" How I Saved $100 Million on the Web."

Jonathan W. Ayers, president of Carrier Corp., thinks that the Web is pretty cool -- and not just because, in his words, "All those boxes that power the Internet require cooling." Ayers heads up the world's largest manufacturer of air conditioners -- a global enterprise with nearly $10 billion in revenues, more than 40,000 employees, and customers all over the world. He also runs an extremely Web-savvy operation. Carrier buys more than 50% of its components and services through a Web-based procurement system, and $1 billion in revenue passed through the company's Web-enabled sales channels last year alone. What's even more impressive, Carrier used the Web to cut costs last year by an estimated $100 million.

That kind of performance puts Carrier in the vanguard of old-line industrial companies that have figured out how to achieve huge efficiencies through their deployment of Internet technology. This transformation has not happened overnight: Carrier has been shifting its operations to the Net for the past four years. But Ayers, 44, who took over as president in late 1999, has accelerated the company's e-business trajectory. His message: Start with customers, measure everything fanatically, and focus on key business results, such as revenue growth and market share, as well as on the operating metrics that drive those results. The payoff for Carrier, according to analysts, has been a surge in customer satisfaction and profitability -- and a two-year lead over its competitors.

Sure, making a big bet on Web technology requires a leap of faith among senior executives. But Ayers argues that big-company leaders will get the Internet religion if they can see large and quantifiable benefits once their Net initiatives swing into play. "For an industrial company that uses the Web, I don't think there's any end to the opportunities for savings, efficiency, and innovation," he says. In an interview, Ayers explained how his company got with the Web program.

So what's the secret to saving $100 million on the Web?

Many of us tend to get starry-eyed when we look at the Internet. At the same time, there's still a lot of fear and confusion surrounding the Net, particularly inside big companies. When you have 40,000 employees and almost $10 billion in revenues, you've got to get people focused on a coherent strategy. So we decided to focus initially on things that we could do to Web-enable our existing businesses. The really big benefits have come from channel integration and supply-chain management. The supply chain is especially important. A lot of people get distracted by trying to create completely new e-commerce initiatives. They forget that the big leverage comes with moving core processes, brands, and relationships online.

What's an example of using the Web to improve the basics of your business?

Here's one from Brazil. We went to our channel partners there -- our dealers, retailers, and installers -- and we said, "We're going to start handling all of our transactions with you over the Web." We started with 3 partners in 1997, and we expect to have 550 partners online by the end of 2000. This is having a direct impact on growth. Our revenue in Brazil will be about $280 million in 2000. It's growing by about 25% per year, and that growth rate is accelerating. But, just as important, more than 80% of that revenue now passes through our Web-enabled channel partners. The time required to get an order entered and confirmed by our channel partners has gone from six days to six minutes. Customer satisfaction is way up, with 77% of our customers saying that they are "satisfied" or "highly satisfied." And we're turning over our air-conditioner inventory 24 times a year, compared with about 17 times in 1998. That's a big jump in asset velocity, and it means that we're a lot more efficient now.

We're doing the same thing in Korea, where we started our Web initiative in 1999. A year later, 50% of our sales volume passes through our Web channel. The cycle time for an order there has gone from 33 days in 1998 to 18 days in 2000.

How do you persuade people to embrace that kind of change?

One of my key messages is that you have to measure everything. We learned that from Dell. When you're changing an organization, you have to measure both the drivers of change and the results that you want to achieve. In Brazil, for instance, we tracked (among other things) how many partners we were bringing online, the percentage of our revenues that were moving through our online channel, and how long it took us to complete an order. And sure enough, we saw higher revenue growth, faster asset velocity, and greater customer satisfaction -- all of which helps drive market share.

What else do you measure?