CEO S. Ramadorai addressed the Commonwealth Business Council at London on November 23, 2000. Following are the excerpts of his speech at the luncheon.

The Right Honorable the Earl Cairns, and esteemed colleagues. I am deeply honoured by your invitation to speak at this prestigious forum, the Commonwealth Business Council. Thank you for your kindness                                          
We are indeed in the throes of a revolution, the 'Internet revolution', which offers us many opportunities for growth and prosperity, but also brings in its wake many potential threats and uncertainties. The Internet is undermining, and in some cases threatening, to obliterate many traditional business structures and models. It is therefore critical that we all, as business leaders in the Internet era, revisit our current approach to measuring business excellence, our topic for the day.
Indian businesses recognise that any engagement in the areas of finance, banking, insurance, medical services will require that they are internet-enabled.

Indeed, it was quite gratifying to read a recent survey in The Economist on this issue, (Frances Cairncross, "Inside the Machine: A Survey of E-Management," 11-17 November 2000) with a perspective that is similar to my own.

It is also exciting to note that the UK industry, (and the UK Government) are seized of the issue of moving quickly to take advantage of the rich opportunities offered by the Internet. Over the years, the UK government has instituted a series of policies and initiatives aimed at helping the growth of electronic commerce. These include the Information Age Partnership, an initiative with CEOs of over 35 major IT and e-commerce companies, to enhance the strategic interface between Government and e-commerce enabling industries.

It is our understanding that the UK government has set itself the ambitious goal of "making the UK the world's best place to trade electronically by 2002." We are also proud that similar initiatives are underway in India.

I believe that we are in the 'mature' phase of the Internet era, a phase for which Evan Schwartz has aptly coined the term "Digital Darwinism," an era of 'survival of the fittest'. In a sense, the Internet is creating a perfect market scenario where market participants, unfettered by constraints of time or space have increasing access to information with which they can make increasingly informed choices, while all the world is their playing ground. At the same time, the Internet brings these participants face-to-face with the world's best players where there is little tolerance for even 'minor' mistakes.

An 'excellent business leader' today will need to wrestle with several complex questions. I will cite a few.
- How will the virtuality of organisations affect their governance?
- What kinds of employment policies will make 'creative destruction' less threatening and yet, productive?
- How will virtual organisations be structured to be customer oriented?
- What intellectual assets will they protect from the public purview, and which of those assets will they share to enhance their own (and overall) societal progress?

'Fit' managers and 'fit' corporations will need many diverse qualities. They will need to be compassionate and empowering employers, passionate and visionary entrepreneurs, level-headed decision-makers, democrats and team players all rolled into one. They will need to be prompt, full of energy, they will need clear strategic focus, the ability to dynamically shift strategies in response to the changing requirements of creative destruction, a chief characteristic of skill- and information-intensive industries. They will need the ability to think on their feet creatively, immediately, to be able to recognise competition even as they adapt to "co-opetition."

There is an additional threat to private operators from India's state-owned monopoly operators. In several countries, including Australia, the U.K., and the USA, clear restrictions were placed on the activities of the dominant operator, which often has the market power to drive new players out of existence through unfair competitive practices. How can private operators argue that it is against the national interest to continue to allow state-owned enterprises to provide cheap telecom services? It is here that the debate is stalled. The Videsh Sanchar Nigam Limited and the Mahanagar Telephone Nigam Limited, both state-owned telecom giants are positioning themselves to control large chunks of the Internet market through subsidies.

Excellent managers will need to create 'flat' organizations, characterized by an open environment, which encourages creativity, out-of-box thinking, non-conformance and knowledge-sharing. They will need to build structures and processes to facilitate rapid communication and diffusion of ideas, and effective knowledge capture in an environment where work-forces are becoming increasingly spread out geographically, and also becoming more mobile. For this, excellent managers need to effectively use IT including email, intranet technologies, knowledge management tools, etc. HR processes also need to be made more responsive to the needs of the Internet-age employee. Organizations have already started utilizing IT tools such as collaboration software, Intranet websites, etc, to streamline HR processes. TCS, for instance, has a repository of its employees' skill sets, which is easily accessible to HR managers and which helps them to match employee skill sets with requirements, in Internet time.

The Internet is clearly provoking companies to dynamically restructure their existing infrastructure. Companies are also redefining their vision or 'reason for existence'. For instance, Microsoft's earlier 'PC on every desk' has now evolved to 'empowering people through great software anywhere, on any device.'

I would like to emphasise that we need to embrace the Internet and maximize its use in everything we do, whether it is to improve the efficiency of our internal systems, to gather and disseminate knowledge, and to communicate with our customers and our suppliers in the extended enterprise.

In their search for business excellence, managers will need to use the Internet creatively to reduce costs, to enhance productivity and to eliminate fat intermediaries to survive in the face of intensified competition. New, lean intermediaries, now called 'infomediaries', will emerge to take their place and to perform specific Internet age activities.

Transaction cost-reductions and the need to improve productivity will be essential requirements for survival and to combat intensifying competition. Excellent business managers will need to critically differentiate their wealth-creating and wealth-destroying activities. Business excellence will be measured in terms of 'wealth-creation'. Companies and individuals that pursue wealth-destroying activities will face certain death in the marketplace. Speed, efficiency, reliability and instant information will be critical success factors in the new Internet economy.

When Michael Dell reduces his inventory holding time to six days, his competitors cannot afford to hold sixty days' inventory in an industry where the value of materials declines at about an astounding 'one per cent per week'. Reduced inventory, Dell claims, has enabled him to achieve a return on invested capital of two hundred and ninety percent. If his competitors do not eliminate their inefficiencies, then they are essentially destroying wealth since they are operating at a level far below what is potentially possible.

When a financial services provider reduces the distribution costs of goods and services - 1 cent on the internet compared to 25 cents via a cash machine, 52 cents via the telephone and US$ 1.14 via the bank teller - then its competitors can hardly afford to ignore such dramatic cost reductions in response to the scrutiny of their shareholders and to the competitive demands of the marketplace.

So how does one tailor the Internet to Business Requirements
The role (and importance) of the Internet and of 'IT as an enabler' will vary from industry to industry. Business excellence will depend upon managers having a clear understanding of the business they are in, the potential role that technology can play to enable them to compete effectively and the impact of the internet on their business - whether it threatens to destroy their business or enhance it.

Certain industries which are well-suited to electronic transactions and electronic delivery of goods and services such as software, books and music have already seen seismic shifts. The incumbents, so to speak, have been forced to drastically restructure their businesses to survive and achieve competitiveness. A classic example is the case of Encyclopedia Britannica. Charles Schwab's business restructuring, in response to the E*Trade equation, is of the same genre.

In certain industries the Internet has helped to dramatically improve business processes and business efficiency in 'supply chain management systems' because these businesses deal with the delivery of standardised goods. In these industries, overcoming customers' fear of the unknown is easier, because in the ultimate analysis they can visualise what will be delivered at their doorsteps. Classic cases in this segment include Dell, Cisco and automobile firms.

The third industry-type is the 'hybrid' model where brick and mortar structures will remain significant. This model includes financial services firms where IT plays a crucial role to achieve business excellence, and where IT is intrinsically linked with business models. Today, competitive pressures are forcing banks to undertake initiatives designed to increase the efficiency of their business processes. Also, in order to successfully cross- sell new products and services and achieve the economies of scale expected as a result of sector convergence, financial institutions require increasingly sophisticated IT solutions. These IT solutions would work towards developing products, managing customer relationships, mining, managing and analysing critical customer data and fine-tuning sales and service delivery operations. They are also utilising information technology to create new sources of revenue to deliver new services and products.

From a strategic perspective their approach to the Internet and IT systems can be expressed in the following manner. At a lower order level, banks are using the Internet to achieve operational effectiveness, something that their competitors can easily duplicate. In such industries, even if online delivery is unprofitable for certain services, it is essential to match competitor initiatives and consumer demands.

At a higher order level, they are using IT to position themselves strategically with new products and services and differentiated services for prime customers. In their search for excellence, managers must recognise that utilising technology to pare down inefficiencies, that is, to achieve operational effectiveness, only gives them 'the licence to compete'. It does not give them a sustainable differentiator. To truly achieve a sustainable differentiation, firms require a deeply embedded, complex web of customer-oriented business processes solidly grounded on IT processes, which in turn, will be structured into a well designed IT architecture based on a clear business strategy. Competitors will find it difficult to replicate this structure and it will go a long way to enhance customer retention. These business processes tied together by a single thread - a single strategy, will include the whole gamut of corporate activities including knowledge sharing, research and development activities, customer-care management, mechanisms for individual customer valuation, etc.

IT clearly has a critical role to play in ensuring that this strategic symphony plays out smoothly.

The role of the CIO (or Chief Information Officer) is also undergoing a transformation in the Internet and IT driven era. Previously 'support' functions, CIOs now play a crucial role in defining the enterprise's strategy, and in overseeing its implementation. CIOs are permanent members of the business strategy team. CIOs must have a broad business perspective and a penchant for change. They must combine the skills of technocrat and business leader, linking the present with the future.

Indeed, it is the first time in business history that the role of the IT manager has become mission critical for corporate survival. The mantle of ensuring that the IT architecture, founded on sound business and IT strategic visioning, with well thought out and detailed business and IT processes, works right, every time, rests on the shoulders of the CIO. CIOs must ensure that the IT architecture is glitch-free, with the capacity to respond (with flexibility) to future changes. Internet time, after all, gives business managers no room for mistakes. Business and IT processes must be scaleable to respond to the dynamically changing marketplace. To be wrong will be suicidal; to be right will bring great corporate prosperity.

I will cite the example of the Indian private telecom industry when it was just starting out, to demonstrate the value of defining business processes well in advance. The nascent Indian telecom industry started out with little understanding of the 'key makers' and 'breakers' of the business. Consequently, Indian telecom firms climbed a steep and tortuous learning curve. Without a clear understanding of customer-oriented tariff packages, some companies did not institute customer care and billing systems to cater to "friends and family" type programs and long-term loyalty programs, essential for customer retention. Inadequate information capturing systems and processes prevented companies from capturing fraudulent behaviour patterns leading to tremendous losses. An inadequate billing system can create havoc. Companies were often unable to raise bills, and obviously, without billing there can be no revenues.

Management Excellence in the Mature Phase of the Internet
The 'introduction phase' of the Internet involved eyeball capture with little attention to robust revenue models. It was a phase concerned with "content push" irrespective of quality under the aegis of the free ISP "eyeball capture" model.

(Under the "content push" approach, everything under the sun that the Internet offers free, is acceptable, irrespective of its quality) The "content push" culture would, if it had continued to hold sway, have created a culture of mediocrity. Furthermore, it is a culture which puts tremendous pressure on individuals in terms of "taxing our eyes and brains," in an uncertain gamble for information that may or may not be available and that may or may not be right and enough despite its vast expanse.

Of course, the true potential of the Internet is still to be realised. As Michael Dertouzas, director of the MIT Laboratory for Computer Science emphasises, we are currently utilising only approximately one-tenth of the web's full potential. Fortunately, we are now entering the 'mature phase' of the evolution of the Internet. We are entering a phase when the computer and communications systems will become "human centres" catering to 'human needs', not vice versa. The Internet's potential will be realised when our machines speak to us, and unload work off our backs, in an exacting and discriminating manner. For this, we need, intelligent IT systems and software, capable of organising, structuring, intelligently abandoning useless knowledge, contextually and building upon the vast store of data, information and knowledge, also in context, that is exponentially increasing by the hour. This can lead to a tremendous innovation explosion and to increasing certainty in our research efforts.

Indeed, we can even envisage a period when computers will increasingly predict when we are pursuing the wrong research path and the relative risks and rewards of pursuing it from a commercial and knowledge building perspective.

'Collaboration' - a key mantra in the Internet era
The Internet paradigm is all about 'global collaboration.' Managers striving for excellence will also need to give due recognition to the new concept of 'co-opetition'. The exigency of competing on 'Internet time' means that companies must simultaneously compete and cooperate with each other. We are witnessing communication, connectivity and partnerships on a scale as yet, unprecedented. The process is becoming evident with the obsolescence of the 'vendor-centric' business model and with the opensource software movement gaining currency. Under the opensource software model, the software developers make their software available freely on the Internet for anybody to make enhancements or develop applications. Although software developers run the risk of creating powerful competitors through this model, they also ensure that the software has a wide support base of developers and users, thereby ensuring the 'longevity' of the software product. As you know, Linux is a classic example.

Another major form of emerging collaboration is the business model of alliances among competing firms to spread their risks and their costs. Also, because technology is becoming obsolete so rapidly, in several industries, companies have to produce new and fresh products and services, in increasingly shorter time periods. Indeed, they must have the stomach to proactively make obsolete their own products, applications and solutions. The cost of research and development is often difficult to recover. Information-intensive businesses must use alliances to rapidly access the benefits of scientific advancements made by other firms, academic and research institutes and government departments. It is becoming quite common for companies to share their plans and products and processes with outside groups, compared to the earlier tradition of corporate secrecy. In the new era of the Internet, companies will pursue collective action and collaborative efforts in "clusters" as strategic initiatives to survive and to promote enlightened "self-interest" instead of pursuing the tunnel-vision path of only "competing." Indeed, firms are even using knowledge management tools to determine which alliances, mergers and acquisitions they must pursue to provide total solutions. What is even more amazing is the emergence of models comprising loose confederations of companies which share, among other areas, customer acquisition and recruitment costs.

Convergence
Managers pursuing excellence also need to be fully cognizant of the all-pervasive computing scenario that is rapidly emerging. Although we may not see the demise of the PC in the near future, there is no disputing the fact that its days, as the number one device to access the Internet and conduct transactions, are numbered. A variety of devices are becoming available which enable an individual to access the Internet anytime and anywhere. So instead of having to worry about one type of user interface for the PC, e-commerce providers will have to provide multiple user interfaces on a number of devices.

Software Developers and Consultants
In such a scenario, software companies - both developers and service providers - have a critical role to play. After all, software is a critical element, which keeps the business running in the electronic market place, and in certain cases, such as Amazon, is an essential factor for competitive differentiation.

Software development companies are launching products, which will enable business managers to achieve global connectivity through the Internet, and tailor their solutions to their business models. These products provide a multitude of functionalities -simplified development of next-generation web services, rapid application development for the internet, 'build and reach' of applications through any channel, automatic XML integration, creation and consumption of web services, enterprise-scale interoperability management, and solutions for cyber security, etc.

Business managers are being constantly bombarded with new applications, new products and new solutions such as componentisation, software as a service, enterprise-wide application integration, etc. They need to be able to sift through all the hype and finalise the best solution. Software consultants can play a critical role in this respect.

Choosing the right solution and the right consultant to deploy optimum solutions is mission-critical. Failure could lead to the loss of competitive position and market share. In recent times several companies have suffered considerable pain and losses because of the service disruptions and the constraints that resulted from failed or inadequate deployment of new systems. In the age of digital solutions and digital business models, companies can no longer afford six-month studies and twenty-four-month implementation periods. Further, digital solutions require a holistic approach combining customer orientation with cultural, business and technical issues. It is critical to focus on solutions first and on technology later. The ability to sell, conceive and deploy effective digital solutions requires an understanding of the dynamics of specific industries and marketplaces. Software consultants who intend to deliver solutions that truly enhance and extend traditional business models will require sales personnel and consultants with substantial industry expertise.

Managerial excellence for software consultants and product development requires that they constantly review the future initiatives of their clients and incorporate this knowledge into their research and development, recruitment and training activities. Indeed, in recent years, many consulting firms have formed strategic advisory boards to identify and evaluate future market trends. These boards comprise technology and industry experts and independent thought leaders from the academic world. Indeed, these boards are an illustration of the 'open partnership model' that is essential for the successful delivery of digital solutions. Another critical requirement for successful consultancy in the Internet era is to establish partnership relationships with clients. Clients will increasingly require consultants to enter retainer-based relationships, taking the responsibility to maintain and enhance applications, in an era of rapidly shortening product and solution life cycles.

Building Deep Customer Relationships
The Internet is a 'customer-oriented' medium where the customer is completely in charge of the interaction with the firm, relatively free from any pressure from sales pitches. This forces firms to accept the reality of all-powerful customers and to become more responsive to them. Consumers can reject goods and services through the click of a mouse, if a firm does not adequately respond to their queries. Consumers are also better able to compare goods and services on the net and obtain free information from competitors. Consequently, firms have been forced to divulge large amounts of information about themselves.

On the other hand, the Internet offers rich possibilities for companies willing to make an effort to understand their customers and develop a strong relationship with them. Research has shown that loyalty of online shoppers is related much more to the customer experience than to traditional drivers such as price. The top two drivers of online loyalty are 1. The quality of the customer experience and 2. The on-time delivery. Customer Relationship Management is already emerging as a distinct domain, and technologies are being developed specifically for this. Through 'mining' their customer data warehouses for nuggets of information and identifying their most profitable customers, organisations can devise better ways of selling to existing customers and appropriately tailor their offerings. Some companies have gone a step further in building their customer relationships. General Motors, for instance, uses OnStar - a geographical positioning system to locate customers' vehicles, diagnose engines and even control their vehicle operations - the next generation in e-CRM.

Externalities & Dependencies
All said and done, business excellence does not depend ONLY on strong managers and correct corporate and technology strategies. Political, economic, regulatory, legal, social and cultural factors too will significantly determine the extent to which managers can utilise the Internet effectively. Governments will play an important role in creating a legal and policy framework to create an enabling environment for business managers to exploit the benefits of IT and the Internet. Unclear taxation and tariff policies, constitutional, ethical and legal issues such as security and privacy issues, and public policies that prevent the growth of critical telecom infrastructure will serve as major disablers in the new environment.

Further, whole industries, such as the telecom industry in particular, have a major responsibility to create the necessary convergent infrastructure. Inadequate bandwidth will prevent firms from fully exploiting the Internet advantage. A critical mass of users with access to affordable, internet-compatible devices is essential to utilise this "general purpose technology" effectively. In the absence of these enablers, the divide between digital haves and have-nots will increase. For instance, in the US, abundant bandwidth and inexpensive telecom access have played an instrumental role in rapidly moving the internet economy into the maturity phase. Although some measures are already underway in this area, governments and companies in India and the UK will need to fully embrace such an approach.

Conclusion
I would like to conclude by saying that we need to look carefully at all the possible avenues to exploit the 'Internet-advantage' together, through win-win partnerships and by enhancing the use of our complementary strengths. TCS and other Indian software firms, offer deep multi-disciplinary skills and capabilities to enable business entities to identify their long-term business and IT strategies with well-developed business and IT solutions to achieve business success.

I thank you once again for giving me this opportunity to be here, and I am confident that the Commonwealth Business Council will serve as an incubator, indeed, as a powerful engine for cooperative and successful relationships to achieve our common goal of business excellence in the Internet era.