Split `clicks and mortar' to get ahead

Traditional businesses facing the "e-business" challenge should split off their Internet-based activities and encourage them to try to devour the parent, a prominent Internet investor has said.

Mr Masayoshi Son, president and chief executive of Softbank Corporation whose own stock has soared through investments in Internet firms, said he saw "pureplay" Internet companies beating those that mix "clicks and mortar".

Mr Son told the annual meeting of the World Economic Forum that firms should take the "crazy" option: "assign a totally different CEO and tell them to go kill this sister company.

"I don't have enough confidence to (enter) this new revolution with only one step - I need both of my feet to compete," he said, of the option of trying to stay ahead in both the traditional business world and the Net culture.

The Internet has the bosses of many established companies scratching their heads as they watch nimble upstarts capturing the high-speed network's potential to set up low-cost, high-service rivals on a very low initial outlay.

Among executives discussing the phenomenon were the leaders of two companies which have illustrated that point - Dell Computer and Compaq Computer, both major employers in the Republic.

Compaq, the world's largest personal computer maker, is now fighting back after seeing its market leadership threatened when Dell wired into the Internet's cost-cutting potential to assemble computers on demand, and sell them direct to customers.

Dell's founder, Mr Michael Dell, said that the first stage many companies go through in addressing the Net is to do old things using the new medium. "The real power comes when you do new things using the new medium."

Mr Michael Capellas, who recently took over the helm at Compaq and has reshaped the group to meet the challenge from Dell, agreed. "One of the difficult things to do is to accept that what has been successful may not be for much longer," he said.

"The one message of the Internet is `cannibalise before someone cannibalises for you' ", he said. Creating a separate entity may be the only way forward.

By letting companies interact with customers and with each other on a global basis, the Internet opens scope for a whole range of fresh ideas to make money, many of which have not yet been realised, executives said.

Mr Son illustrated that point with two extremes - "zero and infinity". In the Internet, he said, it was possible to think of business models based on zero timelag and variable costs, plus infinite access to stocks, to information and to customers.

But Mr Barry Diller, chairman and chief executive of USA Networks - which he described as a mix of old "or proven" - media and new, or loss-making, ventures - advocated a case-by-case approach.

"In the Internet it's very dangerous for a large company to have collective new ideas," he said. "It's different for the guy in a car in the country to have an idea like Amazon (.com, the Internet retailer)."

Large companies inevitably have procedural brakes on initiative, and he said that his group had decided to let individuals develop their own ideas, even though this exposed the group to a lack of control.

"If we had not taken that risk we would really have endangered our own business," he said.

Mr Son added that he had had full experience of the pressure on a public company like his to deliver regular results: "I was almost like a slave of the stock price every day.

"It takes a lot of craziness to be successful at a revolutionary time - (this happens) once in hundreds of years," he added.