“What rationale did people use to justify these rather extraordinary numbers? “New technology will change everything,” the logic went. “The Internet is going to completely revolutionize all businesses,” the gurus chanted. “It’s the great Internet landgrab: Be sure first, be there fast, build market share – no matter how expensive – and you win,” yelled the entrepreneurs.
We entered a remarkable moment in history when the whole idea of trying to build a great company seemed quaint and outdated. “Built to Flip” became the mantra of the day. Just tell people you were doing something, anything, connected to the Internet, and – presto! – you became rich by flipping shares to the public, even if you had no profits (or even a real company). Why take all the hard steps to go from buildup to breakthrough, creating a model that actually works, when you could tell, “New technology!” or “New economy!” and convince people to give you hundreds of millions of dollars?
Some entrepreneurs didn’t even bother to suggest that they would build a real company at all, much less a great one. One even filed to go public in March of 2000 with an enterprise that consisted solely of an informational Web site and a business plan, nothing more. The entrepreneur admitted to the Industry Standard that it seemed strange to go public before starting a business, but that didn’t stop him from trying to persuade investors to buy 1.1 million shares at $7 to $9 per share, despite having no revenues, no employees, no customers, no company. With the new technology of the Internet, who needs all those archaic relics of the old economy? Or so the logic went.” -Chapter 7. Technology Accelerators, GOOD TO GREAT (Jim Collins, 2001)
I regret that I picked up this book only recently. I should have known about this book and read in 2001. My life even could have been different, I ponder. Also, I could have shared valuable insights much earlier.
People chant that we are in the new reality under the digital economy. Paradigm has shifted. The Internet has indeed changed and transformed old way of doing business into new. Has it really?
I was once hesitant to pick up this book only because it was published almost twenty years ago and because it covered great companies who made it to be such in the late twentieth century. Will this book be able to reflect current reality and still shed insights on today’s business?
The answer is definite yes. I was just stunned by the perpetual insights and lessons the book provides through numerous cases of great companies who made a quantum leap. This definite yes even culminated when I opened chapter 7 that discusses on technology.
As you could see from above quotes, what Collins describes on what happened during the Internet hype much resembled what’s happening now under the blockchain hype: ‘Why take all the hard steps … when you could tell, “New technology!” or “New economy!” and convince people to give you hundreds of millions of dollars?’
I see similarities between the current hype on the new technology and what happened during the Internet Bubble, in two aspects, using Collins’s descriptions as a valid reference.
New Technology! New Economy!
First, “Unprecedented novelty,” and “Paradigm shift” are the blockchain technology’s mantras over the old economy. Some projected that this technology has even ‘revolutionary’ potentials. However, as I discussed in my in-depth book review on the Blockchain Revolution, the numerous hurdles the technology is still facing and struggling mean moving to a revolutionary state is very much far-off. Revolution is a mirage.
Go Public Before Starting a Business
Next, when we look into “ICO”(Initial Coin Offerings), the novel way of raising funds on the blockchain using innate coins(or Tokens) such as Bitcoin or Ethereum, I cannot help but be taken aback by its resemblance to IPOs done during the Internet hype.
Those companies twenty years ago filed to go public with an enterprise that consisted solely of an informational Web site and a business plan, nothing more.
Now, what do you need to raise funds through ICO? Do you have to have a substance going from buildup to breakthrough with a model that actually works? No. Only a well-made White Paper suffices. It’s a prospect, not a physical substance. Is there a difference between what happened then and what’s happening now?
Some entrepreneurs twenty years ago didn’t even bother to suggest that they would build a real company at all, much less a great one. They went public before starting a business having no revenues, no employees, no customers, no company. Is there a difference now?
Do we learn lessons at all? I was simply taken aback to find that what happened in the past is being repeated with the exactly same phrases, situations, and logic.
As the case of drugstore.com, whose market valuation increased three folds after going public in 1999 and who ultimately disappeared in 2016, suggests in the book, the company who was able to fly at the high point of the frenzy couldn’t build itself into a great one.
Walgreen, whose adage was ‘We are a crawl, walk, run company’ in the middle of the Dotcom craze, made itself to great by constantly building itself through crawling, walking, and running. It’s Walgreen who ultimately acquired drugstore.com in 2016. What does this imply?
Great companies have great substance that perseveres through thick and thin. I believe it’s time for us to learn from great companies such as Walgreen who never lost grip on the unshaken fundamentals with a clear strategic directive – We are a crawl, walk, run company.
“Technology-induced change is nothing new. The real question is not, What is the role of technology? Rather, the real question is, How do good-to-great organizations ‘think differently’ about technology?” – Jim Collins, p147