[Fwd: [digital-strategies] Revenge of the "Bigcos"?]

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From: Gregory Alan Bolcer (gbolcer@endtech.com)
Date: Sat Aug 19 2000 - 12:15:39 PDT

heh, heh. He said "fat assets". I am on the diamtech
email list. The three "disruptive" technologies
they see are wireless, information appliances, and broadband.

Any kind of information over any device anywhere. You don't
necessarily need broadband to do peer-to-peer, but it helps.


-------- Original Message --------
Subject: [digital-strategies] Revenge of the "Bigcos"?
Date: Fri, 18 Aug 2000 14:42:35
From: "Mel E. Bergstein" <mel.e.bergstein@diamtech.com>
Reply-To: digital-strategies-replies@community.diamtech.com
To: "Digital Strategies" <digital-strategies@community.diamtech.com>


To judge from the huge sighs of relief from many large-company chief
executives, this spring's market revaluation of dot-coms was greeted like a
death-row reprieve from the governor.

In Forbes recently, General Electric's legendary CEO Jack Welch
euphorically proclaimed: "The big, old guys are going to beat the daylights
out of the pure-play dot-commers. The existing business already has sales
and expenses. Digitize it and costs fall. Sales climb. Instantly [the
established company] gets to break even. Then the margins just pour in."

So, does that mean the game is over? Bigcos can sit back on their fat

I asked my partner, Chunka Mui, co-author of the digital strategy
bestseller "Unleashing the Killer App," for his take. Attached is his
reply, which he has since turned into a column for the October/November
issue of Context magazine. I'd be interested in your reactions.


P.S. To continue this conversation, join Chunka and me Sept. 12-14 in San
Francisco at the next Insight Seminar. For more information, go to

-------- Original Message --------
From: Chunka Mui <chunka@diamtech.com>
To: mel.e.bergstein@diamtech.com
Sent: Monday, August 14, 2000 11:20 PM
Subject: Re: Revenge of the Bigcos?

Mel, Jack Welch is right. Wall Street will no longer throw money
indiscriminately at dot-coms. That means the advantage is indeed shifting
to the bigcos. Bigcos have the brand, customers, industry expertise,
transactions, liquidity, and investment budgets to dominate. But here comes
the inevitable "but":

Bigcos still have plenty to fear. The Internet is quickening the spread and
adoption of three disruptive technologies, which will radically change the
business environment once again.
First is wireless. Once, you pretty much knew where a customer was when he
was interacting with your business. He was either at a facility of yours,
or he was attached to a phone or computer at his home or office. Now, with
wireless phones and modems, the customer can literally be anywhere--at his
home, in his car, overseas, outside your store, outside a competitor's

Second is new information appliances. Your customer won't just deal with
you in person, over a phone, or via a personal computer. The customer might
use your Web site from a Nintendo machine, a Palm organizer, or a pager.
His car might communicate directly with you via satellite. Eventually, his
pantry might call to order food. His air conditioner might confirm an order
after holding an auction for the cheapest electricity.

Third is high-speed, "broadband" networks. We won't just send words, or
even still images, to each other. We'll send huge amounts of data,
including audio and video. Among other things, broadband will accelerate
the move toward "peer-to-peer" uses of the Internet, such as Napster.
People will be able to cut companies and their Web servers out of the loop,
sending rich information such as Napster's music files directly to each
other. (The move to peer-to-peer communication will happen even if the
music-industry lawsuit puts Napster out of business.)

These three innovations mean that we'll be sending each other any kind of
information, via any device, from any place, at any time. It's not exactly
clear how these trends will alter the e-commerce landscape. But they will.
A lot.

So what should big guys do?

First, they must be sure they don't repeat history. Instead of going after
niche markets, as start-ups did, or finding a way to put part of a business
online, as they might have a year ago, I think bigcos should explore ways
to reinvent their core markets. The time is ripe. A huge percentage of the
economy is connected to the Internet, is comfortable with it, and is
prepared to use it for conducting business. The coming technologies will
only make e-commerce broader and richer.

Second, bigcos must redirect the focus away from creating interesting
dot-com businesses by carving out assets. Instead, established businesses
should think about "spinning in" their e-commerce efforts. The good example
of the old approach is theSauce.com, which took bits and pieces of a
food-distribution business and set out to create a stand-alone, online
business that addresses a broad array of restaurant owners' needs. Now,
though, the stock market isn't as enamored of one-off businesses, so
spinning them out isn't as valuable. In addition, these types of e-commerce
programs are almost certainly the future growth engines of their
businesses. Why give them away cheaply to other investors through some sort
of spinout?
There needs to be some way to use e-commerce killer apps to renew the
business's core. Charles Schwab is the classic example. It kept its online
brokerage unit separate at the start, then basically told the rest of the
business to start playing by the embryonic venture's rules, such as very
low fees. The approach was a huge success.

These two changes in strategy--focusing on mass markets, not niches, and
reinventing the whole company, rather than creating an entrepreneurial
spinoff--mark a fundamentally new approach for big companies.

To reiterate: Companies used to win by unleashing a single killer app. In
the future, companies will need to remake themselves into what I think of
as killer "platforms." In other words, companies must find the right
organizational, process, and technology approaches to let them launch a
series of killer apps that addresses an array of markets and draws on all
the companies' resources.

Microsoft, first with DOS and then Windows, built its dominance on killer
platforms. More recently, Yahoo! and eBay have set themselves up as
platforms for launching a series of killer ideas. The "big, old guys" that
Jack Welch mentions can play this game, too, but to win they'll need to
learn some tricks from the big, new guys.


Mel Bergstein is Chairman and CEO of Diamond Technology Partners. Each month, via Digital Strategies, Mel
addresses tough questions that CEOs and other senior executives must answer as they battle for both market
share and market value in the age of e-commerce.

Chunka Mui is a partner with Diamond Technology Partners. He is also the executive editor of the business
magazine Context and directs the Diamond Exchange, an executive forum that brings together senior executives
with leading strategy, technology, and learning experts to explore issues in digital strategy.
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