An Excerpt from The Chasm Companion:

A Back-to-Basics Approach for Creating Winning Market Strategies

Introduction

During the last decade of the last century right through the Millennium celebration, we in high technology were feeling our oats, down to the last kernel. For a while, it appeared as if the celebration would be never ending. Technology-based companies flourished and the high-tech start-up, fledglings created as a result of the unprecedented amount of investment capital that had been generated from almost ten years of global business expansion, seemed to have their initial public offering scheduled by the dozen. Each of the IPOs redeemed the equity that had been lavished on virtually anyone savvy enough-or lucky enough-to be associated with each new company's birth. The center of this modern day gold rush was California's Silicon Valley-not only a place but also a state of mind as was noted by one of its longtime residents. People who cashed out of their options now put their newfound wealth into Northern California's housing market. People were now bidding up the price of virtually any house on the market by offering literally hundreds of thousands of dollars over a seller's asking price. Style and good taste, often only a minor distraction to the acquisitiveness of many Valley residents, might command still higher prices but was certainly no guarantee of either. The prevailing wisdom seemed to be that wealth attainment could and should be a scheduled event, duly noted in one's handheld electronic organizer along with the weekly massage and the "play dates" organized for the kids.

A sense of optimism and entitlement also seemed to flourish and there was no greater source than that which emanated from the companies that were exploiting the Internet "revolution." The New Age of the online information superhighway had finally arrived. The poster child of this new age was a new class of company simply and collectively referred to as the dot.com. The dot.com was a magical business model touted as the driver and the exemplar of the New Economy, an economic ecosystem where information products or those accessed through new information technology. The prevailing wisdom of the time asserted that the rules governing the development of markets for New Economy products and services would be radically different. New Economy companies were unparalleled models of business efficiency that would lay waste to Old Economy business models that clearly had outlived much of their usefulness. Authors and consultants everywhere wove a prophesy of doom for many of the Fortune 500. "Many of them simply don't 'get it'" asserted numerous self-anointed New Economy pundits. They opined that a new generation-the Internet generation-was now being spawned, born to point their browsers in an unceasing quest to learn, shop, and connect with others online. The industrial and financial dinosaurs that had roamed the earth since the industrial revolution, now laden with inefficiencies would soon be disintermediated, an uncertain fate that did not sound appealing. Those clever enough to exploit this paradigm shift would make tons of money as a result of consumers' relentless desire to point and click.

"We're going to use our first mover advantage and build brand early to aggregate and quickly monetize eyeballs," enthused one young, Armani-clad dot.com CEO clearly impressed not only with this phrase but also with himself for having said it during yet another "must attend" Internet conference that feted not only the latest crop of Internet-based companies but also those that "got it"-so noted by being asked to participate in various panel discussions on stage-and those that didn't, currently relegated to the audience but eager nonetheless to "get it" as well. Adding to the popular lexicon, another celebrated idea of the time was the concept of Internet time, a new, completely subjective measure that described the pace was pegged at which Internet businesses evolved over their old economy brethren. Digitization, cyberspace, stickiness, "walled gardens," and a variety of other metaphors stormed into our everyday speech-the new patois of the Internet generation.

Then a rather annoying thing happened. In March 17, 2000 the music stopped. The metaphorical New Economy balloon filled with Allan Greenspan's irrational exuberance finally burst. The equity markets, abused as never before and fed up with all the hype, concluded that many New Economy companies were of the species Ideus Stupidus. And what of monetizing eyeballs, building brand early, and filing S1's after the second round of funding and well before product beta testing and actual revenue generation? What of Internet time? Such time had come and gone.

Many New Economy companies were much more adept at marketing a good story then a good product; more adept at going public than staying that way. Meanwhile, the once vanquished Fortune 500 comprised of mostly old economy, old guard companies had caught up to the newcomers by using the same technologies and processes, but underpinned by proven value propositions, strong brands, established value chains and seasoned management. The victors now appear to be the vanquished. And the technological mass hallucination that we all experienced over the past several years now turns out, as it were, to be a kind of a bummer.

How's Your Memory?

Now it seems like we are back to a language that all of us understand. Some, understandably, are more vocal and shrill than others.

"Wall Street doesn't understand our space. We need to reposition our products and the company-and we need to do it now!"

"We need to rethink our business plan or we're not going to get our next round of funding!"

"Our market cap has declined by two-thirds! We need develop a new marketing plan for the next board meeting."

"We need to train our executives [formerly our middle managers] and our middle managers [formerly our new hires] how to develop and execute more effective marketing and sales strategies."

All the preceding quotes are real, jotted down in conversations with various executive staffs over the past two years. It's time once again for the business equivalent of heavy lifting.

While it may be the most challenging of business climates, what has fundamentally changed? Besides the net worth of many in this industry, not a lot. For those of you just joining us, it's called a business cycle. As depressing as that may seem, for many of us, it is back to business as usual, i.e. creating, fielding and communicating a demonstrably valuable product or service and doing so in a compelling, competitive way. During all the fun of the last decade, some of you may have forgotten all the details about doing this rather difficult work. For others, the memory of the last technology recession more may stir coincident memories of your senior prom, cramming for that organic chemistry final, or your first job interview as a second year business school student.

Coping with an economic downturn is always tough, but many organizations face some particularly thorny challenges. After an unprecedented run of uninterrupted business growth, many management teams must now think about and confront issues that many had only previously read about. Slowing demand for products and services, intense competition and surly, now profoundly disillusioned shareholders demanding performance have wrought havoc with many companies and their previously unassailable business models, of which many were so proud. A widening gap between what customers and investors now demand, and what companies can actually deliver has once again placed an extraordinary premium on understanding how markets develop and are likely to develop going forward.

Dare I say, is it time to return to the basics?

Well, let's take a deep breath and try to put this all in a more positive light. The New York Yankees don't forget how to play baseball during the off-season. But they still report to training camp in spring. Similarly, we in high tech have been playing a game where winning for many of us, was simply the norm. Welcome to a new season. While many may feel that the current environment forces them to postpone their scheduled wealth attainment, there are many others who are more insightful, seeing the high-tech industry for what it is, and always has been: the most fascinating, volatile, vexing and ultimately uncompromising business in the world. And unlike Wall Street, we actually make things!

If your are still intrigued by the possibilities of high technology and the wealth that lies therein-and fear not, the good times will roll again-welcome back. The party may be over for now, but the basics are still the basics.