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Wednesday, January 31, 2001

Internet becoming Greater Challenge for CEOs

The impact of the Internet has become a major challenge for CEOs around the world, according to a far-reaching study by Accenture (formerly Andersen Consulting) and The Conference Board. The study reveals that the percentage of CEOs concerned about the impact of the Internet more than doubled from last year.

The study,The CEO Challenge: Top Marketplace and Management Issues 2001,is the most comprehensive survey of CEOs ever conducted by The Conference Board in its 85-year history, covering the views of 506 CEOs in North America,Europe and Asia. The executives were asked to select the top three "marketplace" and top three "management" challenges for their companies in the next year— with "marketplace" and "management" challenges defined as the leading external and internal forces, respectively, posing the greatest concern to their business.

Of the top three marketplace challenges for 2001— "Changes in type/level of competition" (41 percent of CEOs surveyed), "Impact of the Internet" (38 percent), and "Industry consolidation" (37 percent) — only the "Impact of the Internet" was not among the top three in last year’s survey, jumping from eighth place last year to second place this year.

"The study clearly underscores the importance of technology and the Internet to business leaders around the world, especially among successfully established ‘old economy’ companies,” said Richard Cavanagh, President and CEO of The Conference Board. “The Internet, which only six months ago was the principal promise of emerging 'dot-coms' and the fascination of Wall Street, has become the practical technological lever for large and mid-sized competitors. Grown-up companies have taken back the keys to the car. As the Internet makes pricing more transparent, as customers demand faster service at lower costs, and as Internet competition intensifies, it is not surprising that the Internet is the concern that has risen dramatically for CEOs and is now ranked the second major issue globally."

While the Internet showed the greatest gain from last year’s survey among marketplace challenges, the jump appears to be due to IT users, not providers. In fact, fewer technology CEOs rated the “Impact of the Internet” as a top concern this year than did last year. Rather, the study revealed that CEOs of trade companies, utilities, healthcare and other non-tech industries were far more likely this year than last year to view the Internet as a top marketplace challenge. Moreover, it is larger firms with sales volumes of more that $5 billion, not only Internet startups, that are embracing the Internet as critical to their success.

"We're just halfway there in terms of realizing the full potential of digital technologies to transform industry and commerce," said Tom Pike, Accenture’s managing partner for Growth amp; Strategy. "The early lead of technology firms has paved the way for innovative business models on the part of trade and services companies. Similarly,the early lead of the 'dot-coms' has given way to a major comeback on the part of mature enterprises. We’ve seen only the beginning of the inter-enterprise efficiencies and customer relationships that are afforded them via the Internet. We’ll certainly continue to see some bumps in the road ahead, but those who stay focused on innovative applications of new technologies to solve business problems will win big," he said.

Among the survey’s other key findings:

- Customer loyalty is the most critical management issue. Thirty-seven percent of CEOs surveyed ranked "Customer loyalty/retention" as one of the top three management issues. Customer loyalty has been the number-one concern for CEOs in the United States for two years running and is now a major issue in Europe. By stark contrast, customer loyalty is not a major concern in Japan — dropping from seventh place among CEOs in Japan in last year’s survey to 10th place this year.

- Flexibility and speed is another top management concern. Ranking close behind customer loyalty as a top management worry is the "Increasing flexibility and speed" (34 percent of CEOs surveyed). This has been a top management concern for European CEOs for the past two years, and it is now a rising concern in North America and Japan, as well. Technology, catalyzed by the Internet, is accelerating efforts to create business value. Savvy CEOs around the globe realize that survival may well depend on their ability to adjust quickly to sudden marketplace shifts, especially as the long economic expansion begins to wane

- CEOs' views differ dramatically by region. The study shows differences among CEOs depending on where their companies are headquartered. Whereas North American CEOs said their number-one marketplace challenge is "Shortages of key skills" (up from 5th place last year), CEOs in Europe said their greatest marketplace challenge is the "Impact of the Internet." The leading concern for CEOs in Japan, by contrast, continues to be "Changes in type/level of competition."

- Industry consolidation is a persistent concern. For the second year in a row, "Industry consolidation" ranked third among marketplace challenges that CEOs face. Mergers and acquisitions account for a rising proportion of CEOs' time and resources, the study found. Many mid-sized firms say they have fallen out of favor with investors and believe they must now acquire, or be acquired, in order to avoid being marginalized. One survey respondent, the CEO of a leading US telecommunications firm, said, "...About 50 percent of our customers have been bought out in the last four years. Our second-largest customer was bought out twice."

- Price pressures are still an issue. Although "Downward pressure on your prices" no longer holds the number one ranking among marketplace challenges, 33 percent of the CEO respondents said that it is still an important concern, ranking fourth among all the CEOs surveyed. And pricing pressures could well be exacerbated in the face of growing fears about a severe economic slowdown.

Survey Methodology
The data for The CEO Challenge: Top Marketplace and Management Issues 2001 came from a one-page survey mailed or faxed in mid-2000 to CEOs in the Americas, Europe and Asia. CEOs were asked to select the top three "marketplace" and top three "management" challenges for their companies in the next year from a list of 15 issues in each category. Survey data was supplemented with comments from more than 32 business leaders obtained from interviews and Conference Board events in the United States, Europe and Asia. The CEO Challenge survey is in its second consecutive year.

Customer Relationship Management Market to Exceed $24 Billion
In a report released last October, Aberdeen Group, a leading provider of technology market consulting and research, reports that the Customer Relationship Management market will exceed $24 billion by 2003 and will remain a high-growth IT market. The report, entitled "Customer Relationship Management: Year 2000 Edition" provides an in-depth market analysis on the state of the CRM industry.

"A broad base of end-users employ CRM applications and best practices to form the underpinnings for successful e-Business and mobile e-Business initiatives," says Christopher Fletcher, Vice President and Managing Director. "CRM remains a high priority for IT executives because innovative technologies have raised the bar and customers expect quick, efficient service and support."

"Customer Relationship Management: Year 2000 Edition" examines market size, segmentation, expenditures, and growth forecasts for the CRM, sales force automation, customer support, help desk and field service markets. The report also explores the burgeoning role of application service providers (ASPs), marketing automation, e-Service, and partner relationship management (PRM) and their impact on the already mature CRM market.

As a thought leader in the CRM market since 1994, Aberdeen has helped many leading CRM suppliers successfully market their products. Providing consulting and research in the CRM space, Aberdeen's global CRM team covers every facet of this solution, including integration with e-Business, personalization, marketing automation, and customer service applications.

News Tidbits (appears every day on the front page)
- is laying off 15% of its staff in another high profile dot-com job firing. The layoffs will affect 1,300 people. In addition, will close its McDonough, GA distribution center and one of its customer service divisions located in Seattle, WA.

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