After the Fall of the Dot Coms: Five Steps to Recovery for Traditional Businesses
by Jack Shaw

During the stock market frenzy of 1999, many dot com stocks became rockets. Venture capitalists, in turn, responded to the market by frantically funding more of these Internet-based businesses. Unfortunately for investors, many of the dot com businesses were fantastic performers in the short-term, but were not backed up by solid management and realistic business plans.

The initial dot com mania caused many businesses to develop Internet or e-Commerce initiatives of their own. Many moved forward quickly to invest large amounts of time, money, and effort into their Internet activities.

By early 2000, businesses observed that, for the most part, their Internet strategies were not making money. And, investors saw that the dot coms were not making any money. Wisely, investors decided they should sell the stocks of those dot coms that were in financial jeopardy.

Less shrewdly, many businesses decided that if their Internet strategies were not making money, they should cut back technology funding as a poor return. These cutbacks were often shortsighted. In most cases, the reason Internet strategies were not making money is that businesses were simply superimposing new technologies over outmoded business models and processes.

At the time of this writing multiple dot coms have crashed. The stock markets are down. The economy has dramatically slowed.

Some managers and executives blame the weak economy on technology itself. Others say that the crash of the dot coms proves that this technology was all hype. Still others state that we are at the end of the Internet era, that technology has reached a final plateau, and that we will soon look back on the Internet as a fad — something like CB radios in the early 1980s.

For investors to divest stocks of dot coms that showed no promise of profit was generally a wise move. But for businesses to stop investing in technology was not. The crash in the market value of dot coms in no way diminishes the importance of making effective use of technology to better manage business processes. In fact, using technology proficiently is now more important than ever.

Some have referred to the current slowdown as, “The pause that refreshes.” The future is still bright. Not only are our long-term prospects as strong as ever, but we have been through an excellent learning period during the last couple of years. The economic slowdown of 2000–2001 removed a lot of impractical ideas from circulation, and got businesses back to focusing on the fundamentals— quality, speed, cost effectiveness, productivity, and profitability.

But back to basics doesn't mean back to outdated processes and obsolete technologies. It means sticking with your core competencies. It means leveraging current and emerging technologies to update your business models and redesign your business processes to function at levels of speed, quality, productivity, and profitability previously unimagined.

Traditional bricks and mortar businesses that have been hampered by the current economic slowdown must take five steps to recover. Each step requires skillful use of e-Business technologies.

Step 1. Respond to the demands of your most important customers. Start by identifying your most important customers. In general, these are the customers who are most profitable for you. These are not necessarily those who generate your highest revenues. You MUST be aware of and respond to their reasonable technology demands.

If your most important customers (and those prospects who show promise of being important customers) want to communicate by email, then you need to have email in place and people to answer it quickly. If they need to place orders and check on order status via your web site, then you'll want to make sure that your site can handle online order processing. In a difficult economy, it is essential that you sustain your most important customers.

Step 2. Maximize the productivity of your people. It is crucial that you maximize the productivity of your people. In an economic contraction, no business can afford to have under-qualified, under-educated, or poorly equipped staff. Your people are, by far, your most important and your most expensive resource. You must make the most of them.

Many businesses are cutting staff to manage expenses. This may be necessary at your business too. An economic downturn can provide the impetus to trim people who are poorly suited for their jobs. If the survival of your business is at stake, you may feel that a staffing reduction of 5% or 10% is necessary and sufficient to ride out the storm.

But you will probably be better off reducing staff by 10% or 15%. The additional savings can then be invested in your remaining people -- providing them with the best tools and training to do their jobs as well as possible. By cutting fewer people you save a handful of jobs. But, everyone remaining may lack the means to do their jobs well. Further, they may be uncertain as to the permanence of their job when the company is unable to respond to the challenges of the market.

Don't misunderstand my intent. A recovery is coming. Don't strip yourself of good people if you can possibly avoid it. But don't threaten the survival of the company and its ability to respond when that recovery does come by trying to save a few jobs — perhaps at the longer-term cost of many.

Step 3. Determine the needs of your customers. Seek to understand the real needs of your customers. Know that these may be different from their demands. Customers often ask for what they want in the short-term rather than what they really need in the long-term. Survey your customers about their needs. Then follow up by asking them why they have a given need and how they are going to use whatever service or support they want you to provide.

By understanding their true needs you accomplish two things. First, you can screen out unreasonable requests that would deplete your resources without adding any real value for your customers. Second, you can better prioritize your responses—thereby assuring that you can meet the real needs of the highest number of your most important and profitable customers.

Step 4. Harvest the low-hanging fruit. Take a careful look at your business processes. There are almost certainly significant opportunities for benefit—even above and beyond the changes needed by customers or to increase productivity. Perhaps it's removing excess inventory from your supply chain, or accelerating your product development cycle, or better coordinating your advertising and marketing efforts.

Low-hanging fruit has as many as possible of the following characteristics: