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 websites 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. 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.

Two companies have spent considerable time figuring this out. Their sagas
hold lessons for any business now struggling to untangle its snarl of Websites.

Citigroup

Few companies blew more money trying to build independent Web divisions than
Citigroup, 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 US websites. 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.

Still, Citigroup wanted to keep ideas flowing and innovation humming. So last
year, the company formed an Internet Operating Group of top executives 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 websites 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. Now, Citigroup has a chance of seeing profits from its Web
efforts.

Deere & Co

When the e-com craze hit in the mid-1990s, managers at equipment-maker Deere
& Co 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 website 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 CIO.

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.

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 in BusinessWeek.
Copyright 2001 by The McGraw-Hill Companies, Inc