Peer Pressure

Peer Pressure

Wilton scathingly dismisses the suggestion that the tech wreck should make business advance more cautiously.

"The disappearance of the dotcoms was a normal event. Even before the Internet the failure rate for a new business venture was somewhere between 70 and 90 per cent, so you're just seeing a manifestation of that. The reason it was so massive is that so many new businesses started during the dotcom era," Wilton says. "The reasons for many of the failures was different. Quite simply most of the dotcoms that failed had only fleeting business propositions, based on low price and giving things away."

Still, the tech wreck was highly visible and, because the cost of entry was so low, the companies affected were huge in number. The crash was spectacular and it and its aftershocks still secure quite savage coverage in the media. In part, this negative press is keeping investment in new e-business strategies down, Wilton says. But he thinks the canny business should shed its reservations and spend heavily now in order to leapfrog more hesitant competitors.

"What is interesting is that a number of companies are making substantial returns from their investment in e-business. Jack Welch, before he retired earlier this year, gave a speech to the analysts announcing that General Electric this year is going to make $US1.6 billion in additional earnings from its e-business investments. That's a lot of money," Wilton says.

"Southwest Airlines is going to make $US100 million additional earnings this year from its reservations systems being online. It is getting 30 per cent of its revenue out of the online system. So what is happening is that there are a lot of old traditional businesses making extraordinary amounts from their e-business investments."

Why do some established businesses apparently do so well with e-business while others flounder, watching cash burn rates escalate in their online ventures? Why does Jack Welch believe that now is the time to speed up e-business investment and widen the gap between GE and its less nimble competition?

"Let's agree that some people know how to make good returns from e-business investments," Wilton says. "If that is true, then why should they pull back? They shouldn't." In fact, he says, this explains why tech wreck's effects have been largely quarantined to a certain type of organisation: the type that didn't have decent business fundamentals, had poor processes and management control and did not fully grasp how to implement e-business techniques and infrastructure.

"The ones that are pulling back [from e-enablement] are the ones that don't know the rules for how to get the returns from e-business. In other words, the ones that are confused," he says. And so they should pull back, he says, because if you don't know the rules, e-business can be very scary territory.

"The theory about why some firms have done so well and others haven't is like putting a turbo-charger on a car, or giving steroids to an athlete. If the car is finely tuned these additional elements will create dramatic performance; it will go like a rocket. If you're an athlete in top condition and taking steroids it will help you win the race. If you're an athlete who is in average or poor condition when you take steroids you'll have a heart attack. If you have a car that's not well tuned and you put a turbo-charger on it then it will explode."

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