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Let’s Get Back to Basics, Folks!

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DQI Bureau
New Update

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.

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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.

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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.

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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.

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Untangling

the Web
In

the rush to the Net, companies have let departments throw up websites with

little regard for how they help the overall business picture. Now they’re

trying to untangle such initiatives and get focussed on the core business.

Here’s a sampling:

Citigroup

The

Old Way
The

New Way
In

1997, Citicorp set up e-Citi as an incubator for Web businesses. E-Citi

spent $1.1 billion and launched a Net bank called Citi f/i, which landed

only 30,000 customers.
A

Corporate Internet Operating Group oversees Net strategy. Now Citi has 38

US sites, down from over 100.
Deere

& Co
Managers

launched 13 Web initiatives, serving markets that generated little

revenue. Deere makes most of its profits selling new construction

equipment, yet it had three sites for used equipment.
The

company merged the Websites into deere.com. Now customers can buy new or

used equipment, seek service or repairs–or even use the Website to

configure their own gear, a first for Deere.

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.

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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

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