Do you have what it will take to lead in the brutally demanding market of the Internet Economy? Should you aspire to be like Jack Welch of General Electric (GE), who has pushed down responsibility, cut layers, speeded decisions - and added more than 1,000 percent to GE's stock value over the 17 years he has served as CEO?
Or should you do what the leading Internet CEOs have done? None laugh in the face of convention so readily as Amazon.com (AMZN)'s Jeff Bezos. What has Bezos drawn upon to grow Amazon to such a colossus - despite its famously unprofitable results and current disfavor on Wall Street? What capacities enabled Meg Whitman to multiply eBay (EBAY)'s market cap to $20 billion? What has Masayoshi Son brought to Softbank to build one of the world's great venture incubators? And what did David Pottruck do at Charles Schwab (SCH) to push the brokerage online before its competitors got there, making the company worth more today than Merrill (dossier) Lynch?
Identifying the skills that count - and then learning how to get them yourself - could be one of the most valuable exercises you'll ever perform. A number of stock analysts, investment managers, company executives and venture capitalists were asked this question: In deciding to invest in an Internet company, how important is the business model vs. the company leadership? The answers from this unscientific poll show that the right leadership is perceived as just as important as the right strategy in sustaining a competitive advantage.
To identify the skills of winning leaders, the best sources are often the people who recruit the top talent: venture capitalists and headhunters. Benchmark Capital (dossier), one of Silicon Valley's leading VC firms, had the foresight to recruit Meg Whitman, an experienced and proven leader, in the spring of 1998, two and a half years after eBay was founded.
Benchmark wanted a leader who could not only motivate employees but could also move markets, and they chose Whitman, given her track record of doing both at Procter & Gamble (PG), Bain & Co., Disney and Stride Rite (SRR), among others. Soon after reporting to work as the auction site's first CEO, Whitman found herself on the road to promote an initial public offering. With Goldman Sach's orchestration, she made her pitch to dozens of investors, and on Sept. 24, 1998, eBay's stock opened at $18 a share. Her articulation of the business plan worked. Mary Meeker, the renowned Morgan Stanley Internet analyst, told clients that the company would "outperform." By the end of the first day of trading, the stock closed at $47. Over the next two years, eBay's stock continued a spectacular rise, carrying its market value to well over $20 billion.
The winning ingredients of Whitman's road-show romp: With an ear to the market, she picked the banker, wrote the offering and targeted the date. With an executive coach, she rehearsed the show until her lines were flawless. With a quick study's instinct, she mastered an understanding of the site's underlying technologies. With an old-economy résumé, she explained why her experience in brand management at Procter & Gamble was ideal for positioning a new-economy service. And with a strategist's acumen, she showed how her auctions would operate, make money and crush competitors.
After the IPO, Whitman made another smart move: She became obsessed with both her customers and her competition. When Amazon.com entered eBay's turf of online auctions, she quickly learned what Amazon offered that eBay did not - easy-to-retrieve passwords and fraud insurance - and instantly added those features to the eBay site. She then went a step further, ramping up new product categories, adding a way for buyers to search for items in their own cities and installing an application that would notify buyers by e-mail when items they sought were finally listed.
Contrary to popular belief, as illustrated with the successful match of Whitman to eBay, old-school execs can transition to Internet positions if they can learn the technology and adjust to a faster pace and looser culture. Consider the conclusion of two principals at Spencer Stuart (dossier), one of America's leading executive search firms. James Citrin manages its Internet searches, and Thomas Neff serves as chairman. In their 1999 article "Digital Leadership" in the Journal of Strategy and Business, they claim that if Amazon's Bezos and GE's Welch suddenly changed places, they would be equally successful.
That's because the same leadership skills are required in both the traditional and new economies: leading by example, developing a solid business strategy, building a strong management team, motivating the troops, being flexible and proactive, and rewarding performance. If they really traded places, we'd probably find that Jeff is not really a Jack, and Jack not truly a Jeff, but the headhunters' point is on the mark: New or old economy, certain verities hold fast for both. But it is also clear that leadership in the e-commerce age requires an extra edge.
Citrin and Neff identify six capabilities for the new breed of leaders: focusing obsessively on customers; building a flat and cross-functional organization; managing with a business model rather than a strategic plan; promoting the model with customers, media and owners; fostering risk-taking throughout the company; and working extremely hard.
