It’s Never Too Late to Reinvent Yourself as an E-Business Company

Many companies that resisted changing their models to reflect an Internet-based strategy are now finding themselves in a quandary: playing catch-up if they are lucky, or struggling for their very survival.

But there are times when waiting turns out to be the right choice. Reynolds & Reynolds Co., a 140-year-old company with a sizable printing and document management business, is reinventing itself as an e-business provider for the automotive industry. Late to the Internet game? Yes. But luckily, the auto industry was even further behind, making Reynolds & Reynolds' Internet entry time workable. Whether or not you're behind the curve in forming an e-business strategy depends in part on the vertical you've chosen to serve.

Betting its business on the Internet is a gutsy move for the Dayton, Ohio, company, which reported revenue of $1.56 billion for the fiscal year ended Sept. 30. It's selling off its document management business, which constitutes more than half of the company's size in terms of people and revenue. Now, the company plans to focus on information management, e-CRM and Internet solutions for the automotive industry.

When the company recognized the value of e-business in early 1999, knowing it was late to market, it did a smart thing: It hired people who already knew the Internet. Chairman David Holmes reconstituted the board of directors with technology-savvy executives from American Express, TRW and Lucent Technologies. Then he chose the No. 2 executive to lead the turnaround, president and COO Lloyd "Buzz" Waterhouse.

Waterhouse, a 26-year veteran of IBM, was in charge of the Academic Information Systems business unit there. That may not sound sexy, but that unit worked with universities to develop some of the most important technologies on the Internet today, including NSFNet, the original Internet backbone, the Mosaic Web browser and the Mach kernel used in a number of operating systems.

Reynolds & Reynolds chose the automotive market as its target customer base because it's geographically close to that industry, has dealt with it before and because automotive has so much room to grow. "It's where the money is," Waterhouse says, noting that there are a number of efficiencies the automotive industry can gain in an electronic marketplace. "We saw a hodgepodge of what we call the value network, with 14 types of players, including parts, repairs, dealers, insurance, DMV and so forth, representing over 1 million businesses," Waterhouse explains.

Investigating the market thoroughly, Reynolds & Reynolds identified more than $40 billion in inefficiencies in the automotive market as a whole. "All of these companies have grown up developing these standalone, siloed systems, and all we're trying to do is use the Internet to bring these silos together."

Waterhouse says he believes the next wave of Internet success stories and of technology in general will be used to e-enable the brick and mortar smokestack industries.

For much larger industries, with billions of dollars in supply-chain management issues on the table, the potential upside is greatest, Waterhouse says. And he may be right. In mid-May, General Motors Corp. and Reynolds & Reynolds announced a strategic alliance to integrate retailing systems for all of GM's 8,000 North American dealers. GM and Reynolds & Reynolds will develop and provide Web-based retail information technology and services that will integrate GM's information systems with the dealer's systems. In return, GM bought a 10 percent stake in Reynolds & Reynolds for an undisclosed sum.

The strategy works because GM, and many other companies in the automotive industry, have been slow to get online, in part because of Year 2000 concerns draining IT dollars. "GM and Ford didn't have an e-business coordinator until last year," Waterhouse says. "Dealers have used the traditional model for the longest time with EDI or satellite broadcast systems. But I think if Reynolds & Reynolds had invested heavily in e-business five years ago, we would have lost our shirts."