05 Feb 2001  Research & Ideas

The Ten Deadly Mistakes of Wanna-Dots

HBS professor Rosabeth Moss Kanter outlines the ten favorite ways to fail—and two stories to show there's still hope for companies that want to cross the digital divide.

 

Increasingly, it seems, there are just two types of companies left in the world: dot-coms and "wanna-dots."

The dot-coms, of course, are the pure Internet companies operating on-line businesses. Most of them are less than five years old, their activities exist only in cyberspace, and they burn cash faster than they make it. But already successful pioneers such as eBay, Amazon, and Yahoo! have transformed industry dynamics, opened new career aspirations, and become emblematic of a new workplace style.

The wanna-dots are already-established organizations, many of them industry leaders in the off-line world, seeking to incorporate the Internet into their businesses. They resent being dismissed as "not-Internet"—off-line, land-based, or at best "clicks and mortar"—and are desperately trying to get on the dot-com bandwagon. Some are getting there a lot faster than others.

Most wanna-dots don't rise to the challenge with the same resolve. Lacking the commitment or knowledge of how to change, the laggards go through different phases en route to the Web. First, they are in deep denial about the threat to their way of life. Second, as the need for change becomes undeniable, they shift to blame—trying to sue new entrants, for instance, for not playing by the old rules. Third, they begin to take action, but only in the form of insignificant alterations. At this point, a company's leaders have decided they want to play in the new economy but without making any real changes in the way they operate. My favorite characterization of this stage comes from a Fortune 100-level CIO. He says they're just "putting lipstick on a bulldog."

The bulldog doesn't suddenly become beautiful because it was forced to wear lipstick.

That kind of makeup job is extremely hard to do. Worse yet, it doesn't work. The bulldog doesn't suddenly become beautiful because it was forced to wear lipstick. Nothing else about the bulldog or its behavior has changed. It makes the bulldog angry. And the use of cosmetics just covers up problems that still exist under the makeup.

Ten Proven Ways to Avoid Deep Change

  1. Sprinkle Internet responsibilities throughout the company—a little Web site here, a little brochure-ware there. Let them all go forward, as long as they stay small and innocuous. If any look like they have potential, raise skeptical questions at executive meetings and repeat frequently that the Internet is overhyped.
  2. Form a committee to create a new corporate Internet offering, staff it with people from unrelated areas who are already doing five other things, and don't release them from their regular jobs. Give the leadership role to a bored executive as a reward for his years of loyal service. (Never mind that he has no Internet business experience; he surfs the Web, doesn't he?)
  3. Find the simplest, least-demanding thing you can do on the Web. Go for copyware that looks like what everyone else is doing. Instead of a killer app, create a "yawner app." (That will save time and money. And that way, you can cross the Internet off your to-do list quickly.)
  4. To build the site, choose the vendors that are the most dismissive of your traditional business (they think you're dinosaurs) but whose abilities you're least capable of assessing. Then hand over the technical work to them (that way nobody inside has to learn anything new) but refuse to take their advice about how the site should look (after all, you're the industry experts). Use more than one vendor—so you can have the fun of watching them slug it out.
  5. Make sure what you do on the Web is exactly the same as what you do off-line. Duplicate your traditional business assumptions on-line. (After all, the Internet is just a tool, isn't it?)
  6. Insist that an Internet venture meet every corporate standard: cost controls, quarterly earnings, recruitment sources, compensation policies, purchasing procedures. Allocate just enough resources to keep it alive but not enough to risk its becoming an innovator — because that would require more investment.
  7. Under the banner of decentralization and business unit autonomy, reward each unit for its own performance, and offer no extra incentives to cooperate in cyberspace. (Maintain your belief that conflict is a healthy spur to higher performance; let the victor get the spoils.) Keep reminding divisions that they are separate businesses because they are different, and that's that.
  8. Compare your performance with your traditional industry competitors in the physical world. (That way you will always have someone to whom you can feel superior.) Dismiss on-line competitors as ephemeral fads. And don't even consider whether companies from unrelated industries could steal across the borders and poach your customers by using the Net. (Why worry about the hypothetical?)
  9. Celebrate your conversion to e-business by giving people in the rest of your organization tools they are unable to use, requiring changes they are confused about making. Tell people this will help them do their work better. Schedule training classes at a distant location. Watch as the new tools take too much time and make it harder to get the work done, then punish people for their resistance to change.
  10. And last, but not least, never forget that the company, not the customer, is in the driver's seat. The Internet is an opportunity for us to communicate with them.

Many wanna-dots will ultimately arrive in cyberspace, although not necessarily by the same route, as we will see in the two examples that follow. The story of cookware catalog vendor and retailer Williams-Sonoma shows how barriers can be overcome even if a company is slow to the Web. Williams-Sonoma took several years to become convinced of the importance of e-commerce, despite its direct-marketing know-how. Honeywell's story is just as instructive. It shows how a company led by e-believers from the start can make fast progress on the Web—but still be challenged by systematic change issues.

Williams-Sonoma

Williams-Sonoma is a great example precisely because it had such a hard road to travel from initial denial to its first round of successes. The CEO was converted from skeptic to sponsor through two pilot ventures that were improvised quickly. So the first lesson is: when in doubt, create small experiments. Pick one loaded for success that doesn't require much change and one that demonstrates the virtues of changing. Don't bet the company, and don't waste time. Just act, simply and quickly, to have something concrete and positive to use to convert skeptics.

Lesson number two: new ventures need dedicated teams, given space and autonomy. But venture teams also need to be responsive to business realities. And they need to have sponsors in the wider organization to back them up because so many things can go wrong.

The third lesson, then, that Williams-Sonoma offers: recognize that e-business requires systemic changes in many ways of working. Connect new e-ventures to the company mainstream. That's where the synergies are, but that's also where the obstacles are. Without good relationships, without diplomats who can negotiate across all parts of the organization, the obstacles will never be confronted or overcome.

Honeywell

What does the Honeywell example teach us? Mainly, the difference between the pacesetters and the laggards in the wanna-dot race. Pacesetters embrace the Internet as an opportunity for questioning their existing models and experimenting with new ways technology can improve their businesses. They are more likely to consider the systemic consequences of their Internet propositions. They do not wait for a plan to spring full-blown from the heads of top management; they improvise through multiple experiments until they find the approach that seems right. They then establish senior-level guidance to ensure that the approach is strategic, that related initiatives are integrated, and that the rest of the company is cooperative. They work hard to balance autonomy for an e-venture with appropriate integration that can create synergies between the on-line and off-line offerings. They start with curiosity and questioning, move into experimentation and innovation, and link those to cultural change.

Lessons Learned

A company is not transformed just because it creates a Web site. Success requires a more complete makeover. It requires rethinking the way the work of the whole organization is organized. It requires challenging assumptions about customers, internal and external communication, decision making, operating style, managerial behavior, employee motivation and retention—and then defining a new way. And ultimately, that's not a technological problem. It's a human one.

Most Common Barriers to Change

What are the most common barriers to e-business change? I identified a set of 17 barriers through preliminary interviews and tested them in my global e-culture survey. The findings show that companies more than 20 years old face fewer marketplace and technology barriers than younger ones do, but they face many more internal barriers—from decisonmaker uncertainty to divisional rivalries.

Barriers to Change

Source: Evolve! Succeeding in the Digital Culture of Tomorrow, by Rosabeth Moss Kanter (Harvard Business School Press, 2001).

Excerpted with permission from "The Ten Deadly Mistakes of Wanna-Dots," Harvard Business Review, Vol. 79, No. 1, January 2001.

Rosabeth Moss Kanter is the Ernest L. Arbuckle Professor of Business Administration at Harvard Business School. Her latest book, from which this article is adapted, is Evolve! Succeeding in the Digital Culture of Tomorrow, Harvard Business School Press, 2001.

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