Why chief executives can't afford not to spend more on the web

Before company leaders push back the next request for investment in the corporate website they should consider the five ways they could lose out to competitors by keeping the chequebook closed. An open memo explains.

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Dear Chief Executive

I would like to draw your attention to an investment that is quite likely the biggest element in your communications budget. Whose Return on Investment you cannot measure. And whose benefits are as hard to nail as jelly is to a board. I would then like to explain why you should be spending more on it. It is your corporate website.

First, how much do you know about the web? You may be one of those lucky few still insulated from the vulgarity of a computer by your PA, but I bet you have a child or grandchild nagging you to learn. More likely, you use the web somewhere between a bit and a lot. But I guarantee you do not know exactly why your company has a website.

Why a website

Actually, that’s not quite true. It is easy to say why companies have websites. It is because they grew up like weeds, built by enthusiasts for fun. The better question is what purpose the site serves, and why you are being asked to authorise another large cheque to keep it going and growing.

The answer to this is to see what would happen if you didn’t sign that cheque, and the site disappeared. Not a lot, at least in the short run. Unless your company actually sells things online – and not many do – your revenue would not suffer, and your costs would fall.

Of course the same would be true if you stopped spending on advertising or public relations. You wouldn’t do that, because after a while you would start to lose out to your competitors. The same is true of the web, but in a much subtler way. The benefits the web brings are so diffuse that it is extraordinarily difficult to put any sort of numbers on them.

Five kinds of loss

But here are the effects I predict. First you (or rather your company) would see the flow of phone, fax or e-mail enquiries from customers reduce sharply. They use your site, via Google, to find out your details – the most valuable role of any website is as a simple contact point. One industrial group I know monitored e-mails coming through its ‘Contact Us’ web link, and reckoned they were worth $3m a month – mostly in repeat orders.

Second, you would start getting worrying feedback from Human Resources that the staff were wondering what was going on. About one in 10 visitors to your site are likely to be employees – strange, given that none of the information is aimed at them. But they want to know what is going on in the company, too.

Third, your investor relations team would get irate phone calls from analysts looking for an elusive figure from the 1999 annual report. They had got used to finding historical data on company sites, because their proprietary screen systems did not carry them. And you don’t want to upset analysts, do you?

Fourth, your press office would have an upsurge in irritating fact-checking calls from journalists wanting to confirm how the president of your Polish operation spells his name, or whether you still own that company in Indonesia.

Depending on the time of year, you may then get calls from careers officers in colleges, wondering if your company still exists and demanding extra copies of brochures for students. In due course, you would find the quality of recruits was falling, because young (and indeed older) people had come to rely on the web to get a feeling for a potential employer.

Why more investment

In other words, it would all be rather disastrous. But it does not explain why you should actually be increasing investment in your website. This, perversely, is largely to do with cost saving. I said earlier that most websites grew up by mistake. As a result most large organisations now have sprawling web presences that are grossly inefficient. Dozens or even hundreds of sites will be run off dozens or even hundreds of servers – the computers websites like to call home – each racking up unnecessary ‘hosting’ costs.

Many large organisations are now looking at these costs, and thinking how much more sensible it would be to bring the sites together. Extra benefits would then tumble forth. Further cost savings from sharing words, pictures and gizmos such as interactive tools, rather than creating them from scratch over and again. Greatly increased quality for the same reason. And strange connections you had never thought of: a supplier’s daughter realises she is ideal for a job at head office; a customer in Peru looks at your investor section and decides to have a punt on you; and so on. They used to talk about ‘joined-up government’. This is ‘joined-up company’.

But of course this is going to cost money in the short term. So when your corporate affairs director, or whoever, comes and asks you to approve a project with no apparent ROI, please don’t laugh in her face. Ask your fellow CEOs instead; I bet they are getting similar requests. And if they are not, they should be.

First published on ft.com 12.5.2005

First published on 18 May, 2005