 |
2001 Wrap-up:"e" Disappears Via Bubble Hangover, Overshadowed by Exogenous Shock
The Disappearance of eThroughout my e-business strategy engagements with Fortune-500 clients in 1999 and 2000, a central theme was that the more efficient "e-business" digital processes would displace analog processes, and once digital business models attained a critical level of adoption by "bricks and mortar" (BAM) companies, the "e" would cease to be relevant because it would become the de facto standard. In 2001, this clearly happened in most leading companies. Digital models are understood, at least at a high level, and the biggest question is, "How much, how fast, can we do?" and (the ringer) "How can we justify our investments?"However, even though the general value proposition of e gained widespread traction, by no means have organizations even approached realizing the promise of e-business. Predictably, the lion's share of current e-business efforts is focused on efficiency and cost-cutting, a trend that will persist through next year. The bottom line is that there will continue to be considerable opportunity for those who can show BAMs logical ways to move beyond their current cost saving focus. The Continuing Impact of the BubbleA bubble by definition hurts virtually all participants in the sector, even those doing "virtuous" work with the technology or innovation involved. In the current case, reactive conservatism grips the high tech market, driven by the determination to recoup losses from over-investment in technology during 1996-2000. The willingness to invest in anything that doesn't show a return within one quarter of implementation has evaporated, which has hit startups particularly hard since they, by definition, are less mature and represent untried solutions. Compounding this problem, BAMs are no longer threatened by the specter of startups eating their lunch and feel little pressure to invest in innovation. E-Business-enabling service providers, from law firms and consultants to VCs, have been hit extremely hard because they are people businesses that were staffed for expansion, and layoffs have been widespread and deep.In a positive development, the frenetic leading edge work that the bubble blew out of proportion enabled many people to begin to understand many key e-business value propositions, and the collective knowledge base is significant. These value propositions have not been forgotten, and many of us are actively looking for or are developing opportunities to capitalize on them. It's a question of when in most cases--and how. A Classic Exogenous Shock: the 9/11 FactorAs the fall dawned, most people in the sector thought they had the bubble aftermath figured out, and cautious optimism reigned--until 9/11. Looking at the high tech economy as a system that has been trying to find a new equilibrium this year, 9/11 acted as a meteorite that injected chaos into the situation. Not only that, it has arguably introduced lasting change into the high tech economy. In attempting to assess the ongoing terrorist threat to the U.S. mainland, I see two extremes between which reality undoubtedly lurks: 1) al Qaeda succeeded beyond its wildest dreams on 9/11, relying on surprise, complacency, luck and minimal interference, and repeating a scenario of similar scale is beyond its abilities or 2) al Qaeda is an organization that has been quietly developing its capabilities for years, and 9/11 scale events will continue to be an immediate threat.I don't think that anyone knows the answer for certain, so, all else equal, we hope for the former and plan for the latter. 9/11's impact on the high tech economy is still an open question. Currently, perceived success in Afghanistan has allayed the immediate feeling of helplessness and anger somewhat, so the fear and demoralizing aspect of 9/11 has been countered for the time being. Significant funding has materialized for technology that provides security, although the longevity of this investment is unknown. If another major event materializes, which would tip the balance to the second scenario above, that could act to bump us closer to a full-fledged war economy, with persistent high levels of investment in technology related to all flavors of security. Where does this leave us?As I have written elsewhere, BAMs represent the customers for most B2B tech high companies, so closely monitoring their e-business transformation initiatives will remain key to understanding the demand for innovative technology. The good news: current cost-cutting e-business initiatives will run out of room for creating economic value as did reengineering and rightsizing, and substantial exploration and investment will have to be made. Technology is a slippery slope which e-business will bear out again: the increasing level of abstraction in technology leads to enhanced interoperability while the flow of knowledge and people will make it easier for competitors to neutralize cost-cutting gains. Cost-cutting will serve to bump bottom lines in the short term but won't hold sustainable competitive advantages long-term. These will only be tapped by inventing new ways to do things, or (dare I say! ;-) discontinuous change.Therefore, today's scarcity of investment is only creating pent up demand for cutting edge models and technologies. Because BAMs will never innovate as well as entrepreneurs, the potential for collaboration with early stage technology companies and entrepreneurs will remain high. The KnockNow Foundation, which I helped to form this year, is dedicated to strengthening the high tech economy one relationship at a time by facilitating BAM-entrepreneur collaboration, and I'm very bullish on this area as a key element of creating economic value for the foreseeable future. Net NetNo one said that "coming of age" was easy, and 2001 certainly bore that out, in spades! At the (significant ;-) risk of stating the obvious, I don't know anyone that's connected with the high tech economy that isn't feeling a severe pinch this year; we're all party to a throbbing post-bash hangover, and there's no aspirin in sight, we're toughing this one out. Seen from within, the tech economy looks to me like a caldron that's boiling and reducing its liquid to an intense, potent brew. Most of the "opportunist" entrepreneurs and investors have evaporated and those who remain are being mulled in some ungracious circumstances. As in all downturns, I fully expect several world-class companies to take wing.Yes, adversity does cull the pool, but at its best, it can lead us to build durable relationships due to the collective experience of the extreme highs and lows that most of us have felt. Since leaving PwC in the spring, I've had the good fortune to give my suitcases a much deserved break, and I've been privileged to connect with some hard-bitten entrepreneurs, service providers, investors and corporate executives whose determination to overcome this adversity never ceases to amaze and inspire me. Anyone who has been in high tech for a while has enjoyed its fruits during the last several years, and now it's up to each of us to nurture it, individually and collectively, during this difficult passage. That means taking responsibility for building it back, one deal at a time, whether that's helping someone to get another job, connecting an entrepreneur with a customer or investor, or introducing a service provider to a new client. We will all benefit from the strength of the community, and investing in it is a very worthwhile end in itself. This year, adversity has been a gauntlet that has lain before us. It has challenged each of us to pick it up, to see whether we were really up to taking the risk necessary to create lasting value from these new business models and technologies. As the new year dawns, it confronts each of us with who we are, giving us the chance to exercise our will, to bounce back and to not take no for an answer. It reminds me that courage can only exist when the outcome of action is unknown. Wishing you strength, stamina and a little reprieve from character building in 2002! Do you have an appetite for more strategy and predictions?
|
