When I was asked to write a retrospective on the effect of the dot.com crash, I experienced a certain clash of mental gears. My first response was actually to dig through some historical financial data to check my memory.
So yes, there was localised massive over-expectation by investors, especially in retail business-to-consumer (B2C) businesses – the so-called ‘dot.coms’ – and their supply base. Technology companies generally were over-valued, yet had to service investor expectation. The bursting of the bubble led to a long period of Darwinist culling. Yet sometimes it validated the very business principles it called into public disrepute: grow market share; first mover advantage; hire the plan; get eyeballs and worry about revenue later.
For a few, it worked. In fact, it worked so well we’ve seen it used many times since. Today, online services build it into their evolution – the ‘freemium’ model used in online gaming and in the growth of social networks and worlds. For others, it was a true test of their business model and whether networked ICT technologies could transform business for long-term advantage.
An abiding memory for me as an industry sponsorship public official was a call from another department wanting to plan a press release to help prevent the ‘meltdown of the ICT sector’. My reply was that ICT wasn’t going anywhere, we would all be using a lot more in days to come and that a press release probably wouldn’t help an unavoidable market correction.
Anyone using IT less today than 2001? Me neither.
So what trends do we see today that appear to have their roots in the dot.com boom and bust?
- The attitude to entrepreneurship, business angels, venture capital and IPO underwent a massive change that has lasted and spread across many sectors – from dot.coms to biotech, ‘green’ and beyond. As a country, from my perspective, we seemed to go easily from the ‘Tell Sid’ privatisations of state utilities in the 1980s and 1990s to an immense entrepreneurial culture that is clearly still very much with us today;
- A corollary of this: ignore new entrants into your market at your peril. Even where they may not have had such astounding growth or longevity. some have changed pricing and business models across the sectors they have entered;
- Attitudes to risk certainly did change as a result, but in some possibly different ways than would be expected: open innovation, partnering, reducing time to market, willingness to cannibalise existing revenue streams, hot housing product teams and skunkworks (small groups who work on a project in an unconventional way with the aim of very rapid development);
- The get started, go global models that used to be the preserve of massive leveraged finance are now widespread. Now its easy and cheap for online services – which in turn make it possible for all companies to remove overheads, create valuable local specialisations and evolve beyond the central-versus-local management conundrum. The traditional model - start local, go national, clone yourself overseas - now seems slow and inflexible compared to global, integrated organisations
- ICT itself has completed an evolution – from a standalone activity or sector to something that’s a board-level competitive issue for many.
The move to online commerce now seems a foregone conclusion, to the benefit of both previously established players and new entrants into the market. The pure online play versus clicks-and-bricks debate seems simplistic – both won. Our companies, and more and more of us as individuals, are a part of the dot.com revolution. What was hype in 2000 now seems commonplace – it just took a few years longer than expected to be realised.
We now move into public debates about the necessity of universal service and the ability to give everything an online presence – I’ve recently seen news coverage of twittering buses, ferries and fresh-baked pastries.
How will we look back to today’s work in today’s economic situation on adding intelligence and leveraging the instrumented, connected world? What will change now we can know how much electricity we are using, our carbon emissions, whether the bus is just around the corner and whether the pains au chocolat are fresh at the canteen? Will that last be linked to a twit reminding me of my current cholesterol, salt and calorie intake and how much of my daily carbon budget it represents?
Chris Francis is director of government and regulatory affairs, IBM UK.