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The Business Internet and
Intranets:
Extract (3): Business Internet Vignettes
Extract's Table of Contents:
Given that it is only in the last three years that firms have targeted the Internet as a business opportunity, it's clearly too early
for general patterns and lessons to have emerged. The hype about the Internet, however, has led commentators to make huge claims about
its future on the basis of a few examples from the present - or, in some cases, without any evidence at all. A fairly typical dust jacket
blurb for a 1994 book, for example, promises readers will learn "how to do what [the authors] did so successfully - make a fortune advertising
on the Internet... You'll discover that with some fairly simple ideas, a PC, a modem, and a telephone line, you can 'cybersell' your way
to wealth." Three years later, in 1997, no firm (including that of those authors) has yet made a fortune through Internet advertising, and the
most touted examples of Internet business success are, in fact, decidedly dodgy on turning "success" into profits. Amazon.com, for example,
a brilliant innovation in book retailing with a burgeoning customer base that grew its sales from zero to almost $30 million per year, was in
1997 nowhere close to breaking even in terms of profits.
The hype and hope view of the Internet business opportunity doesn't help managers to reach their own practical decisions about the appropriate
scale and focus for their firms' Internet investments. The following nineteen vignettes provide both a survey of the business landscape and a
pretty clear picture of the state of good, though not necessarily best, practice today. We hope that these "snapshots" will give managers some
ideas for their own firms' strategies, but, perhaps even more importantly, we hope that they convey a sense of what's really going on, rather
than what may happen, what a vendor wants managers to think will happen, or what a journalist claims will happen.
As shown in Table 2, the organizations treated here cover a wide range of industries. Most are large, mature firms, although a variety of start-up
Internet ventures, public sector organizations, and a few small companies are also included. We chose mostly large, well-known companies, because
of the greater availability of reliable information about them and their Internet activities and because readers can more easily perceive the
relative importance of such companies' Internet activities to their overall business concerns. One of the ever-present problems in writing about
information technology is that small scale successes are very easy to find, but too often that's all they are isolated,, limited, and, in the end,
peripheral to the firm's competitive and financial health.
Each vignette provides four kinds of information: a brief review of the company itself; what it did with the Internet, and why it did it; what the
impacts of its Internet policies have been and what these impacts imply for the firm's future; and general lessons managers can take from the
firm's experience. We do draw attention to any general lessons or reliable strategic messages raised by a firm's experience, but these vignettes
are not meant as models or exemplars. They just tell managers what's happening on the business Internet.
Millipore is a $600-million, high-technology company that applies purification technology to research and manufacturing problems, such as monitoring
bacteria levels in municipal water systems, reducing viruses, harvesting cells, testing for biological and chemical pollution in air and soil, and
sterilizing biotechnology-derived drugs. Its products include disc and cartridge filters and housings, filter-based test kits, precision pumps, and
other supplementary equipment and supplies. Millipore has a worldwide sales and marketing infrastructure, offering several thousand products and
accessories targeted at many different industries and market niches. In each market, it has become the number one or number two player.
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Headquartered in Massachusetts, Millipore employs 3,482 people in seven manufacturing plants and more than thirty subsidiary and sales offices around
the world. It sells its products to the microelectronic manufacturing, biopharmaceutical manufacturing, and analytical laboratory markets in more than
one hundred countries. Millipore reported total sales of $618 million for the 1996 fiscal year.
Millipore used the Internet to create an on-line information and communication channel to the big-research community that extended its information
resources from a very basic, locally accessible internal capability to a fully interactive, global one. Millipore is in a knowledge-based business.
Its products and their uses are complex, and the customer buying decision is very individual and requires scientific and technical data. This represents
a substantial marketing challenge.
Millipore saw the Internet as a means for transmitting information faster and more efficiently, simplifying data collection, speeding up transactions,
and providing more information to researchers through, for instance, color catalogs, newsletters, Internet designed annual reports, customer case studies,
marketing brochures, notices of employment opportunities, and hyperlinks to major customers.
In each phase of Millipore's Internet experiment, its goals and expectations were met. The company derived the following major conclusions from its experience.
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The Internet is practical for reaching key customers worldwide with the information they need. Millipore now receives electronic-mail requests for service and
information from customers around the world. The two-way flow of communication made possible by e-mail has strengthened customer links and their ties to the
company's marketing infrastructure.
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The Internet cuts costs and accelerates the flow of information. Locating and downloading files is quicker and easier over the Internet. In addition, it
has made Millipore's publishing more cost-effective: Millipore has eliminated printed quarterly reports, produces its catalogs faster and less expensively,
and saves money on mailings.
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The Internet accelerates research as a competitive edge. It has increased research speed and enabled researchers to obtain more data faster: One analyst
reports that "research that might have taken several weeks can now be accomplished in several hours."
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The Internet is a tool for customer service. The Internet cut the turnaround time for responding to customer requests from six weeks (when processed
through the U.S. postal service) to a few minutes or even seconds; responses to customer service issues and complaints have been similarly improved,
along with interaction between the technical community and Millipore's customers.
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Internet marketing growth is a function of external awareness. The Internet helped Millipore build content on its Web server that attracts customer interest,
rather than merely meeting the company's internal information needs. Millipore learned over time that attracting the "right" traffic is imperative to the success
of its Web site and that hyperlinks (dynamic pointers among Web pages) help to establish the "right" traffic; the distinguishing feature of the Web is that its
users gain access to a wide range of information resources rather than being limited to the information in a single database. The potential for information
interaction makes a site a success; Millipore's Web-page design made its customers need and want to use it.
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The Internet facilitates internal communication. Easy to use electronic mail and "live chat" capabilities encouraged more pointed and beneficial internal dialogues.
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In addition to these benefits, the Internet allowed Millipore to more closely observe its competition. That may, however, be one of the Internet's downsides. Companies
can more easily reach out to their customers and provide them with information, but competitors, too, can reach in and grab that same information as well.
Millipore's Internet organization-wide resource developed over seven years from inception to full operation. The following stages and milestones marked this course.
- 1987: Internet access is made available for internal use in the then prevailing traditional, academic mode: links to university research centers, e-mail, and
file transfers.
- 1994: Millipore builds an early version of a powerful database of all Millipore products, accessible via the Internet. This phase shifts the company's use of
the Internet from an academic to an information supply mode.
- February 1994: Millipore initiates active Internet marketing, constituting a customer-contact mode.
- March 1994: Millipore provides access to its product catalog via the Mosaic browser, forerunner to Netscape's Navigator, and houses its Web site on the server
at Johns Hopkins University. In just over a year, nearly eight thousand external users access the site.
- May 1994: Due to rapidly growing response to its Web site, Millipore installs its own server and creates its own home page. In the first fifty-six weeks of
implementation, more than one hundred thousand files are accessed from about 9,500 different computers in around 14,500 different sessions originating from fifty countries.
- 1995: At least 10,000 files per week are downloaded from the Millipore server, with Millipore providing hyperlinks to more than three hundred databases and key customers'
Web sites.
- 1997: Millipore's biopharmaceutical content is the most frequently visited area on their Web site - with over 26,000 hits since being added to the Web site in January.
The biopharmaceutical area contains an online catalog of products, training documents, and forms, as well as hyperlinks to databases, universities, regulatory agencies,
related companies, virtual libraries, and other related resources.
Throughout this development period, the Internet became more and more an everyday part of Millipore's marketing and customer relationships. Millipore reported total sales of $618
million for the 1996 fiscal year and had a market value of $1,792.7 million. The firm's sales and profits grew consistently by 10 to 30 percent per quarter; in January 1997,
Millipore reported a 16 percent sales increase from the previous fiscal year.
It is obviously difficult to assess the direct contribution of the Internet to Millipore's continued growth and success. Millipore employees rate the Internet connection very
highly. Two comments, taken from the Millipore home page, convey the tenor of its internal acceptance. In terms of the customer link, one employee noted the following:
I think the Internet really enables our customers and any interested parties in Millipore, kind of, excuse the expression, get real time access to what's going on in our company.
I think it's also going to really help us from the standpoint of marketing in terms of creating market segments of almost one person if we can customize or tailor information that
our customers need to their individual requirements. 6
Another employee makes a similarly positive assessment from the technology perspective:
I would like to add to that from a perspective of dealing on the technology side, with customers as well, the fact that this alliance is a global alliance, and the world turns
around every twenty-four hours, the time zone difference makes it very difficult to communicate live. And the advantage of having Internet access is that as we do more global
activity such as with Celsis Connect or various information activities with customers, they are going to be able to access this on their terms and it will facilitate communication
as we go forward in trying to find new ideas for products, deal with regulatory challenges and so forth. 7
The Millipore Internet experience is very representative of the Internet experiences of other information-intensive companies, such as vendors of high tech computer and telecommunications
equipment and, as here, providers of goods to the scientific and research community. In this area, marketing and information go together. Millipore built its experience in the pre-browser
Internet of the late 1980s; it had established contacts with the Internet community when it decided to put its product data online, which led to its use of the Johns Hopkins server. When demand
took off it looked for ways to minimize the traffic and reliability problems endemic to university Internet sites, which are heavily used by students, researchers, and others, Millipore did not
hesitate to set up its own site in-house. These straightforward strategic decisions highlight general questions it is useful for any manager to ask.
- Which of our customers request substantial amounts of substantive information before they make their purchase decisions?
- How quickly do we respond to customer requests for information and service?
- How important is a stable customer link to our marketing and service functions?
- In what areas of our business is information a key element in ensuring customer satisfaction?
The Internet provides as obvious a vehicle for building and sustaining information-intensive and information-dependent relationships with customers as a 1-800 phone number is for consumer relationships.
In an information-intensive relationship enhanced by the Internet, customers can ask and answer their own questions.
Lockheed Martin's Research and Development Division, headquartered in Orlando, Florida, employs more than 4,000 people and has been in business for almost forty years. The Lockheed Martin Company is now
the world's leading aerospace and defense contractor, although the planned merger of McDonnell Douglas with Boeing will bump it down to number two in aerospace. The U.S. government buys almost 70 percent
of Lockheed Martin's services and hardware, which include the Trident and Hellfire missiles, the C-5 Galaxy transport plane, and communications gear for defense satellites. The F-16 Falcon fighter jet,
generating 8 percent of total revenues, is Lockheed Martin's largest program.
Through its management of the Department of Energy's Y-12 plant at Oak Ridge, Tennessee, and several other such projects, the company is the DOE's single largest services provider. In addition, as part
of an effort to expand its customer base, Lockheed Martin has pursued and won several contracts outside U.S. borders. Among these have been contracts to outfit the Apache attack helicopter with night-vision
systems and armaments for the United Kingdom and the Netherlands (potentially worth $1 billion) and to build an advanced communications satellite for the China Orient Telecom Satellite Company. Following
Lockheed Martin's formation and acquisition of Loral's defense electronics and systems integration businesses, the company continues to consolidate facilities and shrink its workforce.
Lockheed Martin's Research and Development Division (R&DD) works on the technologies required by LMSC (Lockheed Missile and Space Company). R&DD communicates electronically with other organizations within
LMSC, with customers, and with non-Lockheed partners. In the early 1990s, to meet changing customer needs and demands for improved efficiency, to reduce cycle times, and to create better value, Lockheed
Martin adopted a new business model for the company based on information - about the customer, customer values, competition, alternatives, and costs. The company's previous model, as described by one analyst,
had been founded on "research by individual contributors to development of product-focused technology by cross disciplinary teams that often partner with non-Lockheed companies to share technology development."
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The need for an intranet to meet the new model objectives quickly became apparent: It was the only practical way to deal with legacy systems, a problem faced by just about every large firm. Legacy system is the
somewhat inappropriate term used in the information systems field to describe the often elderly core software and hardware systems that handle the bulk of a firm's transactions and provide the bulk of its information
resources. The term is inappropriate in that legacy suggests something of value, a bequest in a will and an asset to be treasured. Most legacy systems are really burden systems, developed at a time when every computer
manufacturer's equipment used proprietary tools, software and database management systems exclusive to a given type of hardware that could not link to those in use in incompatible technology bases. Systems built on
Digital Equipment Corporation's mini-computers, for instance, the favorite of engineering departments in the1980s, were incompatible with those built on IBM mainframes, the workhorses of finance, sales, and accounting.
Incompatible telecommunications systems, personal computers, office automation, software packages, and hardware types compounded the problem, as departments made their own case-by-case technology choices. In addition,
much of the information needed by and generated in R&DD was on paper documents stored in filing cabinets.
Lockheed's corporate growth history was typical of many large firms. According to William Buonanni, Program Manager of Lockheed's intranet initiative, "I really did not have a way to send a document to 20 different people.
Now suddenly, there is a very easy way to do that. I could see the light bulbs going off as people realized what this could do."
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The Internet provided Lockheed Martin with the means to implement an entirely new approach to the access and exchange of information with independent but cooperating companies. R&DD developed five fundamental concepts to
manage information:
- Deliver information to the desktop in a unified form that meshes with how the user thinks. Information from many disparate databases and sources is delivered to users without their having to know anything about where
it comes from or how it is organized. The browser, in effect, hides the systems that generate it. R&DD became a single information provider, even though it drew on information from many sources. This was significantly
more cost effective than trying to provide multiple internal systems as well as access to multiple external providers.
- In addition, R&DD's intranet allowed the automatic transfer of data through TCP/IP, the telecommunications protocol. This set of message formats and transmission procedures constitutes the foundation of the Internet's
ability to end the incompatibility curse. The constraint on interoperability among hardware, software networks, and data resources has been that the connecting computers must "know" something about each other. TCP/IP
removes that restriction and, in doing so, has transformed the very basis of information technology. In many ways, TCP/IP is inferior telecommunications in terms of reliability, security, speed of delivery, and network
management when compared with the protocols used in business core transaction processing systems; but it gets the message from here - anywhere on the Net or an intranet - to there - anywhere.
- Supplement existing systems. Instead of wrestling with adapting legacy systems to meet new needs for information access, R&DD used the intranet to focus on developing fast, flexible "front ends" to those systems. It was
able to reduce the time needed to modify the Internet information delivery systems to between two and four hours, systems development time to between thirty and forty hours, and system deployment times to fifteen minutes.
For the legacy systems, substitute weeks or even months for hours for each of these tasks.
- Reuse information from internal and external sources. As one analyst notes, Lockheed's R&DD intranet capability achieved "significant savings in labor and implementation systems that enable its scientists to reuse
information provided by others rather than having to re-create the information themselves or rely on laboratory personnel to find the information. [The company] refers to this leveraging of existing information systems
as 'information reuse' internal and external to the LMSC.'' 10
- Lockheed's intranet provided automatic information links among pages through hypertext. This almost magical hypertext feature derives from HTML, the simplest software tool for designing Web pages, which makes it easy
to include a pointer to any other Web site or page on a Web site. By clicking on an item highlighted on the screen, the user can move between databases as if they were all in the same file.
- Utilize information experts. Lockheed's R&DD designed a tool set and an approach that allowed creation of customized information catalogs in a timely and cost effective
manner. These catalogs match the mental models
and work processes of different customer groups, using the very same information elements. Rather than relying on already overburdened computer programmers with limited interest in or knowledge of the information in the
legacy systems or its uses, R&DD was able to draw on skills of people focused on users' needs, not on technology, and to customize its Web pages to those needs.
- Provide a standard and common interface. On R&DD's intranet, the software browser provides the interface (the link between a user and a system) between the PC and the information resources. To the user, the interface
is the system. The interface hides the complexity of the technology behind
it, just as the two-or three-pin cable that plugs into the wall hides the complexity of the electrical system. Instead of learning and adapting to
many different screens and menus of commands and procedures, the user relies on the browser, which presents a consistent view of the system and the means available for accessing the information it conceals. The interface
defines the system's look and feel.
The intranet did not change the basics of Lockheed's R&DD, but it augmented one of its key organizational resources: It made information that had been merely available, accessible. Overall, R&DD's business increased during a
very tough time for defense contractors; after the end of the Cold War, the entire industry fell into a structural recession. In 1991, the laboratory won 37 percent of the jobs for which it submitted proposals; that figure
increased to 52 percent in 1992, 78 percent in 1993, and 95 percent in 1994. R&DD has increased the value generated by each employee by 45 percent between 1990 and1994. Lockheed Martin continues to exemplify excellence in
utilizing its intranet to integrate business goals, customer satisfaction, quality, and corporate vision. In August 1997, Lockheed Martin was listed by the magazine CIO as one of 100 companies that use information technology
to achieve and exemplify a high level of excellence. Sales at Lockheed Martin for fiscal year 1996 topped $27 billion.
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Legacy or burden systems represent massive roadblocks for information flow across organizations and among organizations and their trading partners. Intranets built on Internet technology remove these roadblocks. They offer a
pragmatic solution to the problem of sharing information that will be beneficial to any organization whose vision statement talks about collaboration, learning, teams, intellectual capital, and knowledge workers. Lockheed
Martin grabbed an organizational opportunity that only Internet technology could provide.
1. Thomas Anderson, "Millipore: Marketing Products to the Global Desktop," in The Internet Strategy Handbook: Lessons from the New Frontier of Business, ed. Mary J. Cronin (Boston: Harvard
Business School Press, 1996), 133.
2. Ibid., 133.
3. Ibid., 120.
4. Ibid., 134.
5. Ibid., 135.
6. Bill Rusconi, RealTime Press Conference, www.millipore.com, 30 May 1992.
7. Ibid.
8. Steve L. Swenson, "Lockheed Martin: Integrating Information Resources," in The Internet Strategy Handbook, 90.
9. Lawrence M. Fisher, "The Wired Enterprise: Here Come the Intranets," First Quarter 6, 84-90.
10. Swenson, 110.
11. Elaine Hinsdale, "Lockheed Martin Honored as Top IT Performer," Lockheed Martin Press Release, www.lmco.com, August 8, 1996.
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