Cover image for Cyber rules : strategies for excelling at E-business
Cyber rules : strategies for excelling at E-business
Siebel, Thomas M.
Personal Author:
First edition.
Publication Information:
New York : Currency/Doubleday, [1999]

Physical Description:
ix, 291 pages ; 25 cm
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HF5548.32 .S54 1999 Adult Non-Fiction Central Closed Stacks

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The Internet is driving the growth of a revolutionary commercial paradigm in which size and physical location are surrendering to "virtuality," and in which businesses are facing unprecedented marketing challenges. With the meteoric rise to prominence of the World Wide Web, no manager can afford to be indifferent to this technological revolution, for the Web has dramatically--and globally--expanded customer options, putting uniquely competitive pressures on companies large and small. To survive in business today, you must be online. But being online--and making it profitable--means much more than throwing up a Web site and announcing, "We're digital." It means being alert to the experiences of E-business pioneers, and being ready to apply their hard-won lessons to your own sales and marketing channels.Cyber Rulesis designed to help you do that. Written by the founders of Siebel Systems, Inc., the global leader in Enterprise Relationship Management software applications, it summarizes the dramatic history of the Web's "first generation," explains six critical rules now governing electronic commerce, and provides expert detailed advice for implementing a digital strategy. Whether you're still eyeing the E-business frontier or are already reaping its rewards,Cyber Ruleswill give you a distinctively insider's perspective on this radical new market space.

Author Notes

Thomas M. Siebel is the chairman and CEO of Siebel Systems, one of the world's leading application software companies. A noted industry spokesman, Mr. Siebel is also the coauthor of Virtual Selling, published by the Free Press in 1995. Mr. Siebel attended the University of Illinois at Urbana-Champaign, where he received a B.A., M.B.A., and M.S. in computer science.
Pat House is the executive vice president and cofounder of Siebel Systems.

Reviews 1

Booklist Review

The Web is all about new visions, propagated by new language: such words as portals, search engines, and rich media. And the Web is also all about shameless promotion by self-proclaimed cyber-pundits. Siebel and House are, most likely, among the better examples. Interwoven into this three-part--where we've been, where we're going, and how we get there--business strategy are innumerable examples of the authors' software system; along the way, they interview clients and Web business owners who add some value and insight into the commercial. Covered, first, are the 10 lessons learned, from "zapping is the way of the Web" to a "yes, you can" cheerleading statement. Part 2 deals with rules, most of which lead to Peppers and Rogers' one-to-one marketing philosophy--the ultimate customization of all business. After that? A pretty simplistic strategy, including defining the vision and measuring effectiveness. --Barbara Jacobs



Introduction: The Digital Watershed Every so often an event occurs that is so startling in its economic implications that it may reasonably be considered a watershed in the way we do business. By "watershed" we mean an abrupt and irrevocable turning point, one that signals a shift in historical direction by obliterating an established set of business practices and replacing them with a new commercial paradigm. We are in the initial stages of such a watershed now, with the meteoric rise to prominence of the World Wide Web. The advent of the Web was an unprecedented event that has already begun to set us on a path that will radically alter how we interact not only with computers, but with one another, with institutions both private and public, and with business associates and customers around the globe. In the online world of the very near future, the Internet will link every home, every business, every government agency, and every distributed database together in a complex weave of information exchange. We will inhabit a world where distance no longer matters, and where communication and data transfer will be virtually instantaneous. This will so thoroughly transform the way that transactions are conducted that doing business without the Web will become unthinkable. There have been other watersheds of this magnitude, but not many--maybe ten or twenty in the span of business history. The first, perhaps, was the invention of writing, which enabled grain merchants in ancient Mesopotamia to rationalize their inventory. A second was the appearance of metal currency--that dramatic attack on the barter system that occurred in Lydia, on the east-ern Mediterranean, several thousand years ago. Subsequent watersheds would include the adoption of the Arabic zero, double-entry bookkeeping, and joint stock ownership. All of them transformed the shape of commercial enterprise. The Internet is doing the same thing, only quicker. The speed with which it is reaching watershed magnitude gives it a possibly unique status in economic history. We're not speaking about the speed of data transmission that is one of its rightful claims to fame, but the speed with which businesses have picked up on the Internet's potential, have adopted its technology, and are staking successful claims on this economic frontier. That speed is causing investment counselors who were scoffing at Internet businesses only two or three years ago to call them the current miracles of the world's stock exchanges. No previous watershed has elicited such a rush to approval. Although the Internet as a military experiment had been around since the 1960s, its business potential was broached only in 1993, when the first commercial Web sites began to be deployed. That's only a few years ago, and yet the Net has already made a quantum leap from a technological curiosity to the story of the century. Thus the Net is presenting itself as a watershed with virtually no lag time. It seems to have sprung, like Athena, from some cybergod's brow, fully clothed and fully armed. That perception is somewhat illusory, as you'll discover, but it's a perception that has to be dealt with as if it were true, because it is generating a mind-boggling market revolution that is already dividing the world into "Netizens" and "Netwits." You think "mind-boggling" is too strong a term? Consider these statistics from leading technology industry analysts. According to the Parallax group, in 1998 an estimated 30 million American households owned computers, and probably half of them had modem capabilities. Both figures were expected to double by the end of the century. Find/SVP Inc. estimates that the number of regular Web users jumped from 8.4 million in 1996 to 28 million two years later. By the year 2000, the number was expected to exceed 200 million. The U.S. Department of Commerce gives an even more startling estimate. Its recent study The Emerging Digital Economy identifies over 60 million U.S. Web users today, with another 40 million overseas. Their projection for the year 2005 is 1 billion users. A recent survey by the Graphic, Visualization, and Usability Center at Georgia Tech University gave average Web user income as $63,000, with over 10 percent reporting income of over $100,000. BancAmerica estimates that these users' average per-person annual Web expenditure of $24 will quadruple by the end of the century. The hype of "infotainment" aside, Internet usage has an unmistakable business orientation. Response Analysis Corporation found that a majority of online households have an in-home office. The presence of larger businesses may be gauged by the upsurge in registered domain names, from 26,000 in 1993 to over 1.5 million today. New commercial sites are being added to the World Wide Web at the rate of about 5,000 a month. That's one new place of business every nine minutes. Forrester Research estimates that, in 1997, online transactions amounted to $9 billion; of that figure, the bulk--$7.5 billion--was in business-to-business sales. One leader in this field, Cisco Systems, Inc., brought in online revenues of $3.2 billion. The Commerce Department projects $300 billion in business-to-business sales by the year 2002. Between 1995 and 1997, according to a Price Waterhouse study, annual venture capital funding for online businesses went from $134 million to $1.88 billion. And there's a small coda to this final point. While venture capitalists continue to favor more traditional recipients--especially firms in the communications and general software sectors--the Net is fast coming on as an arena of "high drama." Beginning from a smidgen of support in 1995, E-business in 1997 commanded 14 percent of the funding total. Impressive figures. But if you want to get an even more impressive feel for the new medium's potential, look at these already galloping Net statistics as examples not of simple growth but of untapped potential. Consider, for example, the fact that those 30 million wired households represent only a fraction of total North American households. Or the fact, according to the Nielsen Internet Demographics Survey, that the $9 billion of online transactions were generated by only 14 percent of Web users. Or the most sobering (or is it stimulating?) fact of all: that electronic business, however explosive, still accounts for only a tiny proportion of our GNP. Jupiter Communications notes that, in 1997, when the Net registered that soaring $9 billion in sales, print-based catalog sales were edging toward $70 billion, and the retail take as a whole was over $2 trillion. So the growth of Net business is exhilarating, but it's got a long way to go. We are sitting, right now, on the edge of a vast goldfield, and the riches it will one day surrender are only beginning to be revealed. We're using the goldfield analogy for a double purpose. It should make you justifiably excited--but also cautious. For while millions are there for the making in the field of E-business, they are certainly not there for the taking, like picking nuggets off the ground. Anyone contemplating doing business on the World Wide Web might profit from remembering the lessons of that classic gold-hunting story The Treasure of the Sierra Madre. In John Huston's great film, the novice prospector Fred C. Dobbs, played by Humphrey Bogart, enters his field of dreams with unbridled optimism, imagining that gold will jump from the ground into his pockets. Once he's out in the digs, reality sets in, and he discovers that making a fortune is not automatic. It demands a mixture of judgment, patience, and sweat--and, not least of all, cooperation with good partners to protect yourself from natural disasters and bandits. Those lessons are directly applicable to the goldfield of the Net. To excel at E-business, you need dedication, good partners, a sound business proposition--and maybe a little bit of luck. We can't help you with the luck, but we can help you with the rest. That's why we wrote this book. It's a brief and practical guide to scoping out the electronic goldfield, to learning how to survive in this radically new environment so that you can avoid the bandits and build a secure and profitable business enterprise. Radically new. The point is central. Even though E-business is still business, the electronic "market space" that the Net has created operates under a dual set of rules. One set you already know, or you wouldn't be in business: It involves time-tested principles like identifying target markets, assessing and meeting your customers' needs, providing reliable service, and so on. The other set is no less important, but it's less familiar and--like all watershed rules--less commonsensical. In fact, many of the "cyber rules" of this developing environment seem to directly contradict established practices, and are therefore seen by traditional businesspeople as at the very least unusual. Here's an example from a fascinating article by Kevin Kelly, executive editor of Wired magazine. In the emerging networked economy, Kelly writes, every increase in connectivity creates an increase in value. According to "the law of plenitude," the value of every individual fax machine goes up each time another fax machine is plugged in, because of the enhanced synergistic effect of greater information flow. But this notion flatly contradicts the industrial-age axiom that value comes from scarcity--the old "supply-demand" mantra. The challenge of E-business is to reconcile such novel ideas to the established business principles that we've been using for generations. Eric Schmidt, who is the chairman and CEO of the software leader Novell, puts an interesting spin on this point when he compares the relative importance of Moore's Law and Metcalf's Law. Moore's Law, which was defined by and named for Intel's Gordon Moore, says that computing capacity, as measured by the speed of microprocessors, doubles on average every eighteen months. That's a startling enough observation when you compare the eighteen-month estimate to, say, the doubling times for technology in heavy manufacturing. But, as Eric points out, an even more dramatic "law" is the one that was named for the founder of 3Com, Robert Metcalf. Metcalf's Law, which is a modern version of the old law of increasing returns, says that the value of a network increases in direct proportion to the square of the number of machines that are on it. Is that a statistically verifiable law? No. But it's a good way of articulating an important message, the message of what we usually call the network effect. Kelly's law of plenitude is a version of the same thing. Whether the squaring principle is true or not mathematically isn't all that important, because the sense of it is true, with regard to positive returns. Today, the most interesting rules have to do with these two principles: Moore's and Metcalf's laws. But Moore's Law is inherently limited by the nature of silicon. After a certain microprocessor gate size--around one micron, or a billionth of an inch--you can't get any more speed, so you reach a ceiling and Moore's Law ceases to have any effect. That will happen in another ten years, maybe a little longer. In the meantime, networks everywhere are growing dramatically, and this is having a much more important, exponential effect. Eventually, in terms of how business is being conducted, the fact that my spreadsheet gets twice as fast every eighteen months is not nearly as interesting as the fact that my network is getting interconnected with those of my friends. That creates increasing returns that are more valuable than just more speed, so that eventually the network effect dominates Moore's Law. As Eric's observation suggests, the key to the liberating power of any network--including the world's biggest network, the Internet--is the potential that it carries for total connectivity. In this book, we'll show you what doors that key can unlock without slipping into either technobabble or that semimystical enthusiasm for "connectivity" that has been called "Rapture of the Net." Actually, you don't need to be rapturous to be honestly enthusiastic. Once this watershed technology is fully embraced--and we're talking about years, not decades, for that to occur--it will completely transform the way that we think about business, and about how we must connect with our customers to keep ourselves profitable. The heart of this transformation is "virtuality," or the ability to conduct transactions on a global level, in an instantaneous, or "real-time," format without having to consider the constraints of physical location. In the virtual world of E-business, physical distance is irrelevant. Which means that the time between inquiry and order is so compressed that, for all practical purposes, there is no more waiting time. This fact alone radically changes how customers are already shopping in cyberspace, how they will continue to shop, and how businesses must position themselves to keep their attention. If you're a customer--and a customer here could mean an individual or a multinational corporation--virtuality means that, once you're online, you have a nearly infinite array of products and services available, a mouse click away. You can comparison shop nearly at light speed, even though one potential supplier might be in Honolulu and another in Vienna. You can order products that you have configured yourself, having them manufactured to your detailed specifications, and arrange for payment and delivery on the spot. And you can do all this in a paperless environment, from the comfort and convenience of your own home. The Internet, more than any previous technology, empowers the customer. This has profound implications for business. If you're a business professional in the Internet age, you're confronting the fact that, virtually overnight, your potential customer base has exploded in size, the choices available to those customers have gone through the stratosphere, and hundreds of new competitors are suddenly grappling for their attention. In order to thrive in this world, you must be online. The time to do that is now. "Going digital," in the digital age, is an imperative. It's not a means of ensuring subtle increments in operating margin. For all but the smallest, most local, mom-and-pop operations, learning how to excel at E-business is a matter of survival. We intend this book, therefore, as a general introduction to profiting in the electronic goldfield and to avoiding the mistakes that have already left it strewn with corporate corpses. How, specifically, can you profit from Cyber Rules? The answer to that depends largely on who you are. To give you a better understanding of whether this book is for you, here's an overview: Part I describes where we've gotten to so far. It surveys the first five years of electronic business, reviewing some of the arena's most famous success stories and providing a brief compendium of "first-generation" lessons. If your company is heavily committed to online commerce and you're already reasonably familiar with Internet literature, you may want to skip this section and go directly to Part II. If you're a relative newcomer to E-business, if you're still weighing its potential before investing heavily, or if you just want a quick reminder of how we've gotten here, Part I will provide you a snapshot of the current situation. Chapter 1 introduces the "virtual marketplace" that is the World Wide Web today. It demonstrates, based on the experiences of early adopters, what the business Internet is and what it's not. We'll review here the initial overblown claims about the medium and show how the Web's real potential is very different from what we once thought it was. As exciting as it is, the world of E-business contains problems as well as opportunities. Chapter 2 addresses the two most commonly cited areas of concern among business professionals using the World Wide Web: the so-called bandwidth problem and issues of security. Chapter 3 is a primer for doing business on the Net. In it, we lay out some basic principles to keep in mind before "going digital." These basics comprise a kind of map into the electronic goldfields, showing you the safest paths to travel and the ones to avoid. In Part II we leave the immediate past and look toward the future. This section concentrates on trends that are only now emerging, but that will become increasingly important in the Internet's "second generation." Chapter 4 focuses on the growing shift from the "infotainment" that has seemingly dominated the Internet so far to the global enterprise capabilities that are now bringing it to the next level. Chapter 5 explains how such online pioneers as and Preview Travel are destined to transform their entire industries--even though they may not remain those industries' leaders. Chapter 6 corrects a common "either-or" characterization by showing how traditional and online channels can provide complementary, rather than antagonistic, marketing possibilities. Chapter 7 discusses the emergence of extended enterprises, or "para-enterprises," showing how the Internet has radically transformed traditional relationships between corporate entities, resellers, and end-use customers. Chapter 8 focuses on those end-use customers, showing how the Internet has empowered--and will continue to empower--them and has forced businesses to customize their products to serve "markets of one." Chapter 9 brings this lesson to its logical conclusion, by showing how the rise of Internet-based relationship management models will make "100 percent customer satisfaction" the benchmark of the future. The third and final part of Cyber Rules is a practical guide to making a mark in E-business. Chapter 10, which is directed to managers in large businesses, outlines a digital strategy that can bring you bottom-line results. Chapter 11 is a corresponding discussion for smaller businesses: It shows how to get yourself connected, including the basics of how to maintain a profitable company Web site. We end the book, in Chapter 12, with a call to action--a final look at why excelling at E-business should be mission-critical for any business that intends to survive in the Web's next generation. "Survive" is a strong word, and we're aware that to some observers it may sound extravagant. Many business professionals, alert to the Net's current limitations, are visibly unimpressed with the medium's promise. Some executives have been so slow to appreciate the rise of "postanalog" capitalism that they have been labeled "Internots." The business community certainly has its share of skeptics who think that "Netizenship" is nothing more than media hype. But if you're tempted to agree with these skeptics, you should consider the mounting evidence of a paradigm shift. We've hinted at some of this evidence in the Net use statistics. We'll be giving you more, in the form of stories, throughout this book. Are there challenges yet to be met before "connectivity" is complete? Absolutely. But if you think that the Internet explosion is a mere passing fancy, if you think that we can ever go back to a predigital economy, your logical compatriots are the "realists" who snickered at the Wright brothers. Because the Net, whether you like it or not, has taken off. The marketing implications are revolutionary. With the rise of E-business, successful business people are obliged to adapt their practices to an electronic, distributed, real-time model. They are forced to think about customers in entirely new ways, to alter their production, marketing, and delivery scenarios, and to adopt new strategies for ensuring customer satisfaction. Some will succeed at this challenge, and many will fail. But no one--not even the "Internots"--will be unaffected by the change. All of us in business have a wild ride ahead of us, as the old rules of commerce are rewritten and new ones are forged. It will be a frightening ride in some ways, but an exciting one, and we urge you to take it for what it is--an unparalleled opportunity. "Going digital" isn't a hurdle for you to overcome; it is a once-in-a-millennium chance to seize the economic high ground. Cyber Rules is designed to help you accomplish that. Excerpted from Cyber Rules: Strategies for Excelling at E-Business by Thomas M. Siebel, Pat House All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

Table of Contents

Charles R. Schwab
Forewordp. vii
Introduction: The Digital Watershedp. 1
Part I The First Five Years
Chapter 1 The Virtual Marketplacep. 15
Chapter 2 Problems and Prospectsp. 33
Chapter 3 Lessons of the First Generationp. 64
Part II On the Horizon: E-Business's Cyber Rules
Chapter 4 Private "Infotainment" Will Give Way to Global Enterprisep. 97
Chapter 5 Internet Pioneers Will Reshape Their Industriesp. 117
Chapter 6 Market Models Will Multiply, Not Contractp. 132
Chapter 7 Online Companies Will Become Para-Enterprisesp. 149
Chapter 8 The Net Will Move from Communities to "Customerization"p. 181
Chapter 9 The Sales and Marketing Landscape Will Be Redrawnp. 199
Part III Getting There from Here
Chapter 10 Rolling It Out I: Digital Strategyp. 227
Chapter 11 Rolling It Out II: Nuts and Boltsp. 241
Chapter 12 Mission Criticalp. 263
Notesp. 269
Indexp. 281