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Companies will have to adjust to more products becoming commodities.

by Reid Goldsborough

The Internet represents the biggest change in the way information is disseminated since the invention of the printing press, and this scares the daylights out of some people. Particularly business people. The reason it scares them is that there's no certainty and few clues as to where this epochal change is taking us. Chuck Martin, chairman of the Net Future Institute (www.netfutureinstitute.com) and author of the recently published book Net Future, makes his living studying how the Internet will change things and how we can position ourselves to benefit, rather than suffer, from it. His analysis of how the Internet will affect business is one of the best I've come across.   With the free flow of information, customers will be able to buy anything from anyone at any time from anywhere.   Key to Martin's thinking is the concept of commoditization, the most intriguing of seven cybertrends he describes in his book. It's a phenomenon that has the potential of turning just about any business upside down. ALTERING THE STATUS QUO The Internet is causing products and services to become commoditized, Martin argues. With the free flow of information, consumers will be able to buy anything from anyone at any time from anywhere. "We're moving toward a time when all information is available to all people," Martin said in a telephone interview. What used to be privileged information is becoming readily accessible, and what used to be expensive information is becoming free or low-cost. Information changes the status quo. It puts more power in the hands of consumers by making the core products and services of many companies less exclusive, says Martin, who describes himself as a cyberfuturist and who formerly was a vice president at IBM, founding publisher of Interactive Age magazine, and corporate technology editor at Time Inc. Take these three examples: • In the past, the way to get a good deal on a travel package was to talk to a travel agent, whose fee was paid by airlines and other travel companies. Now Web sites such as Travelocity (www.travelocity.com) provide this and other travel services. With many agents being forced by declining airline commissions to charge for their services or curtail the time they spend on you, Web sites can be a better deal. • Unless you wanted to pony up a fee, you used to have to call up different insurance agents to compare the costs of different insurance policies. Now this information is available on-line. You can visit Web sites such as InsWeb (www.insweb.com) that will scout around for you, for free. • Retail stores now have to compete not only with catalog companies, but also with businesses that have a presence only on the Internet and that consequently save on both overhead and printing costs. Consumers can use automated Internet shopping "agents" such as those found at Consumer World (www.consumerworld.org) to find the lowest price offered for brand-name products across the Web. How can a business adjust to all this? MAKING THE ADJUSTMENT One way to adjust, says Martin, is to shift how you value your core assets. Treat your traditional bread-winning products and services, if they've become commoditized, as loss-leaders-they get customers in the door, but aren't necessarily profitable. Then find other ways to create revenue. For example, now that travel services are becoming a commodity, a travel agent might offer discounted prices and then aggregate frequent flyer miles for clients, making the bulk of its revenue through payments from companies that want to advertise to frequent flyers. Or, now that insurance is becoming commoditized, an auto insurer might offer to procure clients' new cars at cost provided that clients obtain their car insurance through it. Or, now that books are available so competitively through the Web, a bookstore might offer deeply discounted books and earn its profits though the cappuccino, herb teas, croissants and other upscale items it sells to book browsers. The bottom line here is that businesses should look for ways in which existing products and services that may become commoditized can be leveraged to sell other, often unrelated, products and services. "When a company sees that its products are being commoditized, the initial reaction is often panic," says Martin. "Instead, you should view the situation as an opportunity. You're now able to create new value, whether your business is large or small. And because consumers benefit from the value of both the old commoditized product and the new profitable product, everybody wins." Not surprisingly, Martin feels that all businesses should have a Web site. "The most successful companies in the future will be those that play in both the physical and the digital worlds." Reid Goldsborough is a syndicated columnist and author of the book Straight Talk About the Information Superhighway. He can be reached at reidgold@netaxs.com or http://members.home.net/reidgold.