Don't be fooled: the internet revolution has only just begun

'Soon there will be no such thing as an internet business because they will all be internet businesses'
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The Independent Online

It has been a bad few days for the community.

It has been a bad few days for the community.

We are not, it seems, such avid buyers of goods over the internet as the enthusiasts predicted. Here in the UK, Barclays Bank had to shut down its internet banking operation for a while after customers found they could get into other customers' accounts. Clickmango, the site for alternative health products, failed to raise the money it needed for its next financing and plans to close down, despite the backing of the wonderful Joanna Lumley.

Meanwhile, over in the US, Amazon was reporting slower-than-expected growth, and the Nasdaq index of high-technology shares had another bad week. So is the internet boom over? In one sense yes, absolutely - and in another, no, it has hardly begun.

The "yes" is in the sense that the mad, bad and dangerous to know enthusiasm of a few months ago has receded. It was certainly dangerous to get too closely associated with many of the stand-alone internet companies, built on wild growth projections and little knowledge of how to run a business. As the months roll by, expect many more tales of woe.

But the "no" is a much more important part of the answer. The internet businesses may be running into trouble and we may as consumers be showing considerable reluctance to buy over the net. But the internet itself is worming its way into every aspect of business life. Soon there will be no such thing as an internet business because all businesses are becoming internet businesses.

This shift is taking place in four stages. Stage one, already in full swing, has been to use the internet as a new channel to reach customers. Thus Barclays has its internet banking business, which sounds novel. But actually the people using the service might already be electronic customers of Barclays, except that instead of the computer they were using the telephone. Here the internet is simply a new way of delivering the same product or service.

Stage two is using the internet - or rather the new communications technologies, for the mobile phone and digital TV are crucial players - to make entirely new products and services. The trouble is, no one knows what will sell until you roll the product out.

Perhaps the best example of a successful new product or service is texting: using mobile phones to send short text messages. When the phones were first introduced no one particularly thought they would be used to send text messages: the keyboards were wrong and why should anyone bother to type out a written message when they could leave a voice one? Even if there were such a service, the least likely users would be the young, who were supposed to hate writing and prefer talking.

Wrong, wrong, wrong. Texting has become enormously popular, particularly among the young, who have created a new alpha-numerical language to cope with the limits of the phone keyboard, as in CU2N? (see you tonight?) or JSN (just say no).

By contrast what looks like being a good example of a failed service is internet access via WAP phones. It is still early days, but the main problem seems to be that we are so accustomed to accessing the web via a PC that we become frustrated by the crudity of the WAP service. Still, over the next 10 years we are going to get a string of entirely new services - things that we cannot even conceive we want or need - that will change the way we live. We as consumers will decide what we want: texting is a small precursor of seismic changes to come.

Stage three is using the new technologies to make existing products and services in an entirely new way. That is also just beginning. Perhaps the most interesting example is in the supply chain of companies. At the moment this is mostly being used for goods outside the regular production run: thus a manufacturing company might use the web to cut the cost of buying stationery. But the more important development will be using automated purchasing for components, using the web to search the world for the cheapest/best-quality items and ordering them automatically.

This will change service industries as well as manufacturers. Imagine the impact on banking: a company seeking the best return on its spare cash would simply instruct the computer to scour the world for the best interest rate, ensure that the bank or other financial institution complied with various safety criteria (or buy insurance to cover the deposit if it didn't) and then place the deposit. This would utterly revolutionise banking, and it is perfectly possible with existing technology.

If getting a computer to place deposits sounds off-beat, consider stage four. This is when company structure and the job contract start to be transformed by the web.

Right now we can only really try to glimpse what might happen. Clearly, however, the relationships both between different companies and between companies and individuals is going to change.

Take mergers. What used to happen was that company A took over company B, achieved economies of scale and prospered. Now company A takes over company B, all the best people in company B leave and either work for company C or set up their own businesses, and company A is left with a dud business. If that sounds harsh, look at the Daimler-Benz merger with Chrysler.

This happens because a much higher element of the value of any company is the brains of the people who work for it. This was evident in some industries by the early Nineties, but the power of the net further shifts the balance of power away from companies towards people. So companies will have to change the way they interact with each other, for example by forging alliances with other companies, rather than risking a take-over.

Finally, maybe the whole job relationship will, for many of us, simply disappear. It will be like the textile workers before the industrial revolution, or the dockers until the Dock Labour Act - except that this time the power will be with the workers. Many types of high-skill workers will simply bid for work on the net, pricing it at whatever we are prepared to work for, and companies (who will have a few employees, of course) will buy at the best quality/price mix they can.

Bill Gates once said that by 2050 half the American work-force will be self-employed. He may or may not be right, but he's assuredly right in the big idea behind that thought: that the internet revolution has hardly begun.