Dotcom to Notcom
- 28 July, 2000 12:11
You've heard about all those execs leaving big companies for dotcom startups. But for some, the return trip has been more rewarding.
Some day, everyone will work at a web startup. Or at least that's what you'd expect if you believed everything you read in the business news. When top execs make the jump from old economy to new (á la George Shaheen, whose much celebrated leap from Andersen Consulting to Webvan Group caused a stir in the button-down business community), they've been getting a good bit more than 15 minutes of fame out of their decision to defect. They also get stock option packages that promise to make them the next Net billionaires. Story after story charts the mass exodus of junior employees and midlevel managers who've decided to join startups - or launch their own - rather than work for more established, traditional companies.
But off in the distance, attracting far less ink, are the rumblings of what might be the next Internet-era talent revolution. A few crossover execs have discovered that the door between corporate and com is a revolving one. They have decided to leave their stock-optioned, casual-every-day, new-economy gigs for jobs at big, established companies.
Are they nuts? Actually, the trend could be a sign that the e-business economy is entering its second generation. Market researcher IDC (a Darwin sister company) expects e-commerce to grow from US $130 billion in 1999 to more than US $2.4 trillion in 2004; brick-and-mortar giants moving online (think Merrill Lynch and General Motors) will spearhead much of that growth. Dotcom-notcom flip-flopping could become increasingly common as more and more old-economy companies get a clue about the Web. "The membrane between the traditional economy and the new economy will become more porous," says James M. Citrin, managing director of Spencer Stuart's global Internet practice. "People will move back and forth more freely over the next one to two years as the traditional companies figure out how to apply their strengths on the Internet."
Citrin cites a recent search his company did for Time Warner Digital Media, the interactive division Time Warner created with much fanfare last year. The mandate was to "reverse the brain drain," Citrin says, and bag an experienced Internet exec to be the division's chief strategist and deal-maker. The stakes were high - Time Warner had already bombed twice in previous attempts to jump-start its interactive strategy, first with an ill-fated interactive television experiment in Orlando, Fla., later with its Pathfinder website. Time Warner snagged Olaf Olafsson, the exec behind the launch of the phenomenally successful Sony PlayStation (Olafsson had more recently been president of financial services giant Advanta Corp.). As vice chairman of Time Warner Digital Media, Olafsson was part of the team that engineered the ultimate Internet talent-luring coup (or perhaps the ultimate jump from notcom to dotcom): Time Warner's US $165 billion merger with AOL.
True, it will take more than just chanting "we get the Web and we mean e-business" for a traditional business to recapture its runaway dotcom employees. One of the most important factors shaping the recruiting wars - the increasingly volatile stock market - is beyond anyone's prediction. Dotcoms that don't have a prayer of going public or whose stock tanks may see their staffers flee to the higher pay and lower risk offered by corporate America. But Stephen Mader, president and COO of recruiter Christian & Timbers, suspects that employees of failed dotcoms will be more likely to join the "new members" of corporate America - successful dotcoms, such as Amazon.com and Yahoo, that will continue to thrive even if the second- or third-tier dotcoms falter. "Most of them will join the guy that looks like he's going to win," Mader says.
Yet as the following three stories of executives who've jumped to dotcoms and then jumped back show, there's more than one way to win. If you've been frustrated by dotcom defections of your best and brightest, read these stories with hope - they give clues as to what your company can do to lure experienced Net talent. If you yourself are considering making the move to a dotcom, these stories may tell you why staying with a notcom isn't so bad after all. And if you've already jumped and are interested in jumping back, you'll see that you may be in good company.
Options Aren't Everything
Pre-Web job: Senior Writer, Young & Rubicam Dotcom job: VP of strategic services, Agency.com Jump-back job: Senior VP, Lego Direct After logging 18 years in the creative services business, including two stints at Web startups, Brad Justus finally had what you might call a winning lottery ticket: A top spot at a Silicon Alley dotcom that was just about to go public - and a stock options package that could some day be worth millions. All he had to do was stay put.
Instead, just before Agency.com went public, Justus decided to go corporate. He resigned as Agency.com's vice president of strategic services and took a post as senior vice president of Lego Direct, the 68-year-old toymaker's new e-commerce division. Justus would not only run the division. He'd get to build it from the ground up and break any rules he needed to along the way. "It's doing a startup all over again, but now in a very well protected cradle," Justus says.
Justus was able to take some Agency.com stock with him when he left. He won't say how many options he left on the table, nor will he say what his new salary is, other than to note that it is more than his salary at Agency.com. (His options also would have taken three years to vest, and there's no guarantee that they would have been worth anything; the stock reached a high of $98 a share on its first trading day, Dec. 8, but within a few months had dipped below its offering price of $26 a share.) Regardless, Justus says money didn't have much to do with his decision. "It wasn't so much about my compensation financially," he says. "It was about my compensation in terms of opportunity." Lego offered a chance to build a new business based on a well-established, highly regarded consumer brand, plus the autonomy, responsibility and encouragement to run the business as he saw fit. "It wasn't just, 'Come and be our webmaster,'" Justus says. The pre-IPO timing of his departure was a bit unusual, but no one at Agency.com thought he was making a bad move; in fact, he says, some of his peers were jealous. "It's Lego," Justus says. "How can you say no to a brand like that?"
Working at a toy company has proved to be far more hectic than his job at a dotcom ever was. Justus spent his first three months meeting with people across Lego, in the United States and abroad; he wanted to get a good understanding of the brand before he crafted a business plan and hired a staff. He was also hunting for office space near his old Silicon Alley haunts (the thought being that it would be easier to attract Internet talent there than it would be at Lego Americas' suburban Connecticut headquarters). But Justus is not complaining. So far, his new job has met the ultimate test: "I'm having more fun now than I have in years."
Do Big Company CEOs Have More Fun?
Pre-Web job CEO, Pacific Bell
Dotcom job CEO, PointCast
Jump-back job CEO, Concert Communications David Dorman says he wasn't seeking "fame and fortune in the Internet space" when he signed on as CEO of PointCast. And that's a good thing, because when he left the company he had garnered little of either. PointCast was the pioneer of "push," a technology for sending, or pushing, information to users via the Internet (as opposed to traditional Web surfing, where users have to actively search out information). By mid-1997, the company had over a million customers using its free, push-enabled screen saver to receive customised news and information. But the software was getting a bad rap as a buggy bandwidth hog. A deal to sell the company to News Corp. for a reported US $450 million had fallen through. The founder was asked to step aside. That's when Dorman stepped in, at the request of two of PointCast's VC backers who had spent months looking for a successor (Dorman had become involved with the firms when he stepped down from his job as CEO of Pacific Bell, following the telco's merger with SBC). All acknowledged that his assignment would be a tough one: Clean up PointCast and take it public or sell it.
Dorman had just come from a 100-plus-year-old company that he strived to shake out of its monopoly mind-set, but he wasn't a newcomer to startups. In his 20s, he had been employee number 55 at Isacom, a telecom startup that wound up becoming "seed corn" for Sprint Corp.; at Sprint, he rose from sales rep to head of the business division, leading its growth from US $5 million to US $4.5 billion. Even so, when he arrived at PointCast things were worse than he'd expected. The company had US$15 million in the bank and was spending US$2 million a month. After 60 days on the job, Dorman determined that it would take another six months to retool the software - more time than he had money to spend.
PointCast filed for an IPO, but given the rocky stock market, Dorman decided to call it off and go searching for partners and investors to "prime the pump"; at the same time, he was trying to inspire the troops to work round-the-clock to improve the product. Eventually, the board and Dorman decided that PointCast needed to be downsized radically to find a buyer - and that it didn't need someone like Dorman at the helm. Dorman had planned to stay on as chairman. But then in early 1999 he got an offer he couldn't refuse: To become CEO of Concert Communications, a US$7 billion global telecommunications joint venture between British Telecom and AT&T - another startup, in a sense, but one with deep pockets and a big safety net.
Looking back, Dorman says, some aspects of his PointCast tenure were "enthralling" - the variety, the fast pace, and the wheeling and dealing to find a buyer (a few months after he left, PointCast was sold to Idealab for a paltry US$7 million). Yet it still never matched the intellectual challenge of running a large company. "When you've operated a very big business, being the CEO of an Internet company is very different," Dorman says. "Your success and failure is not as complex."
Dorman left about 3 million PointCast stock options behind when he jumped to Concert; he still owns some stock in the company, and his association with the VCs wound up leading to other financially fruitful investments. Even so, he does sometimes think about what might have been: In 1996 he turned down a chance to become CEO of @Home Networks, a Kleiner Perkins Caufield & Byers-backed startup that planned to deliver high-speed Internet access to consumers via cable modems; the company later recruited Tom Jermoluk, former president and COO of Silicon Graphics, to be its chief, and it has since merged with Excite to form Excite@Home. Had Dorman known back in 1996 that Jermoluk would one day lead @Home to a lucrative IPO, he might have been a little more willing to walk. But he can't be too critical about his decision to bet on PointCast and pass on @Home; picking which Internet startup will succeed is about as easy as picking the right Powerball number. "There is just a certain randomness to it that you can sit back and say, 'Holy mackerel.'" You Can Go Home Again Rob Stravitz Age 37 Pre-Web job Brand manager, Clorox Dotcom job Director of brand management, Decide.com Jump-back job Marketing director for the laundry care business, Clorox Rob Stravitz had spent six years pitching the likes of Liquid-Plumr and Formula 409, and a marketing job in Silicon Valley was just too tempting for him to resist. But after a two-year ride in the world of bits and bytes, including six months at an e-commerce startup, Stravitz decided there was no place like home cleaning products. He came back to The Clorox Co., a bit higher on the org chart - and a bit wiser about the Web.
Stravitz was a brand manager in Clorox's cleaning products division until 1998, when he left to take a marketing job at a software company. After about 15 months, he got the Web bug and signed on as director of brand management at Decide.com, a telecommunications e-commerce site. It didn't take long for him to grow disenchanted with the company's business model.
At first, it seemed like a cool concept: Let consumers compare wireless, cellular and long-distance telephone rate info and sign up for service; Decide.com would draw a commission from telecom service providers whenever new customers signed up for products at the site. But Stravitz soon became aware of the model's limitations: The purchase cycle happens every two years, customer loyalty is hard to create, acquisition costs are high and ongoing revenue generation ability is limited. "It sounded like a neat idea, but how do you make money doing it?" Stravitz asks. Plus, the Internet has such a low barrier to entry that it's hard to retain a competitive advantage. When Stravitz started at Decide.com, the company had one competitor; when he left six months later, it had seven.
Stravitz considered going to other dotcom startups. But he found that, unless you're the absolute top marketing officer in the company, the jobs are pretty narrow. Such a job is often more limited at a startup than it would be at a company like Clorox. "When there's only one business to run, the CEO's going to be running the business, not you," Stravitz says. "In the consumer products arena, when you're running the product line, you're owning the business." Then there are the long hours at startups - fun for a twentysomething, but less interesting to someone like Stravitz who has kids at home.
Clorox hired him back as the marketing director of its flagship laundry strategic business unit. He puts in long hours when the work demands it, Stravitz says, "but at some point, you do have a bit of a lull where you can get back your life." Should he ever get bored with his job, the US$4 billion consumer products giant has room for him to grow, and there's plenty he can learn from Clorox's management team - all of which is more important to him than the chance to strike Internet gold. "I would have no problem making a million dollars, but that's not the motivator," Stravitz says. "If it were, I wouldn't have come back."