Sam Bose and R.Bond:
nytimes.com
An old dog - that is me - tries to learn new tricks, words and phrases -such as Core Competence, Price patrol, Robot patrol, Soul of a company
By FRED ANDREWS
.K. PRAHALAD believes a Copernican revolution is putting the
consumer at the active center of the business universe. That is his
vision of the Internet economy, and he isn't by himself.
Why listen to Professor Prahalad? A decade ago, he and a colleague,
Gary Hamel, opened up new pathways in business thinking with a
relatively simple but powerful idea. In their book "Competing for the
Future" (Harvard Business School Press), they said that a business
should think of itself not as boxes on an organization chart but as a
collection of skills, or competences, that cut across internal boundaries.
Break down those boxes, they said.
Most critical was that a company truly understand its "core competences"
-- the skills and technology unique to it, the strengths that paid the rent
and positioned the company to attack new markets.
These were "the soul of the company."
That concept found a permanent place in the business vocabulary.
Today, it is hard to find an enterprise of any sort that has not put
considerable energy into figuring out its core competences, separating
what is fundamental from what is not.
Now the Internet economy has forced a rethinking of what to look for
and where to look for it, just as the astronomer Copernicus challenged
the orthodoxies of 16th-century European science.
Look outward, not inward, Professor Prahalad urges. See yourself as
others see you. A vital source of strength, maybe the most vital, lies in the
untapped power of your customers to exploit the Internet. The flood of
product information to them, the ease with which they can sort through it
and the potential they have for uniting with other Internet users all
combine to shift the balance of market power decisively toward the
consumer, he maintains.
"We are saying that consumers are going to drive the firm," Professor
Prahalad, who teaches at the University of Michigan Business School,
said by telephone last week. Consumers are already doing that, he said,
at Internet companies, which started up without the baggage of traditional
ways of doing business.
Of course, businesses have always tried to figure out their customers. But
the Internet world allows customers to take initiative, to talk back, assert
preferences and flow quickly to the most responsive sellers. The new
task for business is discovering how to channel that power. To succeed,
Professor Prahalad said, companies will have to figure out how to
experience their products as consumers experience them. They will have
to understand what the customer encounters at every step, from
beginning the search for a product to buying it, using it and finally
disposing of it.
The professor explains how this can be done in a Harvard Business
Review article, "Co-opting Customer Competence," which was written
with a University of Michigan colleague, Venkatram Ramaswamy.
In their view, the product is "no more than an artifact around which
customers have experiences." If so, that puts the customer firmly in the
driver's seat. The company makes the product, but it cannot dictate the
customer's experience.
The Internet makes it possible to reach customers in new ways, however,
and management can use this tool to offer an engaging experience. Ideally
that experience should offer enough choices to allow a customer to shape
his own path. The goal is to draw on customers' talents, shape their
expectations and encourage communities to form around the product. A
company can absorb the customers' knowledge of the product and their
suggestions for making it better. The customers become product
developers. These efforts can be mammoth. More than 650,000
Microsoft customers tested a trial version of Windows 2000, for
example.
Professors Prahalad and Ramaswamy suggest a four-part blueprint.
Encourage an active dialogue (as Amazon has done with its book
recommendations and reviews). Mobilize customer communities (much
as customers of Cisco Systems commonly solve one another's
problems). Manage customer diversity (for example, by gearing a
product to various skill levels). As much as possible, personalize the
customer's experience (like learning software that adapts itself to a child's
ability).
With the right sites, companies can do a lot to hold onto customers.
Scholars who track consumers' buying from site to site have generally
found that they do not dart about seeking the lowest price. People seem
to learn a site and settle in. Indeed, that tendency points up an apparent
paradox: Though consumers hold the best cards, smart management,
with superior offerings, can draw them into playing those cards its way.
"There are people who believe that consumers have all the power in the
new economy," said Eric J. Johnson, a professor of marketing at the
Columbia Business School, "that because competition is only a click
away, they'll patrol for prices, or even better, have search robots patrol."
That does not seem to be happening. In fact, he found that most
customers who bought a book in a given month went to only one site.
"The rules change," Professor Johnson said of the Internet economy.
"The results are pretty much the same."
Like it or not, consumers already collaborate with Internet companies
every time they fill out an Internet form. "A basic premise of Web
business is getting the customer to do the work in the form of data entry,"
said Thomas R. Eisenmann, who teaches e-commerce at the Harvard
Business School. An airline customer can write himself an e-ticket on the
Web and then check in with a machine at the airport, assuring the device
that he packed his own bag.
For Web companies, the customer is already the center of the universe.
At innumerable sites, the customers provide the product. At iVillage,
Professor Eisenmann said, "They learned pretty quickly that the reason
their audience was coming was to read and react to what other folks had
to say." At other sites, the product is consumers stating their preferences
in goods and services.
Professor Eisenmann agrees that the Web can powerfully amplify
consumer experiences. The customers' reviews that affect business are
"turbocharged" on the Web, he said. "People are in touch with one
another through their computers, on e-mail and so forth, so if they had a
good experience or a bad experience or an exciting experience, word is
going to travel much faster. You tell more people and you tell them more
quickly. It's the same phenomenon, word of mouth, but it's charged up." |
