Genuity CEO's Dot-Bomb Lessons

Genuity CEO's Dot-Bomb Lessons
Net Economy, The, December, 2001 by John S. McCright

NEW YORK--When Paul Gudonis talks about the bursting of the Internet bubble, he knows what he is talking about.

As chairman and CEO of network services and hosting provider Genuity Inc., Gudonis had a front-row seat in the dot-com boom and the dot-com bust.

His company (which in a previous incarnation as BBN created ARPANET, the forerunner of the Internet) was a prime beneficiary of the mad rush to create dot.com businesses, and it took a big hit when many of its customers and potential customers went out of business. After announcing a $153 million third-quarter loss, Genuity last month slashed its U.S. work force by 24 percent in its second round of layoffs in six months.

So, speaking from painful experience, Gudonis on Wednesday passed on lessons he's learned in the Internet boom and bust to a meager audience in a keynote speech at the Internet World trade show here.

Lesson 1: Change takes time. Technology is not revolutionary, it is subversive, Gudonis said. Although the Internet hype is over, network technology will only become more pervasive. E-mail and instant messaging were new toys not long ago but slowly they have, seemingly without our noticing, have become essential tools, he said.
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"It takes about a decade or more for compelling new products or services to take root in the economy," Gudonis said. "Simplicity, cost, speed and reliability are reasons people adopt new technology."

Lesson 2: Customer service counts. Gudonis pointed to the oft-used saw that online retailers blew a golden opportunity in last year's holiday season when they failed to provide adequate customer service.

Lesson 3: First-mover advantage is a myth. As evidence Gudonis pointed to AOL, which trumped Prodigy and CompuServe, and KB Toys, which bought the assets of eToys.

"There is a great deal of value in learning from the mistakes of others," Gudonis said.

Lesson 4: Cash is king.

"Unless you can get cold cash for your content or service, you aren't going to be able to run your business," Gudonis declared.

Lesson 5: Customers are only customers if they can pay. As evidence, Gudonis generously pointed to his own company

"We took on risky accounts," he admitted. "There was a time when our salespeople couldn't find a startup plan they didn't fall in love with. Everything was going to be the next Yahoo. We now have tight credit controls and require deposits."

Lesson 6: An IPO (initial public offering of stock) is not a branding event. Building a brand requires time and a commitment to customer service, Gudonis said.

Lesson 7: Free stuff on the Internet is free because nobody will pay for it. "I keep asking myself why people keep developing these sites when the advertising model isn't working," Gudonis wondered aloud.

Lesson 8: Don't let your CEO get on a magazine cover. Although he supported this lesson with examples of former Exodus Communications Inc. CEO Ellen Hancock and himself appearing on magazine covers. But Gudonis failed to recall that the CEOs of IBM and Microsoft Corp., two fairly successful software companies, have each appeared on many more magazine covers than he and Hancock combined.

Lesson 9: Innovation still matters.

Since most publicly circulated lists have 10 items, not nine (would David Letterman have been such a hit with a top-nine list?), Gudonis tossed one last parting shot at the hubris of some in the technology world by appending a tenth item to the list of things he learned: "Don't put your company name on a football stadium," he said.

Copyright © 2004 Ziff Davis Media Inc. All Rights Reserved. Originally appearing in The Net Economy.
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