There’s a significant danger that this trend represents a big-business overreaction to the Internet bubble. In the United States it is fashionable to dismiss the Web. At his introductory press conference, the new head of media and communications at AOL Time Warner, Don Logan, was asked what he knew about the Internet, and answered by describing all he knew about the magazine business. In Europe, the bubble was never as big, but the backlash against Internet hype is just as real, particularly among media and tech companies. “They had to be seen doing it, and now they have to be seen not doing it,” says Theresa Torris, Internet specialist at Forrester Research. “That’s just as absurd.” If they listen to their own anti-hype, they risk missing out on the realistic benefits of the digital revolution.
The best scenario for this new breed of Old Economy CEOs would be for them to come in, clean up the mess and leave. At the moment they provide Europe a much-needed dose of anti-hype. The Internet mania gave rise to many interrelated excesses, as rising stock prices unleashed the greatest merger wave in history, and the rush to buy up Internet assets buried many multinationals under mountains of debt. “Those people being fired were in La-la Land,” says Manfred Kets de Vries, management scholar at INSEAD, and he calls for some soul-searching by business schools (his included) for churning out too many financial engineers enamored with designing big deals. Job one for Jean-Rene Fourtou at Vivendi is to get the cash crisis under control, for example. Helmut Sihler at Deutsche Telekom is the only one of these new CEOs who was brought in as an “interim” leader, and he’s charged with reducing a mountain of debt. “You want people running large companies who have experience with real assets, real business plans and real profits,” says Mark Sirower, head of mergers and acquisitions at the Boston Consulting Group.
The public humiliation of the bubble class of celebrity CEOs does not, however, mean that Europe as a whole is turning its back on the New Economy. The larger digital revolution is not about utilities becoming Internet players, a la Vivendi, but about manufacturers like Siemens or Renault, and service companies from banks to airlines, that figure out how to be more productive with new technology. “Even Old Economy managers understand you have to integrate the Internet into existing business models,” says Christoph Mohn, CEO of Lycos Europe. He has hired senior managers with large-scale operating experience who can coordinate major projects, cut costs and keep to budgets, and says they’ll likely help the company break even by the end of the year. “Enthusiasm alone just doesn’t do it,” says Mohn.
Neither does fear. Bertelsmann under Gunter Thielen is not going to abandon the Internet as a distribution tool, but key people close to Middelhoff could leave, making it scary for those left behind to champion new Internet ideas. Vivendi can still salvage some of its dream: to be both producer and distributor of digital entertainment. But for now, Vizzavi–its mobile-phone portal to the Internet–is going nowhere fast. In hindsight, it was loopy to think AOL could transform venerable Time Warner into a New Economy juggernaut overnight. It may prove just as shortsighted to demote AOL to a mere division, as Time Warner has now done. The Internet is here to stay, and these companies still need leaders who get it. “The de-hype won’t last as long as the hype,” predicts Forrester’s Torris. “Deep down, they know what needs to happen.” If they don’t, they’ll be reminded the hard way: by the market.
