How to Build a Great Website
from
March/April 2002
by Rob Norton
Kenosha, Wisconsin, is about as far
as you can get from both Silicon Valley and Silicon Alley without
leaving the lower 48—but it also happens to be home to smokestack
America’s technology champ. For three years running, Snap-on Inc. has
placed first among manufacturers in the
InformationWeek
500 survey,
which ranks U.S. companies according to their levels of technological,
procedural, and organizational innovation. Snap-on, a midsize ($2.2
billion in revenues) toolmaker headquartered in a modest Kenosha office
block just off Interstate 94, has also done well in an all-encompassing
survey category that includes not only manufacturers but the cream of
technology companies too. Last year it came in at No. 4, ahead of
info-age stalwarts Cisco Systems (No. 37) and Intel (53), way ahead of
some multinational giants with thousands of infotech workers, such as
General Electric (68), and way, way ahead of fancy consulting outfits
like KPMG (222) and Booz Allen Hamilton (248).
You don’t need to visit Kenosha for proof of Snap-on’s technological expertise. All you need to do is type “snapon.com” into a Web browser and tour the company’s website. It’s one of the most sophisticated and user-friendly e-commerce sites this side of Amazon.com. And Snap-on.com makes money.
Online, you can browse through the company’s catalog of more than 14,000 tools, storage units, pieces of shop equipment, and the like. You can purchase anything from a pocket screwdriver ($5.25, plus $8.95 for shipping and handling) to Snap-on’s Complete U.S. Set 6, a chrome-plated cornucopia of more than 1,000 jewel-like hand tools housed in a gleaming refrigerator-size rollaway cabinet ($28,357.85, plus $262 for delivery).
Impressive as the website is, it represents only the tip of the Internet technology Snap-on has built into its business. There are companion websites in Canada, Britain, and, any minute now, Australia; “extranets” for dealers, suppliers, and distributors; and online connections to 40 purchasing exchanges that allow industrial customers to shop and buy electronically. Everything is backed up by an online distribution system that ships and tracks thousands of orders per day.
At first glance, Snap-on seems an unlikely wearer of the crown of infotech leader. Its primary pursuit—the manufacture of steel hand tools for automobile mechanics—is the archetypal mature, old-economy business. But throughout its history, Snap-on has shown a knack for recognizing major innovations, figuring out their implications, and making the most of them. The company was formed in 1920 to exploit a simple but profound invention: Founder Joseph Johnson had come up with the idea of the now-ubiquitous socket wrench (a wrench with interchangeable sockets that snap on to a handle). To sell its tools to the rapidly growing auto-repair business, the company invented the “dealer van” distribution channel. Even today most Snap-on tools are sold directly to mechanics through a network of more than 5,500 franchised Snap-on dealers, each outfitted with a customized van full of tools that serves as a mobile store.
Largely on the strength of those two innovations, Snap-on has built one of the finest brands in American business, with a reputation for manufacturing excellence and amazing customer loyalty. Snap-on tools cost up to three times as much as the competition’s, but they are the overwhelming choice of professional auto mechanics, who often have half a year’s wages tied up in their Snap-on equipment. Look at the repair bays of auto dealers, the interiors of airplane hangars, or the pit walls of NASCAR racing teams and you’ll usually see a preponderance of Snap-on toolboxes. Competing brands such as Mac Tools (owned by Stanley Works) have tried to replicate Snap-on’s sales channel by sending out dealer vans of their own, with limited success. Market-share numbers are hard to get, but when you measure by the number of dealer vans in service, Snap-on is estimated to have 60% of the market for professional auto tools, versus 13% held by Stanley, its nearest competitor.
Snap-on hit $100 million in sales in 1972, listed its stock on the New York Stock Exchange in 1978, made it onto the Fortune 500 list in 1982, and passed the $1 billion sales mark in 1993. Since the advent of computerized diagnostics in auto repair, the company has moved aggressively into that field too, both by expanding its own business and by making key acquisitions. It has also expanded globally, buying leading tool outfits in several overseas markets; about 37% of its sales come from outside the U.S. The company unveiled the Snapon.com website in 2000.
Last year’s recession was preceded by a severe slowdown in the manufacturing sector, which hammered Snap-on as well as other manufacturers. The company’s bottom line has been further squeezed by nonrecurring charges, among them downsizing and the sale of an underperforming subsidiary. Net earnings for the first nine months of 2001 were $36.4 million, 73% below the same period in 2000, on sales of $1.6 billion, down 0.77%.
Wall Street is mostly neutral toward Snap-on, Black & Decker, Pentair, and other tool manufacturers. A December review of five such companies by Multex.com, an investor-information service, found that security analysts had issued 43 recommendations on them. Only 14 were “buys,” and Snap-on had collected three of those. Some stock-pickers, however, are downright Snap-on bulls. The Milwaukee brokerage Robert W. Baird & Co. has given the company a “strong buy” rating since October, and Thestreet.com, an investment-advice website, predicted in November that shares of Snap-on would outperform the market in 2002. As it is, Snap-on’s share price, down to $21.15 last September, had made a substantial recovery by the middle of December, to the mid-$30’s.
Wall Street doesn’t seem to have looked closely at Snap-on’s online persona, but it may catch up before long. The company’s successful website strategy should add to its bottom line in the future by both enhancing operating efficiency and increasing sales.
How did an old-line toolmaker in Kenosha, Wisconsin, succeed in implementing an e-commerce strategy when so many of the most aggressive and sophisticated U.S. companies, from Ford to Wal-Mart, have had such a hard time? The key was Snap-on’s decision to take a practical, bottom-up approach to the Web—first in identifying what it wanted to get out of e-commerce and then in devising a site-development strategy that drew on the company’s own resources. Just as important was Snap-on’s determination to ignore the trendy, hype-ridden Web approaches that got so much attention in corporate America. “From the start,” says CEO Dale Elliott, “we were interested in what the Web could do for us, but we never fell in love with it.”
Snap-on had made some early moves into e-commerce, including the creation of a sales system that connected dealers to the company and allowed them to submit electronic orders. But when chief information officer Alan Biland joined Snap-on in April 1998, the Internet strategy was still in its early stages. Like many other companies, Snap-on had paid a Web developer to create a website for it, but (also like many other companies) it had gotten what infotech types call a “brochureware” site. That first attempt did little besides display some boilerplate information and was incapable of handling transactions. “The site was extremely expensive and very hard to make changes to,” recalls Biland, who also heads the diagnostics group. “We decided early on that we wanted to get involved internally in website development.”
Biland brainstormed with other Snap-on executives and decided to form a Web council that would include managers from all of the corporation’s key business units. In addition to inviting “the usual suspects,” as he puts it—himself and the heads of marketing, sales, and the company’s line businesses—he e-mailed a larger group of Snap-on executives and, in his words, asked them to “self-select” themselves onto the team if they wanted to: “We said, ‘We’re doing this, and here are the people we’ve invited, but if you think you should be on the team, just show up.’ That created an environment where people who hadn’t been asked their opinion before had a chance to participate. That was good, because we got people who tend to be type A personalities, movers and shakers who want to make a difference.”
Snap-on’s board of directors was closely involved in the early planning. It decided, for instance, that Biland should report directly to the CEO. The board’s biggest concern was that the Internet strategy recognize that the core of the company was the dealer network, and whatever was done on the Web should be integrated into it. “As a result,” says Biland, “the key decision we made—which in retrospect was a very smart decision—was that this was not a new channel, but a tool we could use to make our existing businesses more productive. You saw Wal-Mart and Kmart spin off Walmart.com and BlueLight.com as separate companies. They felt that the Internet culture was so different that they needed to separate it from the main company. At Snap-on, we took just the opposite approach. We wanted to integrate the site into the company. If there was going to be conflict, we wanted it to happen right away so that it could be dealt with within the business units, not off in a vacuum somewhere.”
Biland picked managers from Snap-on’s line units for key roles in the development effort, and in the summer of 1998 they began putting together a Web strategy. “It was classic IT management,” Biland says. “You don’t start with an implementation; you start with a strategy, and from strategy comes structure and then tactics.” The team began by listing all the different constituencies, inside and outside the company, that might be interested in looking at Snapon.com—customers, dealers, distributors, employees, investors, suppliers, and others—and then identifying all the things they might like to do on the website. The result was a list of hundreds of items and activities, which were boiled down into a five-step strategy.
While the Web council strategized, Biland decided that most of Snap-on’s Web development work should be done in-house. The company already had a small tech outfit in San Jose, California, the heart of Silicon Valley, but “I went out there and found that nobody there was doing a lot of useful work,” he says. Once he’d set some goals for the techies, most of them left, and Biland hired a new team with a strong background in both auto repair and Web technology. The group, renamed the Internet Commerce Center, started off with an $800,000 budget and, says Biland, has funded itself with revenues from the website ever since. Today it has a permanent staff of 15. “We haven’t destroyed the balance sheet or screwed up the income statement to pull these efforts off,” Biland says. “You won’t see Snap-on taking any special charges for Internet applications.”
Locating the development work in Silicon Valley gave the company a huge advantage over outfits that try to do such work elsewhere, he adds. “You have access to really good people in terms of Web development, who can bring to bear a lot of up-to-date skills.” It was the late 1990s, the height of the dot-com boom, and at first finding people to work for an old-line company like Snap-on was difficult. “People didn’t want a salary,” says Biland. “All they wanted was stock options. But that’s all changed in the last year. Now we’re finding that people are pretty happy to have a paycheck every two weeks, and to be working for a company that generates profits and has a history and a customer base.”
In late 1998 the Web strategy was far enough along so that Biland could run it past the senior executive group and also, crucially, show it to Snap-on’s dealer advisory council. He got a lot of good feedback, and also met with a fair amount of skepticism. The dealers knew they needed to be involved in the Internet, but back then much of the talk about e-commerce was about disintermediation, or cutting out the middleman, which, of course, is what a dealer is. “They worried that direct online sales of Snap-on tools would take them out of the business,” Biland says. As a result of this feedback, the Web council came up with a plan for online sales built around the dealer. People who buy tools on the website are asked if they already have a relationship with one of the company’s dealers. If they do, the standard commission is credited to the dealer at the time of each sale. If new customers don’t have a dealer, Snap-on monitors their buying. Once they’ve made three purchases or spent more than $2,000 online, the company contacts them and asks if they’d like to be hooked up to a local dealer. If so, the dealer collects commissions on all future purchases, whether made on the Web or in person.
By the third meeting with the dealers, says Biland, “we showed them that we had not only modified the strategy based on their feedback, but that we’d done a lot of development and also some live testing.” The testing showed that Web visitors who already had regular dealers would buy online as well, and that new Web customers would indeed sign up with Snap-on dealers. Biland was able to pass around lists of dealers who had already collected commissions on purchases their regular customers had made online. “I got a standing ovation,” he says.
The Web council, originally conceived as just a means of getting the site up and running, has become a permanent watchdog over how Snap-on does business on the Web. “It enables us to keep abreast of things, assess how well we’re doing, and chart a course for the next few years,” says Biland. The council, which includes about 30 managers, meets once a year. Over the course of three days, its members look at how the online business has been going, suggest changes, and then vote on which suggestions should be priorities.
Further expansions are planned for 2002, including a Japanese-language website and individual home pages for Snap-on’s 5,700 dealers. The company also intends to offer a continually updated online version of its diagnostic and repair information. Biland envisions a day, not far away, when an automobile technician will be able to sit down at his computer and access all the repair information for a particular make and model of car, a history and description of any problems, updates and advisories from the manufacturer, and advice on the best tools to use. And, of course, he’ll be able to order those tools for overnight delivery.
One lesson from Snap-on’s experience is that despite the dot-com bust, the online revolution is alive and well. Another lesson: Much of the action is happening at companies like Snap-on in places like Kenosha, Wisconsin.
