Internet is not the quick share profit solution

Many observers have been noting the effect of Internet initiatives on a company’s share price. Dixons’ stunning and deserved success with Freeserve is the most quoted example.

It’s a great story, and testimony to the speed with which the Internet is being accepted. Yet this is not an excuse to rush at Net initiatives purely in an attempt to massage a rocky share price. Some are actively talking this up as a route.

Why not? you might ask. Isn’t shareholder value what this is all about? But shareholder value only comes from the long-term consistent delivery of customer value at a profitable rate of return.

The Internet is not a short-term investment, although it is very fast moving. The winners in the digital arena will be those who think through their strategy with care, and then deliver a compelling user experience which attracts customers again and again.

These will also be the companies which understand how the Internet can change whole business models through the considered and creative application of design and technology to interactions between all kinds of stakeholders – staff; customers; partners; suppliers; distribution channels; and, yes, shareholders too.

A useful way to escape this mindset is to consider funding the Internet, not out of marketing and investor relations budgets, but to see it for what it is – a capital investment. If you are setting up an online retail service you are opening a new shop. You wouldn’t consider developing a shop from an annual marketing budget, so why imagine you can online? If it was a capital investment, then it really would add value to the company and hence the share price.

Quick wins, of the kind some people seem to think exist on the Net, are by their digital nature eminently open to being copied. That, plus the sheer speed to market of the digital era, make competitive advantage on the Web very hard to sustain.

It is quite probable that in the future only three things will really mark out an organisation – constant innovation, its core culture, and its network of relationships. How these will be experienced by the end user is the key problem to solve, not how to boost the company’s share price. If a company gets the user experience right, the rest will follow.

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