InReview – Issue 21

Startup.Com directed by Chris Hegedus and Jehane Noujaim; produced by D. A. Pennebaker tracks the 19 month rise and fall of GovWorks, an actual startup that raised $60 million with the aim of making government services more efficient. The film adeptly walks us through the boilerplate phases of pre-IPO Internet startups; choosing a name, the manic-depressive financing game, preoccupation with image and “business models” over substance and profitability, and downsizing and unraveling — all against a backdrop of politicking among founders, management and investors. The nucleus of the film, however, is the relationship of best friends Kaleil Isaza Tuzman and Tom Herman, the inexperienced, 28ish co-founding executives, starting with their early collaborations and conflicts, to their eventual falling out and final reconciliation.

With the focus on Kaleil and Tom, reveals part of what inflated and ultimately popped the Internet bubble: the pursuit of glamorous business visions by young inexperienced managers. Kaleil, the more aggressive and higher profile founder, frequently hypes GovWorks’ “$600 billion market,” mingles at one point with President Clinton, but is still sufficiently youthful to solicit girlfriend advice from mom. Tom, a single father who is equally unseasoned as a business executive, has a more grounded moral schema. For him, personal relationships precede personal wealth creation.

The part of the story that’s untold in is the economic environment that incubated the Internet gold rush — venture capitalists wagering on a seemingly endless pipeline of IPOs, with peripheral interest in creating underlying economic value. GovWorks and many other Internet startups were doomed from the start by not only their inexperienced management teams, but also by the gambler-investors who lured and manipulated them.

In the end, Kaleil comes to terms with his real priorities and admits to Tom his three biggest failures during GovWorks: loss of Tom’s trust, breaking up with his girlfriend, and “letting down all the investors who believed in us.” Though many like Kaleil learned from their mistakes, human nature dictates that The Next Big Thing (bioinformatics, genetic engineering?) likely will provide a sequel. For now, is worth the rent.

Reviewed by Gerard Beenan

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Next: The Future Just Happened by Michael Lewis; New York, W. W. Norton and Company, 2001; 236 pp.

Michael Lewis is the author of several books including A New New Thing and Liar’s Poker. In Next, Lewis sets out to write about “the Internet consequences of society” since, he decided, it is too early to write about “the social consequences of the Internet.” In fact, this book is really a collection of essays. It would have been nice to have had a bit more reflection on the linkage between the separate pieces.

The first essay deals with a fifteen year old boy in New Jersey who uses the Internet to manipulate the stock market. He gained $800,000 in six months which prompted an SEC investigation. Through interviews with the young man, his parents, the SEC, and through transcripts from the investigation, Lewis examines what is right and wrong in this Internet era. It is a disturbing, insightful piece that is well written.

The second essay follows this theme with three stories about novel uses of the Internet. One featured a young man who started offering legal advice through an AOL website, posing as a 25 year old law student, though he was only fifteen. Another was about a code hacker in England. A third related the resurrection of a rock-band Marillion that by-passed record labels and funded its resurgence through direct contact with its fans through the Internet.

The third essay deals with the engagement of the users through the Internet in the development of products. The discussion focuses on a web TV product. Market research may never be the same again.

The last chapter, “The Unabomber had a Point,” listens to prominent figures from the technology industry of the past (the 80s and 90s) who are asking questions about the future direction of the movement. Danny Hillis, founder of the Connection Machine, has raised questions about the obsession with speed, now that he is forty. He is building a ten thousand year clock. Bill Joy, chief technology officer for Sun, wrote an essay in Wired magazine in April 2000 about his concerns over the direction of the technology community. Lewis talked with both Hillis and Joy to get updates on their view of the future.

In the end, Lewis is more convinced by the teenagers than the senior technologists. Next is fun to read and has some remarkable insights. Lewis has an engaging style and his willingness to engage with these people from technology leaders to teenagers allows us vicariously to do the same. Some of the interviews took place in the summer of 2001, so this book contains very recent material. The downside of this book is that it needs more time, more reflection. Only a few sentences link the teenagers and the more senior technologists. It is still a good read, but could have been much better a year from now.

Reviewed by Al Erisman

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Good to Great: Why Some Companies Make the Leap… and Others Don’t by Jim Collins; New York, HarperBusiness, 2001; xiii, 300 pp.

Jim Collins runs his own management research center in Boulder, Colorado. He was previously a Stanford Business School professor and co-author (with Jerry Porras) of Built to Last (1994) one of the all-time best — and best-selling — business books.

Collins and his research team spent five years studying companies that went from good to great. They had to have been good for at least fifteen years, then undergone a transition and demonstrated greatness for at least another fifteen years. Greatness meant outperforming the stock market by an average of seven times. It also meant standing out clearly against one’s competitors, not just being part of a generally rising industry sector. With these selection criteria it is no wonder only eleven companies made the cut.

Collins and his team discovered six basic characteristics of companies that moved from good to great. As in Built to Last, Collins is a superb teacher/writer. Every chapter has clear arguments and definitions, great metaphors and images, abundant illustrations, and honesty in dealing with ambiguity.

The first characteristic of good to great companies is that they have “Level 5 Leadership” — leaders who are more than competent managers and effective leaders and show an unexpectedly powerful combination of personal humility with professional will and determination. Extroversion and charisma are not characteristics of most of these leaders! Second, good to great companies hire great people who fit with their mission and “get the wrong people off the bus.” Rather than starting with “what,” they start with “who.” Executive compensation practices, by the way, do not correlate with performance, Collins argues.

The third characteristic is “disciplined thinking” that simultaneously “confronts the brutal facts” and “maintains unwavering faith in ultimate victory.” The fourth characteristic is a focus on a “hedgehog concept” (doing one thing extremely well — in contrast to the “fox” who has a thousand different guises and tactics but can’t defeat a hedgehog). The hedgehog concept is to be found at the overlap of (1) what you are deeply passionate about, (2) what drives your economic engine, and (3) what you can be best in the world at. Your hedgehog concept must be rooted in your core values, market realities, and your competencies. This is how you decide what to make your focus.

The fifth characteristic is a culture of discipline. This means finding self-disciplined people and it means fanatical, disciplined commitment to the hedgehog concept. Good to great companies are not tyrannies, anarchist utopias, or bureaucracies. They have great freedom and entrepreneurship — but always within a culture of discipline.

The sixth characteristic is the disciplined use of technology as an accelerator. Technology does not lead — it serves the hedgehog concept. The good to great companies have great track records for technological innovation and leadership, but they do not jerk around pursuing “the latest thing.”

Going from good to great is like pushing a heavy flywheel until it begins to have some momentum. There are no magic bullets or secret tonics that will do the trick. Collins suggests that Good to Great is not a sequel but a “prequel” to Built to LastGood to Great describes how to build a good company into a great one;Built to Last describes how then to sustain it as an enduring great company.

Company goodness and greatness are defined, here, by the numbers, not by social contribution, employee happiness, technical innovation, or other less quantifiable, more subjective criteria. This was a practical decision to enable the research. But it does leave to the side some important questions concerning personal meaning, environmental responsibility, and global impact. Philip Morris is the only company that is a featured star in both Good to Great and Built to Last, by the way.

This is a great book, nevertheless. The discussions of level 5 leadership, the hedgehog concept, and the role of technology are three especially important contributions.

Reviewed by David W. Gill

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The Agenda: What Every Business Must Do to Dominate the Decade by Michael Hammer; New York, Crown Business, 2001; xv, 270 pp.

Michael Hammer is a consultant, writer, and speaker, best known as the lead author of Reengineering the Corporation
(1993), a book I loved. Hammer’s ideas were radical and refreshing. Many companies would do well to go back and take a fresh look at this book. Yes, many “reengineering” projects failed, but understanding the cause of such failure would be a great way to re-look at the radical use of technology in transforming the business.

For this reason I approached The Agenda with enthusiasm. I was disappointed. The Agenda is not a bad book; in fact, it is an excellent, very readable summary of ways that technology has led to the transformation of business. Chapters like “Give Your Customers What They Really Want,” “Put Processes First,” “Measure Like You Mean It,” “Extend Your Enterprise,” and “Prepare for a Future You Can’t Predict” are all well written.

For a manager or professor who wants a good summary of major business trends over the past decade, this is an excellent reference. The problem is, I didn’t find anything here that I hadn’t read before. At no point did I jump from my chair and say, “I never thought about that!” Or even, “I never heard it expressed that way!” I could find no radical and refreshing new idea.

So for what it is, this is a useful book. Just don’t expect to break much new ground unless you haven’t done much reading lately.

Reviewed by Al Erisman