MAY 14, 2001
The e.biz 25
25 Leaders for a Dangerous Time |
| The Internet forced a revolution in the way companies are managed. For the CEOs of upstarts and Old Economy players alike, the focus has been on making decisions in a heartbeat, innovating fast, and looking for ways to tap the Net to reach new customers and streamline operations. Now we're in the midst of what experts say could be the biggest tech slowdown in 15 years. With the pressure on to cut costs and meet quarterly earnings expectations, what's a CEO to do?
Ask our e.biz 25. These are the most influential people in e-business--everybody from empire builders like AOL Time Warner (AOL
) Chairman Steve Case to Monica Luechtefeld, executive vice-president of e-commerce at retailer Office Depot (ODP
). Those two have wisely built bridges between the worlds of bricks and clicks. Their advice is bold: Don't just hunker down and try to wait it out. Invest, build, develop new products, and prepare for the upswing. Technology and the Internet may not be growing licketysplit, but they aren't going away. Says Jeffrey K. Skilling, CEO of Enron Corp. (ENE
), one of our 25: "A lot of people will pull back. They will be missing tremendous opportunities. Those with capital and talent should push forward and widen the lead."
Doing this in the face of a trigger-happy Wall Street will require dynamic leadership and cast-iron stomachs. We've got that on our e.biz 25. These are the pioneers, the people with the new ideas, the out-of-box thinkers, and the survivors--especially the survivors--who will shape e-business for years to come.
Some of our 25 have been on the list before. Michael Dell, CEO of Dell Computer Corp. (DELL
), for one. He's a pioneer who has used the Net to reach customers and revamp his supply chain. Now, in the midst of the downturn, Dell is turning up the heat on competitors by slashing prices ruthlessly. Thanks to his foundation of Net technologies, Dell can do this and still make a profit. The result could be a massive restructuring of the PC industry, with some of Dell's competitors losing market share at a gallop.
Others land on the list because of their potential for shaking up the status quo. Example: Rick Belluzzo, Microsoft Corp.'s president. Microsoft (MSFT
) has been ho-hum on the Net--until now. Belluzzo has turned Microsoft's MSN into the No. 2 portal on the Web, and now the company is committed to spending $2 billion this year on research & development for its .Net strategy for supercharging the Web. It may well make the Net more useful--and easier to use. And Microsoft could leapfrog from laggard to leader.
Then there are the folks whose future is very much in doubt--and that makes them even more important to watch. Squarely on the e.biz hot seat sits Jeff Bezos of e-tailer Amazon.com Inc. (AMZN
) With the online superstore's revenue growth slowing and its $15 stock off its peak by 85%, the man who scared the bejesus out of the nation's traditional retailers isn't so terrifying now. But he's still the trailblazer of e-tailing. Whether he fails miserably or triumphs in the end, how he fares will tell us much about the next episode in the Internet saga. "This is a good time to learn, to explore, to get ready," says Rosabeth M. Kanter, professor at Harvard Business School.
Indeed, economic slumps have been launchpads for companies who know how to take advantage of them. The outfits that are likely to pick up momentum in this downturn are the companies that create or adopt new technology, experiment with new business models, and expand aggressively. That's certainly been true in the past. During the 1990-91 recession, EMC Corp. (EMC
) focused on high-end storage technologies and innovated its way through hard times. Chrysler (DCX
) retooled its design process and began farming out component manufacturing to partners--and was the only one of the Big Three to post a profit in 1992. Arrow Electronics (ARW
) bought smaller competitors and expanded in Europe, emerging as the No. 1 electronics distributor in the world. "Slowdowns can be a great opportunity for companies that are prepared. It's time for the strong to get stronger, and for the relatively weak to get stronger, too," says Orit Gadiesh, Chairman of consulting firm Bain & Co.
The Internet's early winners focused on boosting sales. But during a downturn, that's not nearly enough. The Net can be used to supercharge every aspect of a company's operations, from market research and customer service to engineering collaboration and linking up suppliers. Consider e.biz 25 member Pradeep Sindhu, co-founder of Juniper Networks Inc. (JNPR
) He used this wall-to-wall approach to make his four-year-old upstart the leader in high-end network routers. It was built from the ground up to capitalize on the Net. The company takes orders over the Web and automatically passes them to contract manufacturers who make and ship the products. This frees Juniper to concentrate on designing products that trounce the competition. The payoff: Juniper's operating margin hovers around 30%, nearly double the average in the hardware business.
The most successful e-businesses don't just chase the latest hot idea. They figure out which technologies are really right for them. Gary M. Reiner, chief information officer at General Electric Co. (GE
), one of our e.biz 25, turned up his nose when many industrial companies joined consortiums that set up public e-marketplaces. GE has instant economies of scale with its 11 different businesses, so it can reap huge savings by combining all their buying into the company's own private e-marketplace. GE expects to save $600 million on procurement over the Web in 2001.
Many established companies rapidly spun off independent Internet divisions, and for some--NBC, for example--that turned out to be a mistake. The latest thinking is that companies like retailer Office Depot got it right. It set up an independent organization, run by Luechtefeld, but its bricks and clicks are cemented together. For instance, customers who need something immediately can check online to see if the item is in stock at their local Office Depot. The company logged $850 million in online sales last year, making it the No. 2 online retailer after Amazon.com
In a downturn, charismatic leadership is more important than ever. With revenues sinking and stock options underwater, workers need reasons to believe. "You have to persuade people to stay with you for the ride," says Haim Mendelson, a professor at the Stanford Graduate School of Business. While most companies are laying off, some, like Sun Microsystems Inc. (SUNW
), pledge to do so only as a last resort. CEO Scott McNealy, one of our e.biz 25, believes layoffs break a social contract with employees. By holding back, "we're protecting the long-term shareholder value," he says.
For CEOs who have been the company's visionaries during the Net's go-go years, now is the time to buckle down and pay attention to operations. It's advice that Amazon's Bezos takes to heart. The company's goal is to post an operating profit--excluding special charges--in the fourth quarter. He's concentrating on operating efficiencies. And he's using Net technology to get there. Right now, Amazon is installing a system that will automatically route e-mails from customers to the appropriate service representative, saving time and money.
Bean-counting may be back, but so is fear. And leaders who let themselves be ruled by fear won't be able to handle the balancing act that's required of them in these difficult times. "Some people pay lip service to the principles of leadership, but they flush it away when they're running scared," says Raymond Miles, professor emeritus at the Haas School of Business at the University of California at Berkeley. These 25 show no sign of turning tail.
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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