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Like fiction’s Captain Horatio Hornblower emerging on deck during a respite from a terrifying gale at sea, many large-company chief executives are looking around and feeling fortunate. It sure felt like executives were about to get swamped by the big wave of Internet start-ups, but then Wall Street changed the way it valued dot-coms. There’s wreckage strewn about, but executives have survived. What many don’t realize is that they’ve only moved into the eye of the storm. The next part of the hurricane is fast approaching because the Internet is quickening the spread and adoption of three new technologies: First is wireless communications. It used to be that you pretty much knew where a customer was when he was interacting with your business. He was either at a facility of yours, or he was attached to a phone or computer at his home or office. Now, with wireless phones and modems becoming so popular, the customer can literally be anywhere—at his home, in his car, on vacation overseas, outside your store, outside a competitor’s store. Second is new information appliances. Your customer won’t just deal with you in person, over a phone, or via a personal computer. The customer might use your Web site from a Nintendo machine, a Palm organizer, or a pager. His car might communicate directly with you via satellite. Eventually, his pantry might call to order food. His air conditioner might confirm an order after holding an auction for the cheapest electricity. Third is high-speed, "broadband" networks. We won’t just send words, or even still images, to each other. We’ll send huge amounts of data, including audio and video. Among other things, broadband will accelerate the move toward "peer-to-peer" uses of the Internet, such as Napster. People will be able to cut companies and Web servers out of the loop, sending rich information such as Napster’s music files directly to each other. (Peer-to-peer uses of the Internet will proliferate even if a music-industry lawsuit puts Napster out of business.) The result of the three trends is that we’ll send each other any kind of information, interacting via almost any device, from any place, at any time. It’s not exactly clear how this confluence of trends will change the Internet and e-commerce. But it will. And it will be disruptive. There has already been a huge amount of chaos and a number of sunken businesses [See "Killer App Hall of Fame, 2000,"] simply because the Internet has allowed everyone to communicate with everyone from a few places via a slow, maddeningly erratic collection of networks. Going wireless, via a host of devices, with rich content will push the capabilities of the Internet to new levels. This new wave of disruption will create winners and losers just as the first wave did. Captain Hornblower—a favorite of Winston Churchill’s in C.S. Forester’s series of 12 nautical novels—used to growl, "Steer small, damn you!" to admonish an inattentive helmsman to not let the wind spill out of the sails. But how should today’s captains of industry navigate through the gathering storm? Certainly not the way they used to. Nor, even the way recent successful start-ups did. Instead of going after niche markets, as start-ups did, or finding a way to put part of a business online, as big companies might have a year ago, today they’d be wise to consider ways to re-invent their core markets. Initially, start-ups succeeded by attracting early adopters—people inclined to try something new, like buying a used item from a stranger over eBay. Now, a huge percentage of the economy is connected to the Internet, is comfortable with it, and is prepared to use it for conducting business. Initially, big companies looked for ways to cherry-pick one great opportunity. But now, because e-commerce is becoming so rich and so broadly applicable, that is no longer enough. The good news for big companies is that mass markets require the kind of scale they already have—the brand, customers, industry expertise, transactions, liquidity, and investment budgets. That is ironic, because size was considered to be a bad thing in round one, when agility was prized over all else. The other big change in approach that’s needed is to shift the focus away from carving out assets to creating interesting dot-com business. Instead, established businesses should think about "spinning in" their e-commerce efforts. The old approach is exemplified by theSauce.com, which took bits and pieces of a food-distribution business and set out to create a stand-alone, online business that addresses a broad array of restaurant owners’ needs. Now, though, the stock market isn’t as enamored of those one-off businesses, so spinning them out isn’t as valuable. In addition, as big firms have discovered, these types of e-commerce programs are almost certainly the future growth engines of their businesses. Giving them to other investors risks giving away the farm. There needs to be some way to use these e-commerce killer apps to renew the business core. Charles Schwab is the classic example. It kept its online brokerage unit separate at the start, then basically told the rest of the business to start playing by the embryonic venture’s rules, such as very low fees. The approach was a huge success. These two changes in strategy—focusing on mass markets, not niches, and reinventing the whole company, rather than creating an entrepreneurial spinoff—mark a fundamentally new approach. Companies once won by unleashing a single killer app. In the future, companies will need to remake themselves into what I think of as killer "platforms." In other words, companies must find the right organizational, process, and technology approaches to let them launch a series of killer apps that addresses an array of markets and draws on all the companies’ resources. Microsoft, first with DOS and then Windows, built its dominance on killer platforms. More recently, many Internet companies have also set themselves up as "platform plays." For instance, Yahoo! and eBay have built infrastructures that let them rapidly expand their businesses into new areas, which have made all the difference in keeping them ahead of the rest of the pack. Among incumbents, Simon Property Group, the large mall developer, has set up a shopping operating system called clixnmortar that has launched a series of potential killer-app services that combine its extensive mall assets with online shopping capabilities. Do it right and you may be as successful as Captain Hornblower, who became Admiral Hornblower by the end of the books and was put in charge of a squadron of warships.
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