Ice Age for online dinosaurs

A new criteria for evaluating chief executives has emerged: do they 'get it', with the ‘it' being the internet. Closely aligned with understanding the internet will be the productivity performance of companies and so a new way of evaluating the investment worth of enterprises will gather momentum.

My colleague Stephen Bartholomeusz was the first to begin the classification process when he declared that Harvey Norman's Gerry Harvey does NOT 'get it' but Woolworths chief executive Grant O'Brien does ‘get it' (Gerry Harvey's missing data link, May 8).

Our readers responded making it clear that they agreed with Bartholomeusz in declaring that Gerry does not get it. One reader offered the classification ‘Harveynormanosaurus', which could be used by those who do 'get it' to describe those who do not.

However, Gerry Harvey responded vigorously, claiming he did ‘get it' and pointing out that he was the first major retailer to actually disclose what was happening on the net (Why I do 'get' online retailing, March 13). His commentary is important reading.

But what about Woolworths' Grant O'Brien? Is he really a chief executive who is fully embracing the internet world? I believe that Stephen was too hasty in declaring O'Brien had ‘got it'. It's true that the Woolworths chief has set out an ambitious program to drive sales from the net in all the Woolworths operations, and is linking that drive to his database, and for that he scores points.

But Woolworths is also undertaking one of the biggest and fastest brick-and-mortar rollouts that we have seen as it sets up scores of hardware and appliance stores under the Masters banner and expands its physical supermarket network.

If Grant O'Brien really ‘got it' he would make his hardware attack on Bunnings and his appliance attack on Harvey Norman via the internet, so saving a fortune in costs. I know a number of suppliers to the hardware trade who are astounded that Woolworths would, in today's world, make such a high-risk brick-and-mortar play. Some institutions are nervous (Analyst says Masters chain will lose: report, September 9, 2011).

Woolworths might argue that hardware is not going to be an active internet market but in straying into Harvey Norman territory Woolworths is very much in the internet sphere, where Ruslan Kogan is taking market share away from the majors (Ruslan Kogan – maverick or master?February 8).

Bartholomeusz says that later this month we'll find out in which camp Myer chief executive Bernie Brookes and David Jones' Paul Zahra belong.

I think that both Brookes and Zahra ‘get it' but are having difficulty coping with their legacy businesses, where they do not have the staff flexibility and supply chains to compete. The answer is clear – you must let the internet business have its own life. If you don't others will occupy the space. That's something media companies like Fairfax learned the hard way in the previous decade.

Gerry Harvey has been one of my heroes because he revolutionised appliance and furniture market retailing in Australia. But his model does not fit easily into the online world and Harvey Norman has an enormous investment in retail property which he is reluctant to jeopardise by making a full-frontal internet attack.

It not just retail chief executives that must master an internet strategy. Almost every company, including miners, must adapt its business. Transport companies must slash their costs with better management of their fleet of vehicles and banks must be on top of their game. Owners of shopping centres must embrace mobile phone technology to entice shoppers. The list never ends.

But shareholders must not simply just take the chief executives at their word. Coles was a clear leader in internet food supplies. But Coles directors should have checked the strategy by ordering food online themselves. Had they done so, and were treated as everyone else, they would have found that many items on the selection menu were not always available. You did not discover this until the delivery person arrived, so you could not rely on the service. The brand became damaged.

Maybe the supply chain gaps have now been fixed but if not they will need to be as Woolworths makes its push. And chief executives and directors need to watch public media for comments about their company (note the comments about Target after Bartholomeusz's commentary) – that's also part of ‘getting it'.

Also, you have to do more than just ‘get it' – you must execute.