Harvard Business Review, May-June, 2000
Get the Right Mix of Bricks and Clicks
If you think you need to keep your Internet initiatives separate from your traditional business,
think again. Many of the most innovative Internet players are integrating their virtual and
physical operations. The key to success, they've found, lies in how you carry out the integration.
by Ranjay Gulati and Jason Garino
Ranjay Gulati is an associate professor and a member of the Technology and E-Commerce
Group at Northwestern University’s J.L. Kellogg School of Management in Evanston, Illinois. A
student at Northwestern, Jason Garino will join the Chicago office of Boston Consulting Group
The bright line that once distinguished the dot-com from the incumbent is rapidly fading.
Companies are recognizing that success in the new economy will go to those who can execute
clicks-and-mortar strategies that bridge the physical and the virtual worlds.
But in forging such strategies, executives face a decision that is as difficult as it is crucial:
Should we integrate our Internet business with our traditional business, or should we keep the
two separate? Despite the obvious benefits that integration offers— cross-promotion, shared
information, purchasing leverage, distribution economies, and the like— many executives now
assume that Internet businesses need to be separate to thrive. Influenced by the cautionary tales
of Clayton Christensen, author of The Innovator's Dilemma, they believe that the very nature of a
traditional business— its protectiveness of current customers, its fear of cannibalization, its
general myopia— will smother any Internet initiative.
Barnes & Noble is one company that had embraced such thinking. To compete with
Amazon.com, it established a completely separate division— Barnesandnoble.com— which it
ultimately spun off as a stand-alone company. By breaking free of the existing organization, the
on-line outfit gained many advantages....