BUSINESSWEEK ONLINE : FEBRUARY 14, 2000 ISSUE
COVER STORY "The Real Killer Legacy Is the Cultural Legacy" Six experts discuss the perils and payoffs when old-line companies revamp themselves for the Net While the potential gains for traditional companies from the Internet-driven productivity revolution are mind-blowing, so too are the wrenching cultural changes required to take advantage of it. Companies unable to make the adjustments, anywhere within the supply chain, may not survive the transition. Vast numbers of jobs in fields such as purchasing will be eliminated, while skill shortages may keep many companies from moving fast enough to cash in on the potential payoffs. And teaching companies to cooperate -- both internally and with other businesses -- is no simple task. Business Week editors Marcia Stepanek and Jennifer Reingold talked about the challenges the Net poses to traditional corporate cultures in separate interviews with six top e-business consultants and management experts -- William Halal, Gary Hamel, Donald Harter, Stephen R. Rosenthal, Don Tapscott, and Shoshanna Zuboff. Halal is a management professor at George Washington University in Washington, D.C. Hamel is founder of Strategos, a consulting firm in Menlo Park, Calif. Harter is an instructor of information systems at the University of Michigan. Rosenthal is director of the Center for Enterprise Leadership at Boston University School of Management. Tapscott is chairman of the Alliance for Converging Technologies and co-author, with David Ticoll and Alex Lowy, of Digital Capital. Zuboff is a management professor at the Harvard Business School. Here are some excerpts from those interviews about how the Net will force changes in corporate culture: Tapscott: Industrial Age corporations have many legacies, and the real killer legacy is the cultural legacy. Old ways of working and old views of the firm die hard. There's nothing inherent in the technology that ensures this is all going to be great. There's a contrast between the magnificent opportunities that the new communications mediums and the New Eonomy create, and the dark side, which results from dislocation and massive social and economic change. Harter: The biggest hurdle for the brick-and-mortar companies in all of this is that organizations must change. Examples include the shift in the power base from a sales force to an electronic medium. The question is, how do you make that change when in fact you are threatening the jobs and livelihoods of the people involved? Halal: The handwriting's on the wall. Thanks to the Net, middle managers are an endangered species. True, not all middlemen will be ousted by the Internet, but not all of them will be able to reinvent themselves to take advantage of the new world, and I fear we've only just begun to see the displacements, or the downshifting -- into lesser jobs with lesser pay -- that will result from an increasingly Net-based world. At least in the short-term, the changes could be jarring. I don't see much of a role for the old bureaucrat who passed orders down and took information from the bottom up and consolidated it all into reports. These people will have to become operating managers, running a small enterprise. And they're terrified. Two million of them have been wiped out already, and I think the shakeout is still under way. As the old Industrial Age organization dismantles, the hierarchy turns into this bottom-up, self-organizing system. Rosenthal: Folks who have been traditional manufacturing types are now being challenged to understand the Internet and its potential. We're not talking about Web design. We're talking about the competency of understanding how everything is part of a supply network and finding out what types of information needs to be shared real-time with suppliers and customers. With the Internet, you can't afford to be a spectator. This is still so new that the only way you're going to get benefits is to learn by doing. Old-line companies have to have more of the mentality of Internet companies. We're all on the same little boat on turbulent waters. Companies are no longer able to think just about their company. The enterprise is now a network of companies, and planning, thinking, and designing at the enterprise level is where the action is now. Hamel: In the 1980s, we looked at Toyota and thought the productivity problem was really a data problem. Then, for the next five years, we thought it could be eliminated with Japanese green tea and tatami mats and respect for elders. Then, we said no, it's not that, because the Japanese could gain an edge with workers in Ohio. So then we thought robots would save the day, but General Motors invested $80 billion in robots and that, too, didn't work. Now, it's the Net. Except that far beyond being the greatest boon to productivity since the assembly line, it also has tremendous power to totally transform the structure of commerce, rewrite the rules of production, design and delivery -- indeed, [alter] the entire corporation and its role. And we've just begun to realize the profound impact it can have, not only on productivity but on our ability to create and manage innovation. Zuboff: I'm in the minority, perhaps, because I think the Net is asking companies to flatten hierarchies and work more as teams, but is it against human nature? Can companies change their culture deeply enough and fast enough to take full advantage of the productivity improvements the Net has to offer over time? In many companies, it's still who can climb over who fastest. It's not about being tamed by the Net -- though there's a whole lot of talk about that now. But the "let's be good girls and boys and share knowledge" attitude can only last so long before the animal within says, "You've got to be joking." My point is that the changes required to a corporate culture to accommodate the fullest potential of the Web will be the toughest part of all of this to build and to sustain. For many companies, it's true: You can't go at Net speed without changing what you look like as a company. But not many companies will be able to transform themselves in a way that can be sustained for very long. What will happen after a downturn in the economy? Will all this teamwork go out the window? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Boom COVER IMAGE: The Boom How Prosperity Is Reshaping the American Economy CHART: The Longest Boom Is Going Strong... CHART: ...Thanks to Higher Productivity CHART: The Market Soars... CHART: ...Americans Are Wealthier... CHART: ...And So Is Uncle Sam CHART: The Mood Is Upbeat CHART: Society Benefits... CHART: ...Though Not All Is Well TABLE: Origins of the Boom Clinton: Why the Good Times Keep On Rolling (extended) ONLINE ORIGINAL: "This Just May Be the Second or Third Inning" Why the Productivity Revolution Will Spread CHART: The Investment Leaders TABLE: Working the Web ONLINE ORIGINAL: "The Real Killer Legacy Is the Cultural Legacy" Commentary: The Risk That Boom Will Turn to Bust CHART: Unbalanced Growth...Rising Debt... CHART: ...Increased Reliance on Temp Workers...And a Bulging Trade Deficit CHART: Market Values Are Sky-High...And Margin Debt Is Soaring INTERACT E-Mail to Business Week Online

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