Pick up virtually any major media publication covering the dot-com shakeoutof the past year and you are likely to come across a slight variation on thefollowing theme: “the New Economy was a bust.”
The theory goes something like this: the Nasdaq has bottomed out, the NewEconomy business models adopted by the dot-coms did not work, and investment capital in information technology has dried up. Combined with the recent negative economic indicators, we are told that it is obvious that businesses must get back to “Old Economy” fundamentals and forget all this talk about capitalizing on the next “new new thing.”
But was the New Economy really a complete hoax? Many economists actuallyconsider e-commerce to be only a small portion of what the mediacollectively calls the New Economy. And despite the media’s Chicken Little cries that the sky is falling, these experts say that the New Economy is alive andwell.
“I think the press has got the story fundamentally wrong,” Dr. Robert D.Atkinson, director of the Progressive Policy Institute’s project onTechnology, Innovation, and the New Economy, told the E-Commerce Times. “The press equatedthe digital revolution with e-commerce — they thought that’s what it was allabout, but it’s really about a much deeper set of changes.”
So if the New Economy is not defined by the success of the dot-coms, what is it?
“This is a structural change in the economy that happens once about every 50years,” Atkinson said. “Last time — in the 1940s and 50s — the New Economy was the change from small manufacturers to a mass-production corporate consumer economy. Information technology is the driver — ithas nothing to do with whether or not some dot-coms go out of business.”
Mitchell Levy, author of the book “E-Volve-or-Die.com,” agreed with Atkinson, saying that peaks and valleys are a natural part of the current New Economy landscape.
“[The New Economy] is part of the third major age in our societal growth,” Levy said. “First there was agricultural, then industrial, and now the Internet age — andwe haven’t even begun to really enter the Internet age yet. There are many’New Economies’ when a change in the way we conduct business occurs, bundledwithin these three ages of business.”
Out with the Old
In other words, the New Economy commonly referred to by the press isactually a subset of a much bigger picture. As described by Levy and Atkinson, the true New Economy consists of dynamic global marketscharacterized by flexible, digitized production — where risk, innovation,being first-to-market, and forging strategic alliances rule the day.
So where does that leave all the pundits who say the New Economy is dead,and Old Economy principles are required for e-businesses to survive?
“The only Old Economic principle [that e-commerce companies] have to rely on isto make money — beyond that things have changed,” Atkinson said.
Back to School
Both Levy and Atkinson pointed to several New Economy principles thate-commerce companies will have to abide by if they expect to succeed in thenext dot-com evolution.
“Owning a piece of the process is a New Economic principlethat still applies,” Levy said. “If companies can figure out how to own part of thebusiness process … they can succeed. From amanagement style perspective, the old days of business plans that last five to six years are now gone.”
Added Levy: “That was Priceline’s problem. They didn’t modify theirvision after seeing what their customers were interested in.”
Atkinson said that succeeding in the New Economy is about providing highlycustomized information, services and products.
“Speed is critical,” Atkinson said, adding that the importance of being first to develop new products or services intensified with the dot-comexplosion, and that has not changed.
Both analysts also said that operational models should becomeless hierarchical, and companies should find ways to allowemployees to pass ideas to upper management.
“Some of the best ideas come from the bottom butonly get implemented top down,” said Levy.
According to both analysts, the death of the New Economy and the fallout from the dot-com shakeout have been greatly exaggerated.
“Smart companies will figure out when we’re about to hit peaksor valleys,” Levy said. “We’ll have similar excitement about dot-com companies again.”
Atikinson added that “there are many different areas where e-commerce will dramatically change what we do and how we do it.”
Maybe people just weren’t properly characterizing the New Economy before — very few natural or manmade phenomena just skyrocket higher and higher without any retrenching or retreats. The New Economy is just like any other process — it has its fits and starts, its ups and downs, but in the long run things have changed.
People who didn’t think downturns were possible were living in dreamland — and it will happen again the next time there is a big economic boom. Collective AM nesia.
It is highly absurd to equate the fall of dot-coms to new economy. In fact it is arbitrary to draw comparison between old and new economy. The new economy’s objective is to improve old business processes by adding value and make them more efficient. And this is achieved by using the Internet as an enabler which could be termed as the third industrial revolution. It will take its own time & toll before it takes its deserved position in business and domestic life. The netpreneurs, who will manage to keep their ventures alive till the time the Internet is fully accepted, will emerge as winners.
Of course, if you change the definition of New Economy to accommodate your position, you’ll be always right!
The New Economy concept was based on the assumption that the widespread adoption of technology in companies and business processes would mean such an increase in productivity that it would create an scenario in which it would be possible to have unlimited growth without inflation. Thus, in theory, the business cycle was put to sleep.
It’s impossible to argue against the fact that the role of technology in the economy is playing a significant role; but tecnology is just a medium, a tool, and a tool (and an extremely important one, at that) does not a new system make. So, it’s the same Old Economy, but with different ‘weapons’, if you will.
Therefore, the concept of ‘New Economy’ has, in itself, proved absolutely wrong; it has failed. We are unfortunately seeing that the business cycle is far from dead.
Does this mean that the impact of technology in the Old Economy has failed? Absolutely not. It brings, in fact, all the elements of the new economy as described by Levy and Atkinson (dynamic global markets characterized by flexible, digitized production — where risk, innovation, being first-to-market, and forging strategic alliances rule the day). Significant traits for which technology should be credited (although I’m not sure if I totally agree with some of them, especially after seeing what happened to some companies who were first-to-market).
But these factors alone do not define a New Economy: we’re still fundamentally based in the same rules as always, and profit matters (at least, both Levy and Atkinson concede that…).
The new economy has just begun. The last two decades of the century just passed, ushered in the sea-change that is the new economy. Dot-Coms were just the plume that adorned the first wave of new businesses that fed its central appetite – the Internet. The Dot-Coms were inevitable. They were like Ford’s Model-T that led the last century into automation. They are the risk takers that grab for the gold, or is it the brass ring, and went for broke. Toss in the naural human proclivity for “irrational excuberance” and touches of greed and what do you have? A crash of the early racers. Now, the reality, the finish line is still the 26+ miles of a marathon. It is time to regroup catch the next breath, find your mark, get ready Go! The Internet is here to stay at least for the foreseeable future. In the meantime, give the Dot-Coms a thumbs up. They have paid their dues