Dotcoms are fighting for their lives, yet traditional companies are losing key e-business leaders. What lies behind this paradox? The job of "e-CEO" is a tough, if rewarding, one. Pitching against competitors and aggressive entrepreneurs while co-ordinating in-house e-initiatives is a difficult balancing act.
Our research shows that 60 per cent of UK e-CEOs expect to resign from their position within 12 months - with significant consequences for them, their companies and shareholders. And they will go, in the main, not because of competitors but as a direct result of their own and their chief executive's inability to predict and manage threats from within their own organisation.
According to our research, based on discussions with more than 70 e-business heads, there are three main ways to fail: death by misadventure; death by 1,000 cuts; and death by heart failure.
First, death by misadventure. This is a preventable accident in which the executive leadership unwittingly kills the company's e-strategy. This is usually through a lack of understanding of the precise infrastructure and environment needed to allow e-business initiatives to succeed. Consider the following scenario, which may seem far-fetched but is based on our experience with one of the largest companies in Europe. Tim, the newly appointed e-CEO, is passionate about the e-strategy he has formulated. It is a well-conceived portfolio of initiatives that includes big opportunities to combine emerging technologies with existing group assets and to create new businesses.
Charles, the chief executive and a 15-year company veteran, remains unimpressed by the internet - he believes it is all just a passing fad. His conviction is that none of these internet businesses will make money during his working lifetime.
The rest of the board feels that e-business is fundamental to the future, but remain uncomfortable with the uncertainty and scale of investment required for these bold e-business plays.
The outcome? A limited number of incremental opportunities are pursued, and the bold ideas for new businesses and value creation are left on the shelf.
It is little wonder that few e-business initiatives survive when they are obliged to use the existing in-house infrastructure that has evolved to suit the needs of the existing business rather than a genuine e-business venture.
Perhaps the biggest operational tension is when the new e-business venture meets the existing IT agenda. Sparks fly when the mindset of "10 weeks from idea to launch" clashes with the IT infrastructure, procurement cycles, testing methods and management.
Unless the board really understands the different needs of e-business ventures, the risk of mortality remains high. Earlier this year, Rene Carayol, the managing director of IPC Electric, left to run his own show. His view was: "It is impossible to pull off an aggressive move into e-business in a FTSE company if the board doesn't really 'get' the Internet." He now runs his own successful e-business, E-photomail.
Second is death by a thousand cuts. This is where the e-business initiative is the victim of power politics and vested interests. There are many strategies available to those who seek to block a new, powerful initiative, from overt rational opposition to more covert tactics.
Two examples from a leading UK-based manufacturer provide an illustration. First, conflict between an online and an existing business, with the latter claiming cannibalisation. This might sound convincing until it is pointed out that the company might prefer to cannibalise its own sales rather than let someone else do it. Next, the "business case challenge". The typical board requirements for a detailed five-year business plan represent a big hurdle. Yet there remains a huge difference between the grilling for e-initiatives proposed by the e-CEO and the ease with which boards invest millions of pounds in the projects of e-literate outsiders.
Sensationalist news coverage has provided ammunition to those who endorse the blanket dismissal of all e-enabled business models as insubstantial; "just look at Boo.com - these initiatives are all hype and never make a profit". But it is harder for the doom merchants to dismiss, for example, Yahoo! In 1999 Yahoo! earned net profit of $143m (£101m) on turnover of $589m and was cashflow positive to the tune of $334m.
Internal politics are unavoidable and will often terminate initiatives unless the chief executive offers his or her support.
Finally, there is death by heart failure. A depressingly common problem, this happens when there is insufficient resourcing over a long period of time or inappropriate infrastructure and funding reduce the chances of commercial success. This serves to magnify the pressure on the e-business team, eventually driving them past breaking point.
So what can you do? There are many early warning signs. Start worrying if your e-CEO becomes more compliant, stops challenging the board and pushing to recruit more people. Watch out for increased illness, irritability and conflict within the e-team and its sponsors. Monitor turnover of your e-literate staff (at all levels, including the most junior); an exodus of your e-talent is their way of telling you your company has not "got it".
Chief executives should not underestimate the potential for heart failure. High fallout of e-CEOs is a natural result of a lack of confidence in the ability of their organisations (and sponsors) to support their programmes. If leaders quit, a domino effect is likely, with the result that an organisation can rapidly lose its e-capability.
The costs can be counted in many ways. Not just the loss of highly capable people such as Michael Pehl, former president of Razorfish, the consultancy, or Diana Noble, head of E-ventures, the business incubator. But also the fact that e-initiatives might dry up, setting a precedent that visionary and ambitious projects are doomed to fail.
How is your e-CEO faring? Is he or she well protected? And are you confident that your business will not be included in the next wave of companies that have to announce the unfortunate departure of their e-CEO?
The author is a member of the management group of PA Consulting Group
*PA winning e-CEOs summer seminars, May/June 2000
