Voyage to the New Economy

Shaun Holliday says that he sees the bumpier side of this migration in two ways. First, he acknowledges that knitting together a harmonious team is tougher than expected. In some ways, it's as if he has thrown together dozens of total strangers for a long ocean or train journey. And even if they want to work together, they aren't quite sure how to pitch in without seeming either too pushy or too timid. In the most immediate flash point, Holliday is already refereeing tensions between his merchandisers and his Web-development team. The merchandisers have big, bold ideas about how items should be displayed on the Web site. The Web developers must balance such requests with dozens of other demands on their time. They want each major upgrade to be carried out with military precision, so that it doesn't crash the site or impair performance by overburdening living.com's data servers.

Holliday's other challenge is thornier still. When he joined living.com, financial markets were enchanted by companies like his. Even before the closely held company launched its Web site, living.com was able to raise nearly $40 million of venture capital on terms that valued the business at approximately $300 million. In March, Holliday was able to talk about extremely ambitious financial goals for the company to meet by 2003: $1 billion in sales, $100 million in operating profits, and a $10 billion stock-market valuation.

Now, with Internet stocks having been pummeled this past spring, the stock-market goal seems highly optimistic. In May, bowing to tougher circumstances, Holliday and his team of directors approved a belt-tightening program that, among other things, reduces the number of executives reporting directly to Holliday. Such pruning changes the career paths of some recent recruits, but Holliday defends the move as the best way to position living.com properly in today's harsher environment.

Rank-and-file employees are mindful that times have changed, and their concerns surface quickly. At a recent staff lunch, Holliday asked a dozen living.com employees what was on their minds. The first question came from a recruiter who joined living.com in late 1999. "There was a Forrester Research report that came out recently,'' she began. "It said that many electronic-commerce companies might run out of cash. My grandmother saw a newspaper article about that report, and she called me to say, 'Girl, you'd better leave that company. Dotcom isn't good anymore.' So what am I supposed to tell my grandmother?''

Holliday took a swallow of his soda and did his best to calm her. "I do think that there has been a permanent shift in the way that many of these companies are going to be valued,'' he said. "There was a huge flood of cash that went into e-commerce companies last year, almost indiscriminately. There will be significant fallout, and this will be a hard year for us in some ways. But the good news is that we're already the industry leader in our category. There might be just two to three companies left playing in every category, but that's good for us. It's going to be survival of the fittest, and companies like Amazon, priceline.com, and living.com will do well.

"Someday, when we look back on this year,'' Holliday declared with conviction, "we will remember it as the most important and the most successful year in our company's history.''

Senior editor George Anders (ganders@fastcompany.com) recently migrated to Fast Company after a 20-year career at the "Wall Street Journal."