The Internet as Place (first appeared in InfoWorld)

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Is the Internet just a bit-mover, or is it “the” new environment? I chose to describe it as the former while challenging the latter recently, branding me as dour and visionless in the eyes of some readers.

Nonetheless, the Internet is, physically, a way to move bits around. That’s an accurate description. It isn’t, however, the only accurate description, so to restore my luster, here’s an accurate description at a different level: The combination of the Internet and the personal computer (not the Internet alone!) has created an important new environment. In terms of impact on humanity I’d put it on par with telephony — certainly below modern medicine and agriculture, but definitely above Dennis Miller on Monday Night Football.

To understand the Internet’s potential impact, you do need to consider it as place, not technology. You’ll gain more insight from the ramifications of “cyberspace” than of IPv6 and routing protocols, just as psychology gives you more insight into human behavior than the neurophysiology of synapses.

As evidence that cyberspace is a locale, I offer this: Until business met the World Wide Web, IT had never met a customer. The Web is where they first made their acquaintance. It’s been the healthiest experience for IT since the PC first transformed us from a priesthood to just another bunch of employees with a job to do, because it’s IT’s connection to Real Paying Customers that has connected us with revenue.

Never underestimate the importance of revenue. Before the Web, we did underestimate it. We spent all our energy trying to cut costs. And cost-cutting is always a bad goal.

Yes, always. Improved efficiency is a good goal, which may involve reducing unit costs. Improved effectiveness and increased productivity are good goals, either of which may require cost reduction as well. But cost-cutting must be a means to a different end or all you’re doing is playing with numbers.

Want proof? Take a look at a recent study by Professor Gary Hamel of the Harvard Business School, described in the July 17th issue of Business Week. Hamel studied 50 S&P 500 companies whose earnings growth was at least five times revenue growth. No doubt their proprietors figured they were cutting out lots of fat at the time, but guess what: 43 out of the 50 imploded (okay, “experienced significant downturns”) within three years.

It isn’t difficult to understand why this almost has to happen. Think of a business as a hot-air balloon. There are only two ways to keep it aloft: Heat the air, or throw out some ballast. Cost-cutting is throwing out ballast, and eventually you must run out of it. What do you throw out next? The gadget that heats the air … that generates revenue … is a good candidate. It’s pretty heavy after all.

So out it goes, and down the company drifts, because no matter how much hot air its executives generate explaining the benefits of cost-cutting, it isn’t enough to maintain altitude.

Stay connected to revenue. Its importance goes way beyond the money. It energizes every employee in the company, where cost-cutting generates apathy.

To change metaphors, cost-cutters are like hunters who stay home cleaning, sharpening, and polishing their weapons. Yes, it’s important to do it, but whether you’re in the north woods or cyberspace, the excitement of hunting isn’t in weapons maintenance.

It’s bagging the game.