motored onto the Internet like everyone else. The 13 major Web initiatives that just one division put up, though, were narrowly focused, with overlapping missions. Three sites focused on used equipment alone: one to list it, one to sell it through an online marketplace, and one to support used-equipment dealers. The sites targeted Deere's largely Web-allergic dealers, not customers who bought Deere products and might save time by locating parts or seeking repair know-how online.
Two years ago, with the sites developing little traction, Deere figured there had to be a better way. So it hired consultants to help organize its site and advise the company on overall Net strategy. By the end of 2000, a plan was in place: The $13 billion company would create an e-business group to oversee Web initiatives for its financing arm and its equipment divisions targeting farmers, consumers, and construction companies. Deere would create one Web site with areas for each customer group, and it would enable customers to search for parts or information about equipment online. The site offers "a new set of tools that will be applied to everyone's day-to-day business," says Kirk Siefkas, Deere's chief information officer.
By centralizing everything at deere.com, the company not only controls its corporate image but also makes life easier for its 4,000 independent dealers and their customers. Consider the case of Brent Mellergaard, president of Circle Lazy H. Inc., a farm in Ellensburg, Wash. In the past, if he needed a new part for a machine, he would simply eyeball it and tell the local dealer what he thought he needed. Mistakes would happen, and he might lose time in the field by having to reorder the part. In April, Deere gave farmers access to JDParts at deere.com. Now Mellergaard can check the parts online, find a clear drawing, description, and stock number, and be sure that he is ordering what he needs. "There are a lot of parts that it helps with," he says. "It's hard to tell them apart sometimes."
Deere aims to make life easier for buyers of heavy equipment as well. It plans to roll out online tools that let customers configure their own backhoe loaders, combines, lawn mowers, or other machinery. They no longer have to flip through several-inch-thick catalogs or negotiate with dealers, saving everyone time.
What does Deere get out of all this? It hopes customers will stick with the company because it's easy to do business with. That, in the long run, is likely to prove more valuable than trying to make money through a used-equipment marketplace.
By Faith Keenan and Timothy J. Mullaney