Small, large companies primp for investors with new business plans

That seems to be the prevailing wisdom in the technology sector, where a spate of corporations--from Internet start-ups to industry bellwethers--have unveiled sweeping strategic reorganizations in recent months.

Executives touting their reorganizations say that technology companies no longer have the luxury of three- to five-year business plans because they're operating on accelerated "Internet time." They say that disruptive technologies springing from the Internet--such as automated procurement and supply chains, peer-to-peer computing, and viral marketing--have forced all companies to reconsider and revamp business models on a monthly or quarterly basis.

"Twenty years ago, when I started doing strategy, you'd do a business model and say, 'Here's our three-year plan,'" said Ron Erickson, chairman of Seattle-based online payment company eCharge. "Now it's a three-month or even a three-day plan. You throw it together, see if it works, and then regroup."

But many experts and academics say some strategy shifts are little more than desperate, last-ditch efforts that are doomed to fail. The business model du jour approach, they complain, is simply a means of presenting investors--at venture capital firms or on the public markets--with a seemingly plausible business model. The result is often a string of plans that change with Wall Street's whims: business-to-consumer one day, business-to-business or file-sharing the next.

"We're finding without question that bad business models were funded in great quantities, and the result is that many of them just don't work," said Adam Kapel, director of market strategy and development for Portland, Ore.-based consulting firm Emerald Solutions. "Too much infrastructure was built around a bad model that wasn't tested, and they're now hurrying to catch the next wave of favoritism on the public markets. It probably won't work, either."

A newer, better look?
Although few sources track the number of announced reorganizations in Corporate America, it's clear that businesses--from Internet start-ups and technology giants to Old Economy manufacturers--are rolling out major strategic reorganizations at an increasingly swift pace.

On the brink of bankruptcy and maligned as a printing and photocopying stalwart of the Old Economy, Xerox is trying to reinvent itself as an e-commerce document-management and business-to-business company.

AT&T is refocusing on its broadband and wireless divisions, trying to erase its public perception as an exclusively long-distance voice provider. In addition, after years of bringing these disparate businesses under its corporate umbrella, the company recently determined that splitting them off may be better for investors.

Japanese camera giant Nikon announced last month it would team with online photo services company Zing Network to launch and redesign photo Web sites--an effort to turn the Old Economy consumer product company into a digital photo provider. Best known for its high-quality 35-millimeter cameras, Nikon is now focusing on a new digital imaging unit, MicroscopyU. It plans to launch an online photography education division called Nikon School next year.

Software maker Novell, among the worst performers in the Standard & Poor's 500 stock index this year, announced a sweeping overhaul in September as sales of its core software cooled. Trying to recoup profit lost to Microsoft and the Linux operating system, Novell laid off workers, refocused the sales department to concentrate on larger accounts, and redirected computer programmers to concentrate almost exclusively on Internet-specific software.

Like many troubled business-to-consumer e-commerce ventures, HomePortfolio.com has shifted its modus operandi: Once an online furniture store, it is now building and hosting Web sites, creating online catalogs, and conducting market research. The site, where customers used to go to buy sofas and credenzas, now offers consumer information about home design.

Business experts say the plethora of strategic shifts hasn't caught them off guard--and that the reorganization rally makes perfect sense, at least in hindsight.

Strategy consultants and academics paint an interesting timetable for entrepreneurs over the past year, typified by the meteoric rise to prominence and rapid fall from grace of the business-to-consumer e-commerce niche.

The rise and fall of the New Economy
An era of experimentation with new ideas in business-to-consumer and other technology sectors dawned in 1999 and early 2000, and the stock market rewarded anyone who ventured into the Internet, regardless of profitability or strategy sustainability.

But on April 4, the Nasdaq composite index plummeted a stunning 574 points in midday trading, its biggest percentage loss since 1987. The months following the spring drubbing were a period of wound-licking and regrouping--a time for entrepreneurs to digest their losses, consider future paths, and incubate new strategies.

The sector is now in a period of strategic resurgence as business developers hatch new plans and curry favor with Wall Street. If the economy remains vaguely intact, experts say, the stock market will determine those companies with the most sustainable business plans.

"The B2C models were flawed from the start," said Mark Weaver, professor of entrepreneurship at the University of Alabama in Tuscaloosa. "It is surprising to me that anyone felt that 'eyeballs' and throwing money at advertising were sufficient to create a company...I teach that anyone can give it away, but real business can get paid for it."

But few experts blame companies for trying to capitalize on business-to-consumer or other Wall Street trends. And the strategic guru who can plot a successful business course over a year or two is exceedingly rare, they say. Instead of trying to come up with a brilliant, long-term strategy, experts say, businesses should focus on a continually evolving course.

"You should have some planning, but in many cases, it's best just to try it out," said Robert Singh, who teaches strategic management and entrepreneurship at the University of the Pacific in Stockton, Calif. "You should have some reason for doing what you're doing and have empiric data about whether it's working, but in some cases, even a three-week biz plan is too long...I don't think changing the plan is a sign of desperation. It's a sign of survival, of what has to be done at every company."

But how can investors tell the difference between a company that is legitimately plotting a new course with long-term viability from those that are simply trying to capitalize on a trend?

For example, is it possible to distinguish between a 1999 restructuring at Hewlett-Packard--a generally lauded affair that bumped up corporate revenues and the stock price--from a strategic partnership between online magazine Salon.com and the formerly trendy Linux seller Red Hat, which boosted Salon's stock 90 percent in a day--only to collapse soon after?

Unfortunately for investors, it's virtually impossible to judge a reorganization's prospects for success when launched, experts lamented.

Kapel said he is most confident in the relaunches of companies that retain their "core mission," regardless of whether they change their product lineup or focus on a new niche. As an example of a company with a core mission, he cited Amazon.com CEO Jeff Bezos, whose mantra is to build a company that serves customers better than any other online retailer.

Although it was founded as an online store dedicated exclusively to books, Seattle-based Amazon.com now sells products ranging from DVD players to new cars. It also hosts other companies' Web stores and licenses its "1-Click" technology, providing business-to-business services to bolster revenue for the profitless company.

"The way Bezos talks about what Amazon.com is there to do--serve customers through their proprietary approach--I can see them moving from B2C to B2B because the fundamental value proposition of the company hasn't changed," Kapel said. "Compare that to a company whose mission is simply to sell children's toys to customers, and now it wants to switch to selling paper to businesses--in that case, the value proposition has changed, and they're merely riding a wave of financing."