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ANALYSIS: General Motors, from bricks to clicks

August 17, 1999
Web posted at: 11:25 a.m. EDT (1525 GMT)

by Dana Gardner

From...
InfoWorld
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(IDG) -- To dot-com or not to dot-com? With the potential cost savings and expanded reach of Internet commerce too great to ignore, even a global corporate behemoth such as General Motors is now fully designing its long-term business strategy around the Internet.

A new e-GM division, launched this week, is one of the early examples of the wave of traditional brick-and-mortar companies, such as Wal-Mart and Williams-Sonoma, that is pursuing major initiatives based on Web services.

"The early Internet economy we have now is only a small vibration of the changes we will see," said George Colony, founder and CEO of Forrester Research, in Cambridge, Mass. "It will be General Electric, GM, and Wal-Mart that will harmonize their channels and create a single experience for the customer. This is where the action is going to happen. This e-GM is the Manhattan Project of [Internet commerce]."
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This new e-GM unit will pull all of GM's electronic business-to-business, business-to-consumer, and in-vehicle wireless and Web-based service initiatives together under a single chain of command that will extend to the top of the global organization.

Clearly, GM's goal is to offer more of its dozens of car models directly to thousands of end-users anywhere across the globe via a single Web transaction. Then GM will swell that customer relationship to include wireless Internet services through the life of the car, making GM an Internet service and application provider.

GM's move to more systematically and strategically embrace e-commerce may well be a clarion call to other companies and industries contemplating reorganization around a Web model. The message is that virtually no business, no matter how old, dispersed, or complex, can resist the sea change the Internet has whipped up.

Wal-Mart, one of the largest retailers in the United States, is already on the Web with a consumer business site. However, some are calling the site merely a placeholder for a giant relaunch this fall.

"The new site will 'out-Amazon' Amazon and basically blow away a lot of other retailers, including the new Rx online services," said a source in the retail industry, who asked not to be identified.

Industry sources also report that Williams-Sonoma will recast its entire retail strategy around the Web later this year.

With e-GM, one of the world's largest - and by many accounts most bureaucratic - corporations has decided to view its customers, suppliers, partners, channel providers, and employees through Web-colored glasses.

With some 100 Web sites, scores of networked supply-chain applications, and a history of online marketing campaigns, one could say GM already has an Internet strategy. The difference with e-GM, however, is that the Internet will no longer form an adjunct to existing business practices in Detroit. It will become a central way of doing business, and that use of e-commerce as a re-engineering force bar none is where companies are now clearly headed.

"We want to put a bear hug on e-commerce," said Mark Hogan, new CEO of the e-GM business unit, to be based in Detroit. "Our objective is simple: We want to change GM from being an auto company that moves on car time to a car company that works on Internet time."

As much as any technological advance, management school case study, or red-hot Internet stock initial public offering, GM's drag race to the Web signals the end of the fascination phase of e-commerce for the enterprise. The e-commerce action phase - and all of the turmoil, risk, and promise it holds - have arrived.

The pressure on companies such as GM to change has reached a critical point. The car industry - like the computer industry, securities business, media world, and certain retail sectors - has faced quick-witted online upstarts that have challenged it head on. The race to the Web so far has often been a pained reaction to clear and present danger. Now, as older, established companies catch on, a new round of deeper adoption is sure to follow.

"If GM doesn't do this, then they are fried. This is GM saying, 'We have to provide a car in a week over the Web,' because that's what its competitors can do," said JP Morgenthal, chief technology officer at TechSolve, a consultancy in Uniondale, N.Y.

As more enterprises get drawn into the Web, they face tough choices about how to graft onto their online business models without killing off or estranging their critical conventional sales channels. It is the same conundrum that struggling Compaq Computer has faced with its reseller channel because the company desperately needs to compete with the likes of Internet-sales-driven Dell Computer.

"The direct vs. indirect decision is so huge," said Tom Dwyer, an analyst at Aberdeen Group, in Boston. "As soon as you change the model, your existing channel thinks about changing suppliers. In the case of GM, will the independent dealers leave GM and go to another car supplier?"

GM's answer is to "harmonize" its channels - to continue with the old while adopting the new - setting the stage technologically to embrace both by integrating all of its systems and procedures. Other companies, it turns out, are either sitting on the fence about e-commerce while quietly amassing an e-commerce architecture, or investigating the virtues of outsourcing as a means to the Web.

"How much to dot-com and when is an extremely big decision. It affects all the processes in your business," said Fred Kauber, director of Internet and e-commerce solutions at Reliance National Insurance, in New York.

"Over time, it's best to have as many options as possible. We have chosen to do a parallel strategy, one of not disowning the brick-and-mortar channels, but also using e-commerce to strengthen our options and reach new, niche markets," Kauber said.

GM's public battle cry for the Internet should be heard as more than a publicity stunt, analysts said.

"The biggest decision you can make right now is whether to go to the Web," Morgenthal said. "It was the decision recently faced by GM. They went to the Web."

"It's interesting that GM, by reputation one of the slowest to innovate, would be the first to go this far. That's pretty dramatic. A lot of people will be watching," Dwyer said.

Dana Gardner is an InfoWorld editor at large based in New Hampshire. Editor at Large Ephraim Schwartz contributed to this article.


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