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"GREAT EXPECTATIONS" - by Piyush Gupta * "Bulls make money. Bears make money. Pigs get slaughtered", goes a common saying in the investment markets. Grating as it may sound, there is no escaping the fact that the average investor, largely made up of the common man, made a pig out of himself during the so called technology boom. And a really dumb pig at that. Millions of people lost their lives' earnings in a moment of fallacious expectancy, while people like Jack Grubman laughed all the way to their banks, piggybacking confidently on the gullibility of the masses, ever so eager to believe in the dreams that these magic wands spun so deftly. The logical question that ensues is that who is to be held culpable for the slaughter that occurred? The analysts of all those investment banks, whose buy-sell recommendation could be changed at the convenience of whoever dangled the largest wad of notes, or the people, who hid their heads in the sand, deeper than any ostrich ever could, when the stark reality reared it's ugly head? "The new age idols", such as Stephen Case, who engaged the world in the make-believe of Internet wizardry, or the people who promptly, took the bait? "Angel investors" whose brainchilds kept mushrooming faster than a litter of mice, or the whiz kids, who flocked to these entrepreneurs with the alacrity of a boy out on his first date, only to realize later that it was one big, sick joke? One might be accused of having the benefit of hindsight tucked under his belt while making these observations. While that may be true to an extent, the fact remains that there was so much that could have been done to avoid the massacre. But like the donkey who kept on hankering for the carrot dangling in front of his eyes, no one chose to wake up to the reality that the carrot was only an illusion, and it was always going to remain out of his reach. Warren Buffet, popularly known as the Oracle of Omaha, remained a distant spectator amongst all the ruins. His stated stance that the technology stocks always made him feel uncomfortable, sound Nostradamus-esque today. He averred that businesses, which sought to create value for the investors through "rising share prices rather than rising profits", were bound to fail. He was often chastised during the height of the boom for missing out on the party, but it's quite evident as to who is having the last laugh. While the world was busy burning its money on what turned out to be one night wonders, Buffet quietly went about investing in what were billed as unglamorous companies. Shareholders of Berkshire Hathaway, the investment firm that he heads, must be one joyous group of people. Their faith in the Oracle has been vindicated several times over. With shares of several of those ubiquitous dot-coms not even worth the paper they are printed on, Buffet's actions have amply demonstrated to the world that wisdom never tried to take the express elevator to monetary nirvana, simply because there was no such nirvana in the first place. Growth rates bandied about in multiples of hundreds, obscene pay packets, irreverent disdain for conventions, unearthly working hours, outlandish business models… the list goes on. The 'Great Internet Phenomenon', so to speak, was all just too surreal to last; sooner or later it had to come to a grinding halt. It has just as well done that now, than any other time. Though it has come down with a resounding thud, the fact remains that it had its moments under the sun. The entire world gaped in fascination, as companies were formed by every Tom, Dick and Harry over dinner, strolling in the park, exercising in the gym, and may be even shaving and bathing. So what went wrong? At the risk of sounding insolent, one might hazard that it was because the proponents of the dot-com rush, chose to send some basic tenets of business, out for a swim in the Pacific Ocean. Though there were myriad reasons working overtime to send the dot-com model tumbling to it's doom, for considerations of brevity, we will take a look at three of the more important ones. One of the fundamental assumptions that went awry was that profits were not everything. In the rigorously competitive cast that business is in today, it was a great folly to continue a soldier's march ahead into the future, without taking due care of the present. Companies were copiously floated with the credo of 'Ideas came first, profits later'. A bright, young man with impeccable credentials made the investors to believe in the viability of some vague notion with the help of a generous splashing of technical mumbo jumbo and they quickly fell for it. Costs kept on piling up and the profits remained elusive. The champions of the 'idea' kept on pushing their rendezvous with profits to a later date, concentrating on expanding their business for the present. Herein lay their nemesis. Investors were only willing to wait for so long. When the dreams of eye-popping profits remained just that, they pulled the plug and chose to exit with whatever little they could salvage out of their investments. Thousands of aspirations died a sudden, but well deserved death. Second, but equally important was the fact that those budding entrepreneurs, goaded by the all pervasive euphoria, sustained that any concept could be lent to selling on the net. Without properly analyzing the viability of the idea, or delving into the implementation and scalability issues, the protagonists of the opera went ahead with their grandiose plans, eager to get their 'baby' off the ground. Sometimes, it could lead one to wonder what magic potion those people had, which he or she by the dint of some terrible misfortune didn't. So you had everything from the rarest of Picassos to ancient Chinese relics available for sale. How many people actually went ahead and purchased them is anybody's guess. The model also threw some well-established marketing concepts to the wind. High involvement products such as apparel, which people like to try out before purchasing, was really never going to be attractive for buying with only a mug shot to show. The third reason is easier to gauge. The dot-coms didn't 'make or produce' anything, so the physical assets were almost negligible. All that they had was a mishmash of intangible wealth, goodwill, services, which no one was ready to buy and yes, lots of people. All the talk about people being the greatest assets merely degraded into vacuous pretense once it was evident that due to the inherent flaws in the model, these otherwise brilliant people were nothing more than white elephants - came at a high price, and did little useful work. The lack of a visible front end deprived people of the emotional benefits of purchasing goods and services; interaction with salesmen, advice on latest trends, assurance of after sales service and a place to compare relative strengths and weaknesses of competing products. Consequently, the possibilities of doing business took a massive hit. The interplay of these and a several other big and small factors made the Internet phenomenon extremely vulnerable. The foundation stone was laid on quicksand, and true to its nature, was quick in sucking the structure into a bottomless pit. It was only a matter of time before the inevitable happened. Once the first few companies lost their footholds, the entire edifice came tumbling down like a pack of dominoes. And along with it the hopes of an expectant world. Billions of dollars were wiped off the markets, and the common man took such a huge thump that it would be years before he can recover from it. So was it Armageddon? You can bet your last dollar, it wasn't. Yes, a lot of companies closed shop, lot of people lost their livelihood, investors lost their life's savings and economy took a nosedive. But nobody was forced to don the mantle of a doomsayer and proclaim "Ok folks, we had a nice stay here, it's about time we vanished from the face of the earth. So long and thanks for everything." Far from it. If nothing else, the whole episode taught the world a lesson about doing business. There are some ground rules, which cannot be violated. There are some conventions, which must be followed. There are quite a few positives, which came out of the bust. For one, the traditionally brick and mortar companies can now go back to concentrating what they were good at, rather than having to draw up ambitious and often-fanciful dot-com plans. With the coals of the Internet bloodbath still simmering, budding entrepreneurs will take a much closer and deeper look into their business plans before knocking on any venture capitalist's doors. More attention will henceforth be given to the demand supply laws of economics rather than trying to shove fancy technology down an unwilling consumer's throat. Now that the unrealistic expectations of the dot-com era have taken the flight into oblivion, companies and candidates can talk on a much saner pedestal in terms of salaries and perks, giving both of them a fair chance in the process of selection and rejection. And yes, it would be normal to expect your boss to be older than you! The business models all over the world are geared up to undergo critical transformations. E.R.P is already becoming the next big thing. IT-enabled Supply Chain Management (S.C.M) will be the dominant paragon in the next few years. Big corporates like Wal-Mart have already moved towards that in the right earnest. The IT enabled services (ITeS) sector, especially customer interaction services and back office operations, is catching on in a big way. With leading management thinkers like C. K. Prahalad promulgating the idea of core competence, more and more companies are looking to outsource whatever is not nuclear to their organization. This has, and will continue to fuel the growth of the ITeS sector in countries like India and Ireland. Information will be the key factor, both for companies as well as customers. Internet has all the ingredients to be the best and most efficient source of the latest information. It will be the great enabler, helping expand reach and accessibility, ensuring instant two-way connectivity and easy comparison with competitors. Concepts like vendor managed inventory and lean production will increasingly make use of the Internet to keep the various stakeholders in the supply, production and distribution process connected to each other at all points in time. Set models will undergo massive changes. New paradigms will evolve, which will throw those who choose to stick to tradition and a stiff set of beliefs, into a tizzy. More importantly, even as the world is recuperating from the Internet shock, news of the first dot-coms, such as AskJeeves.com, reporting profits has started pouring in. Couple that with the other reportedly profitable ventures like Google, Yahoo and Amazon and one can see that the e-commerce bubble was not all air after all. Amazon.com, in particular, has shown that if you can successfully intertwine technology and solid business sense, you have a heady combination for success. By sticking it out so long in a minefield where many ventures were blown out of existence every single minute, it has proven that the power of the Internet was there to be harnessed, only the means had to be correct. Slowly, but surely, businesses across the world are starting to pick up their threads and start with renewed vigor and enthusiasm. Increasingly, one hears about cautious optimism about the IT sector being poised for a turn around. The pieces are firmly in place. We are standing on the precipice of a major technological upheaval, which has all the makings of the next big revolution. All that remains now is to plan our moves with observant consideration, careful not to be sucked into another whirlpool of illusory targets, fanciful expectations and unreal goals. Once was enough. For the betterment of all, lets hope that we get it right, this time. Amen! * Contributed by - |
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