NetMarketing

In articles, books, conventions etc. people are using some rather grim language about new technologies and the net – such as the killer applications that we discussed a month ago.

They don’t make me (or anyone else, I guess) very happy when they talk about "survival". A company, they say, won’t "survive" unless it "adapts" to innovation in technology. Of course that makes sense; but I think it’s the wrong approach.

"Adapting" passively, because we "have to", is an unpleasant experience. We are driven by anxiety, we feel uncomfortable with the technologies; the process is likely to be more expensive than what we really need – and to generate conflicts and discomfort throughout our organization.

"Survival" is a negative concept. Decisions are generated by fear, by the depressing feeling that we could be "left behind", that we are inadequate, that we are "forced" to move into unknown and unfamiliar territory.

I believe that the approach to new technologies (and especially to new communication opportunities) is much more effective, and less distressing, if we look at it from a totally different angle.

How can we win with these tools? How can we gain a better competitive edge? How can we improve our resources and enhance our unique identity?

This isn’t just a matter of attitude. It has a lot to do also with method. A defensive approach leads to imitation – or to timid, limited, weak solutions. A dynamic strategy is based on the strengthening of our points of superiority, on the improvement of quality and service, on the distinctive identity that makes us different from the rest of the world (and especially form our competitors).

"Survival", as I see it, is not an objective. All tools can (and should) be used to do much more than "keep our heads above water". To be aggressive, not defensive, in the marketplace. An ambitious approach is not more difficult, or more complex, than mere "survival"; and it’s much more effective.

The problem is that this needs a strong commitment from every part of the organization. A technical adjustment can be left to a few specific functions – or even delegated to the pre-cooked packages offered by the software merchants. An active use of the opportunities offered by new information and communication tools needs a much deeper involvement. Clear strategies, a strong will "from the top", harmony in the cooperation of different functions that could be quite remote from each other in the "normal" course of business. That’s quite a task. But innovation isn’t an "option pack".

The miracle mongers have changed their style. It took them years... but they seem to begin to understand that (on this side of the ocean) there has been no "takeoff" of "electronic commerce" – and that there are some differences between most European countries and the United States. Maybe they were awakened by the fact that the two largest mail-order companies in Italy closed business this year. Of course e-business (including e-commerce) can develop here, but starting from a different perspective.

But they don’t want to stop the hype; so they concentrate on prophecies. It’s true, (they finally admit) that "electronic commerce" in Italy is negligible. But, they say, "takeoff" is near. Before the end of this year (they say) e-commerce will reach fantastic proportions in our market. In a few years it will reach the same level as in the US (that will have grown tenfold in the meantime). Nobody says (I guess nobody knows) on what these projections are based. But they make headlines in the business press, and often in newspapers.

Will any of these prophecies come true? I don’t know. But I think it’s dangerous to expect anything "extraordinary" to happen spontaneously in the market – and to believe that all we need do is hang on and ride the wave.

Of course I believe that there are opportunities for online business (including e-commerce). The number of people online (even if we forget the unreliable statistics used by the hype-makers) is much larger that two or three years ago – and increasing. Really valuable offers could appeal to an even wider market than the total number of people with an access to the internet.

But I don’t think "hype" is the road to success; it makes it seem too easy. The confusing noise on easily conquered, huge markets can lead, once again, to delusion and disappointment.

Articles in several newspapers reported that there are 400.000 companies selling online in the United States – and 400 in Italy. I don’t know where they got those figures, but they are not far from reality. Surveys on e-commerce in my country found even smaller numbers; and of those few companies some where totally unreachable, several never answered mail ad most were not taking their online activity seriously. Quality is an even bigger problem than quantity.

The number of companies online is increasing, here as in many other places. But it will take a while to understand which of these new presences are just cosmetic and which have something really interesting to offer.

In a few weeks’ time there will be more numbers in this newsletter. New data will be available – and I hope they will reveal something interesting. In the meantime I would like to take another look at the meaning of data and news – and specifically at the problem of unverified information being repeated without checking the source (or even trying to understand if it makes any sense).

This is not a new problem. Since I was a student I found many cases of poor information being reported – sometimes for centuries. It happens often that one author, considered an "authority", makes a mistake; and everyone else copies it without checking. An example in thousands... did Nero burn Rome? In 1562 a historian called Gerolamo Cardano analyzed sources and came to the well documented conclusion that Nero had no part in the fire (or in persecuting Christians); or, al least, that there was no reliable evidence that he did. His arguments were quite sound; but to this day that story is repeated, even by "serious" historians, without the shadow of a doubt.

A recent example. Where I live, it was very hot in July. Several newspapers reported "The hottest July in 600 years" and the same statement was repeated in television news. Other articles told quite different stories (such as "it was hotter 15 years ago"). But the most picturesque "news" made the headlines – and nobody sopped to think: how can there be any accurate record of temperature since 1398? (Celsius established the centigrade scale in 1742; Fahrenheit a few years earlier; the Kelvin scale was adopted in the 19th century; and thermometers today are quite different from any equipment used 600 year ago).

Do we want to be specific about the internet? Some sources say that there are 28 million users in the United States and another 23 worldwide. Others (the majority) give figures twice as large – or more. Some sources believe the rest of the world is growing much faster that the US, others say the opposite. It’s difficult to tell who is closer to reality, but the relevant fact is that all statistics must be taken with a very large pinch of salt.

As long as this is academic chitchat, the damage isn’t serious. But when it comes to investing resources and setting strategic objectives it’s quite dangerous to base them on "hearsay", even when it comes from sources that are assumed to be "reliable". I wouldn’t trust an arson prevention system based on staying away from Nero – or an online business strategy based on the assumption that "electronic commerce will soon replace all forms of traditional trade" (silly as that is, it’s repeated quite often).

Luckily, there is no need to follow this course. Measuring online success has little (if anything) to do with broad market data. Investment can be gradual, each step can be tested. Results can be constantly checked and related to specific objectives. In any business activity, but especially in a new and fast-changing environment, direct experience is much more valuable than any general statistics or forecasts.

I could fill ten issues of this newsletter with examples of prophecies that didn’t come true – or statements by some pretty bright people about why forecasting doesn’t work.

If I can get a bit philosophical for a moment... are prophecies possible? Yes, I think they are. I don’t mean soothsaying or tea-leaf reading. A true prophecy is not looking into the future, but seeing something that has already happened – but nobody else has noticed. For instance, good teachers of meteorology explain that their science is not about "predicting" weather but understanding what is already there in the movement of the atmosphere.

There are two problems. One is that genuine intuitions are rare. The other is that it’s not easy to understand if someone has really seen the "invisible nexus" or is just dreaming – or drawing the wrong conclusions from an inaccurate analysis of the circumstances.

But there is another, and possibly more relevant, question. How important is it to make prophecies or forecasts? Not as much as we may think. Life is quite unpredictable. It’s more important to be able to react to unexpected circumstances than to believe that we can "predict" the future. A brilliant Israeli professor (unfortunately I cant’ remember his name) in a seminar seven or eight years ago made an interesting observation. Business plans, he said, are based on "the most likely scenario". In a complex environment, "most likely" can mean a 30 or 40 percent probability. That means that we are facing a 60 or 70 percent chance that we shall be in one of the "low probability" situations (in fact more, because circumstances may take a different turn than described in any of the "scenarios"). What can we do about that? asked some rather worried managers attending the seminar. It’s quite simple, he answered: instead of strategies based on a rigid scenario, we should go for flexibility: work on the basis of "what if" – as they teach in military training but not in business schools. All this leads to the problem of complexity that was briefly discussed in this newsletter ten months ago.

Some keen observers have noticed that most forecasts show an abrupt change of trend, and the point of that change is the time when the forecast is made. A year or two later the forecast is re-issued, the trend is still there (the same or maybe a different one) but the point of change has moved – to the time when the new forecast is published.

Another peculiarity is that almost all these forecasts are perennially "up". In real life things go up and down.

I am not saying that what X is forecasting abut Y won’t happen (that, in a way, would be a prophecy). I am simply saying that we don’t know if those things will happen – and we don’t even know if any of those forecasts are "high probability scenarios" (most "futurists" offer only one projection, with no alternatives). I am not even saying that if so-and-so says that such-and-such a thing will have a certain size in 2005 the actual size will be smaller. That’s what happened with most forecasts so far, but the opposite is also possible (though most of the things that did grow more than anyone expected were the ones that the prophets hadn’t even considered).

I am simply saying that running a business is not like buying a lottery ticket. The logic of a lottery is that the reward is high because the probability is low. Unlike a lottery ticket, buying someone’s forecast blindly may bring no prize whatsoever – and cost a lot of money in misguided strategies and applications.

Another low-probability game is the one that Wall Street and venture capital are playing with new technologies. They don’t know which will be the successful ones, so they invest in many in the hope that the few winners will give them a high enough reward to pay for the losers. Nobody seems to know how long this gambling will continue; so far, the game goes on. Like everything in life, and especially in financial markets, it could come to a sudden end quite unexpectedly. But who knows when and how?

Does any of this apply to running a business, or using the net to improve a company’s opportunities? I don’t think so. It’s wise to make "scaleable" investments, grow gradually, test along the way, stay flexible. But that doesn’t mean operating without a precise strategy. Market trends may change, technologies may evolve or die, some of the chosen roads could turn out to be dead alleys and unexpected opportunities will need to be caught. But there are values, built over time, that don’t change so easily; and are owned and managed by our company. Knowledge, corporate culture, competitive talent, quality of service, relations. These are the things in which we need to invest; using the tools of technology and communication to make them better.

Some interesting news is creeping around the net. Apparently, since Netscape made source code available, its programmers are jumping with joy. They’re getting even more, and more useful, contributions than they expected. I hope the results will help to enhance the value of "freeware" and shared knowledge.

Other news is about "light" software and the use of cheap computers. On July 2 Sun proclaimed the "network computer" dead (even Oracle doesn’t support it any longer) and said that it’s much better to bring back to life the old 486s, 386s and 286s that were being phased out. Of course Sun offers a Java platform for "low-end hardware" (though others are not enthusiastic about that technology) and of course there are many other practical ways of using "low-end" computers instead of investing in uselessly expensive new equipment (that is likely to be called "obsolete" a year from now).

Linux seems to be making more steps in the direction of an interface that will make it more easily accessible to non-technical people. And there is Iact (International Alliance for Compatible Technology) saying: all experience has shown that users are more disposed to suffer from incompatibility, while evils are sufferable, than to right themselves by abolishing the restrictions forced upon them. But when a long train of abuses and usurpations, pursuing invariably the same goal, evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such incompatible technology, and to provide new guards for their future security.

Just words? So far, probably yes. But the problem is real and sooner or later someone will have to do something about it.

These small symptoms don’t mean that the pendulum is swinging back or that efficient systems are ready to take over. So far, these are only little twinkles in the darkness. But it’s encouraging that awareness is beginning to spread: cumbersome and messy technology is not the only possible way ahead.

For a long time I’ve been thinking and saying that female presence is important for the growth of the net – and that more women online are a sign of "maturity" of the new communication technologies. According to a recent survey by Eurisko 33 percent of internet "users" in Italy are women. Still a small number, but much higher than two or three years ago.

In the United States the percentage of women online seems to be growing slowly, but steadily; apparently now it’s around 44 percent. According to a study by Georgia Tech 52 percent of new users are women. This source says that women online are 38 percent in the US, 30 in Canada and Australia and 16 in Europe (but European sources report higher percentages).

A test of people’s ability in using the net carried out by MCI gave good scores for both genders, with a slightly higher rating for women (82) than men (80).

Even in Russia, where net development is still quite limited, traditional male dominance is beginning to decrease. According to Eugenia Volynkina, editor of InfoArt, the presence of women online increased from 7 percent in April 1997 to 15 percent in March 1998.