01 Apr 1998


Plunging Into the Net


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Technology has a way of seeping into our lives. On our first encounter with a microwave, an answering machine, an ATM, a cellular phone, or a video camera, each of these innovations probably seemed foreign, odd, perhaps unnecessary. But each one eventually became essential, everyday, a given.

The latest technological buzz, what some people are calling a revolution, centers on the Internet. Even neo-Luddites must admit that this network of wires that links computers all around the globe is changing the world. Still, given that the Internet began to be developed (by the Department of Defense) almost four decades ago, this change is clearly more evolutionary than revolutionary. During the last five years, the Internet - and more specifically, its most user-friendly thoroughfare, the World Wide Web - has emerged as a preferred way of communicating, of transferring information, and, in more and more cases, of doing business. As millions of individuals and organizations stake out positions on the Information Highway with Web sites, the nature of business is changing.

"The Internet provides new ways to do old things," says HBS professor William A. Sahlman, an expert in entrepreneurial management. "It's one of the most important developments in the history of business," he observes. "But in the end, it's merely plumbing."

To use the lingo of the Net, that plumbing is way hotter, hipper, and sexier than your standard pipes and valves. And it can deliver all kinds of information in every format imaginable. "This is a new world," says HBS associate professor Jeffrey F. Rayport of the Internet. "It has its own laws, dynamics, and economics."

Together with several HBS colleagues, Rayport is working to get a grasp of this nascent domain. In a 1994 Harvard Business Review article, he and fellow faculty member John J. Sviokla coined a term to describe the nonphysical arena in which business transactions were increasingly taking place - the marketspace. The Managing in the Marketspace course the pair developed and taught for a year has since evolved, with the help of the School's Service Management Unit, into an oversubscribed elective: Managing Marketspace Service Interfaces (MMSI), taught this year by Rayport and HBS professor Leonard A. Schlesinger.

But a number of experts at the School emphasize that the key to this change is not the technology in and of itself; rather, it is the way people will adapt to and use that technology and the way firms will mobilize it to do smart business. As Rayport points out, "Internet-based businesses encounter the same management and marketing challenges that traditional businesses face. The bottom line is still figuring out how to create satisfied, loyal customers."

In such new territory, it is not surprising that there was initial skepticism about observing the world of cyberspace from a management perspective. "During the first few years we were studying the marketspace, there was a perception that this was not a business school topic," says Rayport, who has witnessed a phenomenal increase in interest in the Internet and in Internet-based commerce. Today, every major business school is in hot pursuit of research and analysis of what's going on in the marketspace, and HBS is delivering the goods, in the form of case studies, course notes, journal articles, and a forthcoming book - Marketspace - by Rayport.

In addition, HBS is delivering human capital. "Our graduates are going into established industries and creating new models that are changing the way we do business," says Professor Lynda M. Applegate, who coordinates elective field studies in information technology and has developed case modules on electronic commerce and emerging Internet-based business opportunities. Applegate has worked with a number of HBS alumni who are launching their own Internet companies, selling products or services through cyberspace, or developing tools to facilitate electronic commerce. Rayport also notes that the School's alumni have played key roles in numerous cyber success stories, as founders, funders, and managers. Whatever their degree of success, HBS Internet entrepreneurs are feeling their way toward an unknown future in a brand-new universe.

"It's a tough world out there," notes Sahlman of Internet startups. "A lot of people have failed. A lot of companies won't make it." Rayport and Applegate note that of the hundreds of thousands of commercial sites on the Web, only a few dozen are actually making a profit. At this stage, however, profit is not the point. "Ultimately, we're talking about a change in the economy, in the way businesses organize themselves, and in the way customers access services," says Rayport.

The HBS Bulletin recently spoke with five alumni who have founded and lead Internet-based companies, plunging head first into the fast-paced, topsy-turvy Internet economy. The following profiles represent a sampling of the impact HBS graduates are making in cyberspace:

 
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