BUSINESSWEEK ONLINE : AUGUST 28, 2000 ISSUE
BOOKS Old Economy, We Will Bury You LIVING ON THE FAULT LINE Managing for Shareholder Value in the Age of the Internet By Geoffrey A. Moore HarperBusiness -- 288pp -- $27 When it comes to understanding and explaining the Silicon Valley approach to business, few management pundits have a better track record than Geoffrey A. Moore. In books such as Crossing the Chasm and Inside the Tornado, he has crystallized much of the thinking about how to create huge new technology markets. Now, in his latest provocative volume, Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet, Moore addresses a different audience: Old Economy managers. Such codgers, he warns, had better rethink their most fundamental, time-honored practices if they're to hold off the dot-com threat. The world has changed quite a bit since the book was written--back before so many dot-coms crashed to earth this spring. With stocks such as eBay Inc. down more than 50% since March, Moore's central argument--that stock price is a proxy for competitive advantage, and therefore good management is whatever raises the stock price--seems a bit too simplistic. But Moore's book is not irrelevant, not by a long shot. Moore correctly points out that even after their fall, dot-coms are valued far more highly than their bricks-and-mortar rivals. And while Living on the Fault Line may be a bit over-the-top to use as a practical blueprint for Net Age management, it's a useful manifesto for managers struggling to understand how to cope now. Be warned, though: This is not an uplifting manual detailing how you too can be worth billions, but a horror story that could keep you up nights. To hear Moore tell it, everything that has led to Old Economy success will now lead to depressed stock prices and vanishing competitiveness. Proud of your efficient operations? Outsource most of 'em. After all, nobody cares if you can save a few pennies when there are vast new e-markets to conquer. Got a world-class R&D outfit? You're probably better off scrapping it and just buying up hot tech startups, a la Cisco Systems Inc. That string of record quarterly profits? Who cares? Better to spout a vision for Net dominance and spend like a drunken sailor to bring it off fast--that'll do more for the stock. ''By treating money as more valuable than time, [traditional companies] are effectively shorting the Internet,'' he writes. ''This is a hugely risky strategy that ironically is being conducted under a banner of risk avoidance.'' The author's most compelling argument involves the need for companies to outsource the day-to-day, noncore activities--janitorial services, say, or manufacturing or product design--that take up 95% of most companies' resources. In the past, there was little choice but to tackle these jobs, which he labels ''context,'' as opposed to ''core.'' But with the Internet in place, there now exists a mechanism to find and do business with the most efficient provider of such services. Even if it costs more than the do-it-yourself method, outsourcing allows companies to consume less of the resources that are in short supply these days--time and management attention, primarily--in exchange for resources that are in vast supply, namely money. Outsourcing frees management up to get after the big opportunities of the e-future, since that's still the reason for those inflated Net price-earnings ratios. As if shedding or refocusing 95% of your daily activities isn't a big enough challenge, it gets worse. Given how quickly new Net companies can sprout to attack new opportunities, even today's ''core'' capability is bound to become obsolete. Sure, Amazon.com may be the best at managing the logistics of selling books online. But what happens when some upstart figures out a better way? Moore would say Amazon will have no choice but to outsource its hard-won expertise. If Moore shines with such themes, the book has major flaws. For starters, this is Moore's first attempt to move beyond marketing punditry to Wall Street matters--and it shows. For example, check out this prediction: ''A [stock market] correction is not likely to wash away the dot-coms and leave the traditional market leaders once again standing in all their glory. It is far more likely to re-price everyone while keeping them in their same valuation relationship to one another.'' Tell that to Amazon.com. Since April, its stock has been halved, to $30, while Wal-Mart Stores Inc. has merely been flat. What's more, Moore doesn't quite deliver in his effort to show nontechies how to compete Net-style. That's because his analyses--and thus his conclusions--stem from his experience as a consultant to tech outfits like Hewlett-Packard, Apple, and Xerox. So while he lays out an approach for treating a hypothetical dot-com threat, its value to execs from other industries is limited. And Moore fans will find that the second half of this 288-page book rehashes theories of prior volumes. Moore, president of Chasm Group in Palo Alto, Calif., pleads guilty to such criticisms. He told this reviewer he was trying to build on his past work and admits his analyses are tech-centric. In short, Fault Line is a flawed but useful book that's caught between business time zones. Given the bubble burst on Wall Street, some might say it reads like a last gasp of Net-management arrogance. But prudent readers would be well-served to consider Moore's warnings--they just might help you understand why the Net changes everything. By PETER BURROWS Burrows covers technology from Silicon Valley. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Old Economy, We Will Bury You PHOTO: Cover, ``Living on the Fault Line'' INTERACT E-Mail to Business Week Online

Copyright 2000-2008, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice