Many corporate chief executive officers (CEOs) are like "deer caught in the headlights" of the onrushing Internet juggernaut, according to Ray Lane, president and chief operating officer of Oracle Corp.
Giving the keynote address at the Oracle Open World conference here today, Lane said that the Internet would cause businesses to face more changes in the next five years than in the past 50 years.
Existing brand leaders in many industries would need to shed a lot of their existing infrastructure in order to face the challenges of the Internet age, Lane said.
Lane said that many CEOs see their businesses being "amazoned" -- a word he coined to describe new agile Internet-based businesses like online bookseller Amazon.com Inc. -- taking on and beating established companies by a better understanding of new market dynamics.
"It's scary for CEOs -- they know that the Internet is important to their businesses," Lane said. "They now have to figure out how to change their company infrastructure to fit the new set of economic models which electronic commerce is bringing about."
Businesses need to use Internet technologies to cut the costs of business processes by 80 percent, gather business intelligence to manage the supply chain, and must realize that the customer is now king, and not necessarily a loyal friend, Lane said.
"The Internet is causing breakaway economics and changing economic models dramatically," he said. "If you don't use the Internet to cut your costs of processing an order from US$100 to $20, you can be sure someone else will. Eighty percent cost reductions are what Internet business is all about."
Companies can become "nothing but 'Net," Lane said, outsourcing functions such as manufacturing, distribution and marketing to become virtual companies managing information rather than physical assets. And they will be able to sell goods for lower than cost price, relying on Internet advertising to generate extra revenue, he said.
These fundamentally new ways of doing business will be hard for the current generation of mid-level managers to adapt to, Lane said.
"There is going to be conflict between the 40 year old-plus managers who have been trained to run old-style businesses, and the 25 year olds of the digital age to whom the Internet is second nature," he said. "The relationship between people in companies has to change from command and control to a partnership-based approach."