The Future of E-Business

At a recent e-business research meeting, I was asked the following questions: “Five years from now, what will be happening with the Internet, and what breakthrough research projects in e-business will have contributed to the changes?”

My (intentionally provocative) answer was: “Lots of good things will happen, butnone of them will be enabled by research breakthroughs.” To understand my thinking, let’s look at the present from the perspective of the not-too-distant future.

The View From 2006

One thing I clearly remember about the early years of this century was the big e-business backlash. For a while in the 1990s, people thought that any business with “.com” at the end of it or the lettere in front of it was an automatic license to make millions! With such wildly unrealistic expectations, we shouldn’t have been surprised to see a backlash that was almost as silly and extreme in its disillusionment as the original expectations had been in their blind faith. For a time during the backlash, people thought anything related to the Internet or the New Economy was doomed to failure.

Eventually, the disillusionment worked its way out of the system. I think it was sometime in ’02 or ’03 when the last of the “e-business is dead” stories appeared. In fact, people generally have stopped talking about e-business altogether. Today, the term e-business sounds about as silly as the term telephone-enabled business.

We now realize that the dot-com bubble was more like a wave on the surface of an underlying sea change that is still working its way throughout our economy. Nowadays, virtually all companies use the Internet in some way, and every year dozens of new uses for it emerge. Although lots of things are bought and sold on the Net, people still go to stores, too. Sales people still call on customers, but more of the calls today are done by videoconferencing. Companies increasingly share product designs, sales forecasts and orders electronically. Large companies now outsource many tasks to electronically connected freelancers (“e-lancers”).

The breakthroughs that facilitated those developments occurred long before 2001: Hypertext networks of interlinked documents, electronic connections between buyers and sellers, and the Internet itself had all existed for decades. The key technical driver of all the recent advances was simply the relentless march of improvements in the cost-performance ratio of information technology year after year after year.

Whatreally enabled all these new uses of the Internet were the countless experiments to get all the nitty-gritty business details right. To use the Internet successfully in business, managers had to figure out hundreds of things: What kinds of customers wanted to buy which kinds of products? How could companies find those customers cost-effectively? How could they make those products profitably? How should they set prices?

In a few cases, academic researchers helped figure out some of those details. But people in businesses worked out the vast majority by doing far more experiments than could possibly have been done by academic researchers.

The main way that academic researchers helped was not by research breakthroughs but by accelerating the rate at which businesses learned from each other’s experiments. Researchers observed the experiments, gathered and analyzed data in systematic and interesting ways and disseminated the lessons to anyone who wanted to listen. The academics were often wrong — just like the business people they studied. But, in the end, they were right often enough that this was their greatest contribution to the many successful business uses of the Internet in 2006.