Trial and Error at IBM

Computer exec says building an online business is tough HOW DO YOU BUILD an online direct marketing business? Take it from IBM: It’s not easy.

The company tried to nail everything down when it started its Web site five years ago. It began by examining every internal process from procurement and production to customer relationship management, according to Pete Martinez, e-business strategy executive for IBM Global Services, speaking at the Direct Marketing Association’s Net.marketing conference last month in Boston.

“The examination produced a significant overall view of all those processes,” Martinez said.

But it wasn’t enough. By 1997, more than 4,000 IBM Web sites were being managed by over 1,000 people, and content was growing at a rate of 25% per month.

To deal with this, the firm created a global architecture to ensure that all business units would perform at the same level. That announcement caused problems.

But once company chairman Louis Gerstner stepped in, the conversion to a global architecture began.

IBM also quickly discovered that it couldn’t conduct business with all its clients in the same way. It partitioned its online organization into specific audiences – “influencers,” employees, customers and partners – and began targeting and customizing its Web sites to those groups. By 1998, each unit had its own objective.

Another insight came in 1999 when a reporter tried unsuccessfully for several days to buy an IBM computer online. He wrote an article about his experience and it landed on the chairman’s desk. “We [focused more] on how to change from a selling site to a buying site,” Martinez noted.

The computer giant overhauled 250,000 Web pages over a three-month period. Each business unit’s pages had to conform with specific headers and footers for consistent navigation but could use the “white space” in any way it wanted.

The parent site (www.ibm.com) was relaunched last year after Christmas with no discounts and no special promotions. In the first month, revenue was up more than 400%. “We had the traffic all along but the customer could never get to the products,” Martinez said. “We were in their way.”

The site now averages 2 million hits per week. E-commerce revenue hit $3.3 billion in 1998, soared to $14.8 billion in 1999 and totaled $9 billion for the first half of 2000.

Doing business online is 40% more cost-effective than face-to-face sales, and IBM has implemented tactics to capitalize on those savings, Martinez says. For example, last year the company required all its office products suppliers to conduct business with IBM electronically. This saves the company $600 million annually.