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 Technology Tidbits |
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Dr. Tom Stein
The October 30th issue of Fortune spends a lot of time analyzing the ‘crash’ of the dot-com world. But as the quote suggests, they say over and over again that although the first wave of dot-com experimentation is done, the Internet itself still changes everything. Roger McNamee of Integral Capital Partners says, “Now we’re going to settle down to the business of building the Internet industry.” Or, as Intel’s chairman Andrew Grove puts it, “It’s work, very unglamorous work… The heavy lifting is still ahead of us.” At the same time, the idea of “Internet time” has fallen by the wayside with the first wave of dot-com deaths. Net-based companies now realize that there are huge technical issues to deal with. None of the technical issues are unbeatable, but they will all take time to work through. As Joe Costello, CEO of Think3 says, “The idea that it was all going to get done in two or three years was complete crap.” Although we’ve changed our perception of what fast means – especially in the arena of software development – the hype of ‘Internet time’ is over. In other words, “It’s a marathon, not a sprint.” Some new-economy, so-called dot-com innovations – like the concept that a business doesn’t have to earn a profit – are dead. But others are true innovations in the way business works, and are here to stay. The crucial point is to make clear distinctions between the innovations that were just nonsense, and the ones that will truly change the way we do things. Then take those things and create a business that’s built to last. Another dot-com myth that’s now dead is the concept of creating an instant company. Get a lot of money from VC’s, build a brand, get people’s attention, sell advertising for that attention, turn them into paying customers, and then figure out how to turn it into a business. As Fortune’s article says, it’s clear that this ‘innovation’ has been a “categorical failure.” At Metafarms, we’re focusing on two innovations that we believe will allow us to create a business built to last, specifically involving livestock production and aquaculture. We are interested in creating a company, not an IPO event. We believe companies are built by creating a real base of customers, one by one. We are not a revolutionary company. We’re not trying to up-end the existing industry, we’re trying to support it. We don’t believe trading exchanges will get us there. We never approached the Web with a trading exchange business model, and don’t believe that the pure trading exchanges out there today will succeed. While we’re not knocking the people or the technology behind sites like Pigsale.com or Cattlesale.com, we don’t believe they are aligned with the way today’s livestock industries really work. Everybody was focused on building B2B exchanges in 1998 and 1999, and investors rewarded them with huge market capitalizations. The idea was to change the slow, old, inefficient way of purchasing input materials and supplies into a fast-moving, cheaper-priced, big transparent marketplace, where all buyers and all sellers could come together to get the purchasing done virtually. But it turns out that’s not the way the world works. In most industries, most companies have worked hard to establish deep relationships with a few preferred or favored suppliers, using a ‘total cost’ approach to the pricing. Under this model, price is only one dimension of the purchase decision; other attributes like quality, service, geographical location, and other perks like tickets to sporting events become a part of the total package. At the same time, there are (essentially ) no barriers to entry in creating an exchange; as of late 1999, some industry categories had upwards of 14 exchanges competing for the same dollars. Not only do companies not want to purchase their most important supplies through an exchange, they don’t want to deal with multiple exchanges. The result has been an impossible lack of liquidity among the exchanges, and either outright business closure or very depressed stock prices, good examples being VerticalNet and Internet Capital Group. “The real wealth creation is yet to come”1 The time in the Internet industry is similar to 1985 in personal computers and software. Some analysts were writing off PC’s as a fad, and software companies like Ashton-Tate were riding high. But the real wealth creation hadn’t even happened yet, with companies like Microsoft, Dell, Gateway, Lotus and others rising even while others – the first wave – died. The Internet is about cost-lowering and productivity-enhancing applications, not so much about revenue-increasing apps. There is a glimmer on the horizon of revenue enhancement that may come from enabling virtual supply chains. But the Holy Grail of increasing revenues per pig sold by creating a branded supply chain remains a long way off. At Metafarms, what have we learned from the first wave of dot-com business model failures? And how do we apply it to the pork industry? At the most
basic level, we are creating an operating system for the pork
industry. It’s not an operating system for a computer,
rather it’s an operating system for the underlying business,
which combines financial management with a biologic production
model. Meta is a Greek root, it means to take a step back and view
the big picture. And that’s what we’re doing. By taking
a step back, we are abstracting a generic, replicable model for
livestock production. We are not the only ones thinking about industry operating systems, but we are one of the few. This is very current thinking, but we have found one reference in another industry. Ibuilding takes all the services and functions to manage office buildings and aggregates them into a Web-based business. These include finance, procurement, inventory management, maintenance, work orders, scheduling. Today, these activities are managed with stand-alone applications or people walking around with clipboards. IBuilding is a tech company, not an owner or operator of real estate. You can think of it as an operating system for real estate. iBuilding was founded by 12 Enterpreneur Co. and Tishman Speyer. 12 includes Halsey Minor (CNET and Snap.com founder), Eric Greenberg (founder, Scient and Viant), and John Hagel (former leader, McKinsey strategy practice). Tishman Speyer is a New York real estate company that manages Rockefeller Center, among others. 12 is funded with $100+ million from founders and Benchmark Capital along with money from Board members including Mark Andreesen (Netscape), Pierre Omidyar (eBay), and Ted Waitt (Gateway). (By the way, I’m pleased that our thinking is consistent with that of a well-respected group of successful entrepreneurs.) The idea is to look at vertical industries and horizontal value chains with a new eye. The traditional way is to follow the tangible assets, who owns what and the physical movement of goods and services from farm to refrigerator. But the new way is to look at the intellectual value chain – the flow of goods, services, and information through sets of ideas, processes, and intellectual property. The step to an industry operating system comes from breaking the intellectual assets out on their own. Our pork industry operating system will be delivered through our MetaDesk, a digital dashboard (to borrow Microsoft terminology) where everyone involved in managing a hog production business can interact with their internal and external information sources. It includes the following applications and features:
The Application Service Provider (ASP) model changes the whole definition of an enterprise. An enterprise becomes a collection of applications, some owned, some out on the Net. But for it to work, the hosted applications have to be able to talk to one another and with in-house, customer-hosted applications.
I’d like to close by saying that it’s true, the Internet does change everything. But not everything will change. Fundamentally, the way we raise live hogs won’t change. But how we manage the processes will change dramatically. And that will make all our lives a lot easier while at the same time reducing costs and improving profitability. Thank you. 1Dot-Coms – What Have We Learned. Fortune, October 30, 2000: 82-104. 2Eric Greenberg, founder of Scient and Viant, quoted in Fortune,
October 30, 2000: 294. |
