As we sit at midyear mired in an economy that seems to be going nowhere, the Internet fiasco is an object lesson in what's wrong. Everywhere you look there's tremendous excess capacity as high-tech companies spent billions of dollars to develop stuff that corporate customers now see no immediate need to employ. As Phil Dusenberry once put it, marketers are taking a seventh-inning stretch in which nobody is buying much of anything from anybody. They have become exhausted by the irrational exuberance that not so long ago permeated the business landscape, and they are in no hurry to get back to more tumultuous times.
Global Crossing is a high-tech company left holding the bag. It spent $20 billion to construct a 100,000-mile telecommunications network only to find that too few companies need it or want it.
"A weakening economy in the U.S.-and signs of trouble overseas-has scorched the information-technology budgets of many firms," The Wall Street Journal reported. "Some of the companies to which Global Crossing planned to sell capacity have gone out of business or filed for bankruptcy protection, while others are conserving cash amid sluggish revenue and heavy debt loads."
The WSJ says the amount of underused long-haul fiber capacity in the U.S. is about 97%.
So what we have here is a scenario where everybody is laying back, thankful that competitors aren't forcing everyone to become more aggressive.
These are times of great opportunity to make bold-but also basic-moves. Now is not the time to take on a host of new initiatives that could upset and confuse the troops, as Ford Motor Co. seems to have done. Business Week, in a cover story, says there's a "backlash against the pace and intensity" of many moves made by Ford CEO Jacques Nasser. "Nasser may still have the board's support, but he has lost the goodwill of some Ford employees, the trust of many consumers and the confidence of Wall Street," BW states.
But now is the time to start or acquire strategic products or services that fit with your current portfolio and that can be bought on the cheap.
The same issue of Business Week, for instance, notes that Morgan Stanley is interested in buying credit-card companies to bolster its Discover Card. "We will be bidders on international card portfolios as they become available," the guy who heads the credit-card operation told BW. I think Time Warner's move to buy Business 2.0 and fold it into Fortune's own high-tech publication will prove to be a smart move. And the price was right.
Another way to make inroads on the competition is to beat the bushes for new business, business you probably wouldn't have bothered with in rosier conditions. All of a sudden a $25,000 order from a brand new customer is worth the effort, and what's even better is that the new customer will probably stay with you when we turn the corner. (Unless, of course, you turn up your nose at such paltry business when things are flush.)
What will eventually turn things around-probably not until a year or so from now is my best guess-is that some companies will seize the opportunities and others will be afraid to stay behind.
In the meantime, the name of the game is to push hard to increase share of market, a feat not easily done in good times when all boats rise. Keep putting out a good product; don't scrimp on quality; beat the bushes for new customers; take advantage of strategic opportunities. That's the formula for easing the pain now and racking up spectacular gains later.