Model Management: In praise of dot-coms

Even if 2000 was the year many dot-coms were forced to sober up, they are still something of a phenomenon. In their latest column for silicon.com, the team at FTdynamo.com consider what the dot-com revolution has taught us so far.

This has been the year of the dot-coms, first powering stock markets worldwide and then leading them to collapse. It's tempting to dismiss the whole phenomenon as so much hot air, but the pioneer dot-coms have achieved a great deal in a very short space of time. Their impact should not be trivialised. The greatest contribution of the first wave of dot-coms has been to galvanise traditional companies into action. The dot-coms shook traditional business to its foundations. Disbelief rapidly gave way to something approaching terror. Complacency was shattered. The mood was perfectly captured by Jack Welch, General Electric's outgoing CEO. He launched GE's ebusiness initiative under the slogan "destroyyourbusiness.com" to remind managers that the internet calls into question every aspect of the way a company operates. The word revolution has been used so liberally that its meaning has become devalued, yet the reverberations in the world of commerce constitute nothing less than a revolution. Even if many fell at the barricades, the dot-coms led the charge. It should be remembered, too, that many of the companies that build internet infrastructure, such as Cisco Systems, Sun, Yahoo! and eBay, have flourished. Naturally, there have been some hiccups along the way. It's par for the course. In recent months, pure-play dot-coms have hit hard times or unravelled. They have been on a rollercoaster ride that has taken them (and their shares) to dizzying heights only to fall to earth. It was ever thus for those gathered up in the whirlwind of technological change. Caught up amid the hyperbole, it's hard to put the internet revolution into perspective. We know that the business world is changing, but is it a revolution to end all revolutions? In reality, what we are experiencing is just the latest in a string of technology-driven shifts. Far from being unique, there are remarkable parallels with earlier advances. The history of business is punctuated with technological breakthroughs that redefined the economics of commerce, triggering massive redistribution of wealth and employment. Although the most recent manifestation is the world of the internet and ecommerce, the internet isn't the most important phenomenon in the history of business. Money, the wheel, writing, electricity, mass production, the microchip all arguably had a bigger impact. Once you look back at the early days of the factory, the railroad, the automobile, and especially the harnessing of electricity, a lot of what seems new about the internet starts to look familiar. But what about the explosion of entrepreneurial activity ignited by the web? The advent of almost every new technology during the past 150 years has spawned a free-for-all for entrepreneurs. There were, for example, 150 companies making automobiles between 1910 and 1920. Wild investor enthusiasm is another common feature. Internet stocks may be up today and down tomorrow, but the phenomenon is nothing new. Investors have repeatedly gone gaga over the next big thing - from canals to railroads. Thomas Edison invented the light bulb in 1879. Three years later, electricity stocks were selling like crazy, with 16 new electrical companies floated in a single two week period in June 1882. What can be said, however, is that the internet is one of the most significant technological breakthroughs of our time. Truly astonishing however, are the rate of growth of the internet; the redistribution of wealth it has already caused; and the outrageous claims made on its behalf. Beyond the hype - and counter-hype - of recent months something significant is occurring. Interconnectivity, once we get to grips with it, has the potential to create huge productivity gains. The plain fact is that today more than 300 million people as far afield as Bangalore, India, Palo Alto, California, and Beijing, China, start their day by logging on, collecting their email, and surfing the web. They are being joined each day by tens of thousands more. We may indeed see a new economy, but we are only at its threshold.