Timing Is Everything

Amid all the hair-raising financial statistics, cynical post mortems and breathless analyses of last month's announcement that the erstwhile online grocer Webvan would shut down, there was one headline and article that really caught my attention. "Traditional Grocers Feel Vindicated by Webvan's Failure: Critics of Online Delivery Services Are No Longer Dubbed Dinosaurs," read the headline in the Wall Street Journal. The accompanying article noted that executives of companies such as Kroger are "crowing" over the Webvan failure and apparent vindication of their "conservative" (that is, pretty much nonexistent) approaches to e-commerce.

Oh boy. That reaction could be the most significant development of all. Don't you just have a feeling that, a few months down the road, you're going to be seeing a headline in the Journal that reads something like, "Traditional Grocers Scramble To Compete with Next Generation of Online Competitors?"

The point is not that Webvan was a great idea or a well-conceived and executed business concept. Far from it—the venture burned through more than $800 million in just two years, while its stock plunged from an IPO-day high of $34 to less than $1. But the failure of Webvan is not necessarily a vindication of the status quo. Not only does it illustrate just how hard it is to be successful in the extremely competitive, low-margin grocery business; it also demonstrates how critical excellent performance, customer focus and efficient processes are to success. It can only be a matter of time before those players gloating, "I told you so" are facing new challenges from competitors that are able to learn the lessons of the Webvan debacle.

Of course there's a lesson here for insurers, too. In hindsight, insurance executives are looking pretty smart for not aggressively trying to sell insurance online, hedging their bets with a clicks-and-bricks model, focusing on the customer service and B2B aspects of the Web. We won't let anyone in on the secret that, in many cases, this was strategy by default, resulting more from caution and lack of internal support or resources, than from a researched and debated decision process.

And while much of the past couple of years' discussions about the future of the agent channel and the relative backwardness of insurance compared to banking and securities was misdirected, no one in this industry should now be feeling smug or superior to the competition, when it comes to e-business strategy. We don't truly know yet what a successful financial services e-business model is, but you can be sure someone is going to figure it out one day. The insurance business is at least as tough as the grocery business—and aggressive players are going to keep trying to reinvent it. Are you going to let someone else bring home the bacon?

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio