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| Welcome to the real New Economy |
November 6, 2001 |
By David Stevens, Pricewaterhousecoopers
Traditional businesses were finally getting it: the New Economy was about market share and revenue, big splashes and bigger promises. That was the recipe for success. But just as they began to play in this new game, along came the dot-com meltdown to wipe out the whole playground. So what’s left?
YOU WORK FOR A LARGE ORGANIZATION. YOU HAVE A GREAT idea.You have the right team.You have the right technology. You have an airtight business case.
But nobody will sign off on your project. Welcome to the real New Economy.
Over the last year, corporate spending on new projects-information technology projects in particular-has not only slowed but has been reduced to levels no analyst, vendor, consultant or chief information officer could have predicted.
Rather than continue to fight, it is time to recognize what’s causing this situation. In a word: fear. Most importantly, the fear of new technology.
The last few years have not been kind to the executive committee in any traditional Old-Economy company. From ERP to Y2K, from innovative Web sites to incubators to spin-offs, they invested with the best of intentions built upon seemingly solid business cases. But just as they were beginning to figure out how to play in the New Economy, it all but vanished with the dot-com meltdown.
Is there confusion in the executive committee? Yes. Is there anxiety? Yes.
What lies at the heart of these fears? Read on.
First, there is a shortage of capital in today’s market, particularly risk capital, and any new project with new technology represents considerable risk. Most companies are beginning to optimize their enterprise resource planning investment ( ERP).
Many of the business cases associated with proposed collaborative technologies are based on business case numbers similar to those originally put forth to defend the ERP implementation in the first place. As some of these haven’t paid off this is hardly comforting to the executive committee, which is still looking to realize the full benefit of its investment.
Second, there is considerable fear of being wrong. While any idea would get funding from a venture capitalist ( VC) in the dot-com glory days, VCs were then playing with different odds. Their intent was to be successful in one out of 25 cases, and the successful investment would yield a payback that covered the investment costs of the other 24. An executive committee in today’s environment cannot play the odds and expect to be around by the end of the quarter.
Third, there is a profound need for greater education at the executive committee level concerning implementation of new technologies. For example, data sharing with business partners is often viewed as a compromise to the security of internal systems, but as you decide how to share information and which information to share, and therefore do not open the entire system to outsiders, there is little security risk beyond that which you consciously accept.
Fourth, this is not a market that rewards organizations for making significant announcements concerning their information technology investments. Eighteen months ago, the number of press releases about new software investments, alliances and business partnerships was overwhelming. Virtually every organization was trying to demonstrate that they were riding the dot-com wave. Today, very few organizations-except for the technology vendors themselves-are looking to make announcements that could imply a significant information technology investment or strategy.
Fifth, most organizations realize new strategies must drive genuine customer benefits. While in the past, many projects were about internal process optimization, today’s investments are driven by customer threats and fear of losing customers.
So, how to launch a great new idea in this climate of fear? Accept the fact that investment capital is constrained. Start small with seed funding to prove your concept. Conduct a pilot to test your idea. If that pilot involves a customer, generate genuine customer benefit and support for a much stronger business case.
Also, appreciate the fact that your project may be operating under scrutiny for a period of time.
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