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Dot-Coms Provided Many Lessons

Established businesses wouldn't have acted so quickly were it not for the competitive threat from the online firms. Consider Amazon.com—a truly revolutionary business model. It introduced consumers to a whole new way of enjoying convenience, selection, and price. It not only changed the book business—forcing, for example, Barnes & Noble, the largest bookseller in the U.S., to reexamine its own business model and set up its own dot-com—but it has also impacted retailing in general.

The Net has revamped B2B relationships, resulting in greater value, efficiency, cost reduction, and service. For example, General Electric's former CEO, Jack Welch, mandated an Internet strategy for each of the firm's many business units. The speed of response was accelerated by the threat of competition from dot-coms, at least in some sectors.

The pure-play Web companies accelerated decision-making, taking the concept of "quick and nimble" to new heights. Dell Computer, for example, took the lead with its customized, on-demand production of individual PCs. This approach enhanced consumer expectations about service in all sectors. In addition, the dot-coms altered the standards for boards of directors. Passive boards may have dominated the Old Economy, but in the dot-com world, boards are active and involved. Traditional businesses took notice.

Maybe most notably, the dot-coms changed the talent side of the equation. In the late 1990s, a whole host of successful business managers, MBA grads, and just plain folks left the Old world for the New. Many were burned and many returned, but one thing is certain—they will always remember the excitement of the New Economy entrepreneurial spirit and rapid innovation. The early success of the dot-coms caused a brain drain and labor shortage in the Old Economy, at least initially. Businesses suddenly became very aware of the issues surrounding how to attract, retain, and motivate talent. Established businesses reevaluated their personnel, incentive, and compensation policies. Flex-time, job sharing, training programs, and interesting, innovative incentive plans were introduced. Perks such as daycare, family care, concierge service, health clubs, massages, family counseling, and on-location medical services were offered by many large businesses to keep the talent they so desperately needed.

Investment banks, consulting firms, and professional-services firms were forced to adjust their compensation and profit-sharing systems as many of their ranks headed for the dot-coms and many of the top graduates of the leading professional schools opted for the entrepreneurial world. While the dot-com meltdown of 2000 and the subsequent economic slowdown dampened a good deal of the enthusiasm in 2001, the appeal of consulting and investment banking to the future crop of MBA graduates may well be diminished. Historically, these had been the hot areas, but increasingly, many ambitious young people have something else in mind. The Internet has captured their imagination. Start-ups are not uncommon today in dorm rooms and garages.

Many of the changes the Net companies created in the work environment were healthy and lasting. More casual dress codes and less hierarchical structures have tempered the often stilted and formal cultures of traditional big business. Key professionals today work in teams and on projects, rather than in the traditional pyramidal structures with fixed job specs. People make job choices based on their interest in the nature of the work and the opportunity for learning and growth on the job. Title and rank are no longer as important.

New Economy businesses realized the key to future success is in attracting and keeping the right people. Talented individuals invest their human capital for a piece of the action and for the knowledge it provides. Job-hopping is common. Gone are the days when people joined a firm upon graduation with the intention of staying for forty years.

Surviving dot-coms and new entrants to the Net will learn from the failures. The freedom to fail is a key ingredient in the success of the U.S. as the global technology leader. Older firms have been forced to be more adaptable as well. While the many early B2C dot-com models did not work, new ones will take their place. Internet commerce will blossom and ultimately flourish.

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