The year 2000 brought with it plenty of learning opportunities. Not least of them, says Bob Weinstein, was the downfall of the dot coms. Read on to see why the dot-com shakeout has led many companies to wisely reevaluate their business strategies.
A new year is under way while another fades into our memories. One hopes that we learned something in the process.
Until the economy downshifted in the last quarter, we enjoyed an unprecedented boom time. And as we all know, those in the technology field did especially well.
Most significantly, 2000 was the year of the Internet, with the promise of a “New Economy.” At that time, the New Economy was touted as the turning of the capitalistic tide from the conventional brick-and-mortar style of doing business to 24-hour, 365-days-a-year e-commerce. This vision of the New Economy was fluid, powerful, and fueled by an open funding faucet that appeared as if it would never run dry.
Technology mainstays like Dell, IBM, Gateway, Compaq, and a few others reaped the benefits of the New Economy and grew more powerful and profitable. Meanwhile, new companies catapulted out of the starting gate believing they could bypass infancy and go straight to adulthood.
Big ideas and new business models were everywhere. Dot-com mania swept the country with recent college grads, their sheepskins hardly dry, leaping from dorm rooms into spacious corner offices and commanding obscene salaries. If Dell, Yahoo, and Google could build a powerful niche, anyone with a great concept could. Right?
The dot-com catechism
Within a short time, dot-commers seemed to have created their own cult—an exclusive club to which only young, fast-track, “cool” superstars gained admittance. The attitude was elitist, arrogant, and often contemptuous of those outside the circle. The lifestyle was outrageous, loose, and freewheeling without rules, restrictions, or boundaries.
Many dot-commers worked around the clock enjoying indulgent perks—health club memberships, massages, and gourmet meals—to offset the grueling hours. They wouldn’t do business with anyone who was difficult or questioning. Rather than building relationships, they’d dump clients.
In the end, Internet companies paid a hefty price for this “creative freedom”: overindulgence, waste, and disregard for basic management principles. Last fall, ZDNet News reported that Internet start-ups were closing at the rate of one a day. By early December 2000, 130 dot coms had bitten the dust.
Many of the failures were the subject of front-page headlines. The London-based Internet retailer Boo.com is a colossal example of waste. During its short life, it bolted through $135 million, burning about $23 million a month.
Lessons from the shakeout
What can we learn from the dot-com shakeout? Perhaps the simplest lesson is that job searchers should be wary of dream peddlers.
In a slowing economy, I’d be reluctant to take a chance on a start-up with an uncertain future. As a recent article in the Internet news magazine The Industry Standard said, “It’s just not cool to work at a dot com anymore.”
If you’re considering working for a start-up, find out if it’s financially secure and has an experienced management team at the helm. If management is asking you to take a gamble on a company that “could be the next Microsoft” and offers stock options in lieu of a competitive salary, head for the door.
And if you entertain fantasies of launching a dot com, carefully consider your chances of succeeding. The days of easy venture capital are over. In this business climate, venture capital firms will be reluctant to pour money into highly speculative start-ups.
Overall, expect a return to old-economy values, said Dick Sirbu, chairman and CEO of Sirbu Enterprises, an investment company in Morrison, CO.
“Under ‘old economy’ rules, you built a company to make money,” Sirbu said, “whereas New Economy companies concentrate on initially spending money on marketing programs to expand the business before they’re on solid ground.”
“Be brutally honest in all your decisions,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corporation. “Don’t make assumptions about anything. Consider the marketability of your product or service, watch your competition, and keep tight reins on spending.”
Are there other lessons to be learned from the events of 2000 that you think are applicable to technology jobs or technology companies? Start a discussion below and share your opinions and experiences with us.