Scient's Near-Death Experience

"We had built all those dotcoms," Dickenson says. "And now we had these big enterprise companies coming to us, saying, 'Teach us how we can make our companies run like the dotcoms.' They weren't talking about just slapping together a Web site to sell stuff. They saw that the dotcoms were using the Internet as a way to run their companies. And they thought, 'What if we could stay as big and powerful as we are but change how we actually behave? Can we use the Internet not just as a way of going to market -- but as a whole new way of doing business?' " Exhibit A, the new prize client, was Hotwire, which signed on with Scient in December 1999. Hotwire was formed by Texas Pacific Group, an old-line investment group with stakes in companies whose revenues totaled $50 billion. Bankrolled to the tune of $75 million, Hotwire signed up six major airlines to create a business that would challenge priceline.com Inc. in selling deep-discounted air tickets to leisure travelers. The idea was to offer consumers fixed prices in place of priceline.com's murky bidding process and to give airlines a level playing field in unloading excess inventory.

This was a giant undertaking. "We weren't just building a sucky Web site," says Karl Peterson, 30, Hotwire's CEO. The project, in fact, would take 20 Scient consultants nearly nine months to complete. They had to build a site that could negotiate and complete transactions linked to the existing reservation-and-ticketing systems of each airline partner. And the consultants had to make the consumer experience nearly flawless, because Hotwire inevitably would attract both heavy traffic and media scrutiny from the start.

That was the kicker. Hotwire wanted to get to market quickly, because every week that it lingered, after all, was one more week for priceline.com to win new customers. But speed wasn't the only priority, or even the most important one. "We were entering a market that was much more skeptical, where consumers were tired of business models that didn't create value," Peterson says. "We had an opportunity. The old rule on the Internet was, He who gets there first, wins. We think that's total horseshit. The new rule is, The first person there who has it right gets customer loyalty."

Of Water, Tidal Pools, and Land

In Scient's Chicago office, Gerry Komlofske and John Rheinfrank had been deputized by Howe to make high-level sense of the new strategic realities. They were the company's big-think guys. Komlofske, 43, intense and gregarious, was an economist and engineer by training who had run Booz Allen's business in North Asia, and then had run its computers-and-electronics practice. Rheinfrank, 56, quieter and professorial, is in fact a professor in the technology and e-commerce program at Northwestern University's Kellogg Graduate School of Management.

That was in July, well before Scient took its tumble. Komlofske and Rheinfrank looked out at the marketplace, and initially they struggled to find a useful conceptual framework. "We were trying to explain the idea of a new world from an environment that we didn't understand, because it was moving so fast," says Komlofske. "I was dying to explain it all, and, looking back, it was like being a physicist in the 1950s -- before they had figured out quantum theory."

Lacking a theory, the two settled first on a metaphor: In evolutionary terms, they argued, the old economy was "water," capable of sustaining life, but only in limited forms -- with many of those forms being slow and inflexible. The new economy was a "tidal pool," a small but seething laboratory of change, Rheinfrank says, producing "a variety of corporate life-forms that just exploded in our faces." In that environment, operating under new rules, newcomers held an advantage over established enterprises.

But the tidal pool -- the new economy -- was ephemeral, a transitory state leading to something ... bigger. It seemed important at the time, because business experienced rapid, loud, dislocating change. But really, Komlofske and Rheinfrank argued, the new economy was merely an evolutionary stepping-stone. Like a tidal pool, it exhibited some characteristics of what came before -- but also some of the more profound phenomena that would follow.

One of which would, of course, be "land." Komlofske and Rheinfrank didn't yet know what to call that new state, but they were starting to get a handle on what it would look like. Unlimited telecommunications bandwidth and connectivity, advanced technological applications, and relative global stability, among other trends, would combine to produce incredibly efficient capital markets. Capital would flow freely to opportunities globally, and arbitrage opportunities would nearly disappear. Companies' margins of error would narrow precipitously: Mistakes, and poor management, would be revealed by markets almost instantly.