Coming of Age
Actually, they are. We might lose the right side rear tire--body work is certainly in order--and we'll have to replace the driver's side window. But we've been here before. Icarus-inspired exuberance tempered by a tumble has always provided lessons that, although unwelcome at first, have led us to realizations and subsequent substantial gains. The Economist put it succinctly in September: bubbles have accompanied the last several technology advances. Their sanguine explanation of the railway and electricity bubbles was on point.
Looking at it another way closer to home, we can observe the difference between formulating a strategy and realizing the economic value from its implementation. Consultants, as educated outsiders, see truths and guide their clients in applying poignant strategies. If the consultant is worth his salt, he will take into account the complications of implementing the strategy, and he will help to build expectations regarding the economic value it will produce. When the strategy involves profound change--in the case of "the Internet," we're talking about nothing less than constructing a pervasive electronic representation of global economic communication and work processes as a preamble to reorganizing everything--that economic value is often some way off because many things must happen in tandem in order for the economic value to be understood and realized.
We know that making advanced technology hyperavailable will produce incredible value, its hyperavailability being the Internet. On one level, how that happens is irrelevant because we know it will happen. But sustained economic performance, being largely grounded concrete facts, insists on the answer.
As I have written elsewhere, one of the dialectics at work is the selective destruction of the integrated industrial enterprise. In search of scale, we have spent the last ~150 years creating vast organizations which, we came to see, stifled initiative and creativity even while they delivered economies of scale. The Internet, in giving a voice to the individual (anyone can publish to millions via her own website), was seen by many as a liberation from "the machine," "the organization," or "the bureaucracy." Dancing on the graves of the stodgy corporations who didn't "get it" was in order. I still get a kick out of ordering books twenty-four hours a day, and following them along "my" supply chain. On-line banking has my current bank and credit card vendors starving for service fees, tax forms are downloaded real-time, heaviest groceries are delivered and postage stamps purchased, albeit reluctantly, once a year. It was obvious that this was it. Move over, BAMs.
But something happened on the way to the B2B forum by way of the B2C tent, which I first observed in May. At Ground Zero 3, the heated discussion was around gaining "liquidity" for all the newly minted B2B "netmarkets." Using technology savvy, venture backing and industry knowledge, the netmarkets had put together "better ways to B2B," but belatedly found that B2B customers were unbelievably sticky in their established business relationships with their customers and suppliers. Being a technology aficionado myself, I marveled at the inability of superior strategy, process and technology to win over B2B customers on a widespread basis. Consumers are notoriously fickle--unsticky, in web parlance--and their resistance to change is far less than businesses'. Individuals can experiment and see that doing things the new way is better. However, when one is dragging along a global supply chain, things are a little more complex. As Geoff Moore and colleagues never tire of saying, there is a chasm between the early adopters and the early majority, and here we are.
So, we're in the ditch and our wheels are still on, so where from here? Raw innovation and superior technology were not enough to win the day in B2B, and B2B is where all the analysts put the lion's share of the economic value of the Internet. Moreover, global enterprises did not go away in the face of venture-backed entrepreneurs, although there were more white knuckles in BAM boardrooms a year ago than will ever be admitted. Technology will win the day and change the world, but the world (BAMs) will have a big say on how this is done ;-) because they are the ultimate B2B customer with strong buying power. We can (and should) generalize the netmarkets' lesson: the BAMs don't need for the world to change quickly, venture-backed entrepreneurs do, and the latter suffer more in the face of delayed adoption, which serves BAMs just fine. Possession is ninth tenths of the law, and BAMs possess the supply chains and customers.
That said, castle walls eventually fell at the hands of gunpowder and, likewise, select destruction and mass reorganization of global enterprises will happen in favor of global value networks. That's the "what." To be answered are the exact "how" and rate of the transformation. And, let's not forget the all-important "who" (will be on first when all that happens ;-).
I predict that 2001 will be the year of the beginning of serious economic gains from the Internet. Further, although BAMs will certainly not lead the charge (they're risk averse), they will have a major influence during the implementation phase onto which we are now embarking. Entrepreneurs will have to run their businesses like, well, businesses. Those who understand the big picture and build for the journey will do extremely well. Having spent 1998 and 1999 helping BAMs to formulate e-business strategy and 2000 advising startups on their business strategy, I am already seeing interesting synthetic combinations, which will come into full flower in 2001. BAMs will vigorously pursue spinouts and various e-business activities such as involvement in e-markets. This activity will be a far cry from the frenetic initial wave of BAM spinouts that ended in disaster for many. They will be more purposeful, and more will succeed. On the other hand, many startups will seek to temper their "Internet" business assumptions with traditional business strategies and metrics, and they will have a great thirst for domain knowledge and BAM savvy. Alliances between BAMs and entrepreneurs will be a big thing. For more predictions, read 2001 Vision and Predictions (on this site, forthcoming in January).
As 2000 ends, we have seen the e-transformation vision for what it was: an idea, a working prototype. The inevitable tumble in the markets represents the realization that the vision itself was not a solution from which sustainable economic value flowed. That remains to be done.
Now we can dust off our hands, get back in the car, head to the garage and get ready for· what? Did somebody say, "More motoring?"
you plenty of petrol, sufficient spares and a damned good navigator!