Fast Talk: The Old Economy Meets the New Economy

Fast Company recently convened a Fast Talk session in Chicago, bringing together some of the smartest people in the world.


Lightning Round 1: Lessons From the Old Economy

Alan Webber (founding editor, Fast Company): Rumors of the death of old-economy companies, it turns out, were not only overhyped, they were flat-out wrong. To get started, let’s have a lightning round: What’s the biggest misconception that you’ve heard over the past couple of years about what was wrong with old-economy companies? You choose: Gloat or vent.


Amy Williams (vice president, finance and planning; Allstate Insurance Co.): People kept telling us, “You just don’t get it. It’s about how many customers you have.” But no one talked about the economics. To me, the great lesson is that you have to focus on both the customers and the economics.

Fred Crawford (executive vice president, consumer products, retail, and distribution; Cap Gemini Ernst & Young Consulting Services): New companies were overhyped, old companies were maligned, and both were wrong. The reality is that consumers have changed, and what they want has changed. Going forward, we’re going to require a blend of the best that new- and old-economy companies have to offer.

Jim Sappington (vice president, U.S. information technology; McDonald’s Corp.): The idea that old-economy companies can’t change or are too big to move fast is wrong. Right now, we’re seeing old-economy companies move much faster than we thought they could.

Warren Holtsberg (corporate vice president, venture investing; Motorola Inc.): My favorite misread was the idea that business fundamentals had changed — that the traditional ways of doing business didn’t matter anymore: If you sold enough product or enough items at a loss, eventually you’d make a profit.

Betsy Cohen (vice president and futurist, extended enterprise group; Ralston Purina Co.): According to new companies, you had to do everything quickly, and our large companies couldn’t react or were too slow. In reality, I don’t think that we were too slow. We moved quickly on some things. On others, we didn’t — and maybe that was wise.


Lars Nyberg (chairman and CEO, NCR Corp.): Absolutely the biggest misconception was that profit isn’t important. But people also grossly underestimated the importance of understanding the customer.

Eric C. Dean (senior vice president and CIO, United Airlines): You can’t eat bits and bytes. You can’t fly on bits and bytes. You actually have to do something. The aura of magic around the Internet was one of the biggest hypes.

Mike Brennan (senior vice president, marketing and product management; Peapod Inc.): I’d fault new-economy companies for doing things just for the sake of doing things, versus having the fiscal discipline to do things that are smart — and smart in the long term. It’s about having the discipline to understand what’s real and what’s smoke.

Mary Lee Schneider (president, Premedia Technologies; R.R. Donnelley & Sons Co.): I’d say that the greatest misconception was the belief that print is dead — which is kind of a hoot, since it’s one of the most cost-effective ways to reach the consumer. But going forward, we may have to face an even more dangerous misconception: that it’s the old economy versus the new economy, when it’s actually a combination of the two.

Brad Brinegar (CEO, Leo Burnett USA): There was also the misconception that big is bad. But in fact, there wasn’t a new-economy company out there that didn’t want to be big. Most of them just never got there. Smaller companies faulted big companies for being slow. But those big companies got big for a reason. They did something right. Now the question is, Can big companies get past what they used to do in order to do the right things now to keep moving forward?


Lightning Round 2: One Cheer for the New Economy

Alan Webber: For all of the wreckage among hot new startups, they must have contained some useful, even important, insights. What were they right about?

Brad Brinegar: Two things: First, they didn’t have legacy systems. They were starting from scratch. Second, they were free to innovate. Our business is all about innovation. Big companies that continue to innovate will win. The ones that forget that innovation is what drove them in the first place will die.

Mary Lee Schneider: What was really great about new-economy companies was that they were willing to challenge everything. They were willing to challenge the status quo and the whole concept of profitability — which ultimately was a flawed challenge. They forced a lot of us who might not have gotten past our own inertia to adopt new technologies and new capabilities. The suspension of gravity — however temporary — helped us to move in new directions.

Mike Brennan: New-economy companies showed us the importance of having better coffee in our offices! That, and the importance of having a fresh perspective. We could identify some different nuances in how we viewed our businesses.

Eric C. Dean: They not only had better coffee, they also invented the virtual coffee klatch. The Internet-based economy took collaboration to whole new levels. And that not only leveraged the technology, it also allowed people to risk working with others, even if they didn’t know them very well. The change in who could talk to whom and in how decisions could be made was remarkable and very powerful.


Lars Nyberg: NCR is a 117-year-old company. We learned that new-economy people did business in other ways. They forced us to think out of the box, and that was a good thing. It’s healthy for an old company to think that way. It’s one of the biggest challenges in keeping an old company vibrant.

Betsy Cohen: At Ralston Purina, we thought that we were in the pet-food business — fairly simple. The new economy showed us that we needed to rethink the business we were in: the business, the partnerships, and what our customers want.

Warren Holtsberg: I find the impatience of the new economy refreshing. The concept that fast is better than perfect bodes well, particularly for the technology industry. At Motorola, we used to be able to introduce a cellular telephone, and it would have a life expectancy in the marketplace of about two years. Now we face cycle times of four to six months. People continue to demand new things. They demand change. They’re impatient. Bringing that into a big corporation is invigorating.

Jim Sappington: The dotcoms helped us to understand that technology can make a huge difference when it is executed effectively. The changes of the past couple of years have had a huge impact on our management’s thinking about how technology can be used to make the business better — and how it can be used incorrectly.

Fred Crawford: The lesson that I learned was that the big brand-push mentality can be overcome by a viral marketing pull. New-economy companies had a kind of wonderment in the ways they connected with people. They tried to fit their products into the context of their customers’ lives, to become part of the fabric of their day-to-day existence. That’s a legacy that any successful business is going to have to carry forward.


Amy Williams: At the risk of sounding warm and fuzzy, I think that the thing they got right was bringing together diverse groups of people who had a common vision, passion, and commitment to take on the world. As an old company, that’s one thing we want to capture and replicate. There’s no substitute for people who have a common vision and passion.

Essay Question 1: Looking for BOBW

Alan Webber: We’ve explored the misconceptions that have dogged the older companies and credited the kernels of truth that were embedded in the startups. Going forward, we’re looking for the synthesis: Is there a version of doing business that combines the best of both worlds — BOBW?

Fred Crawford: For the past few years, I’ve been focused on what makes consumers tick. In the new economy, we’re seeing people with high disposable incomes, relatively high consumer confidence, but a plummeting consumer-satisfaction index. People are spending more, but they’re enjoying it a lot less. And that tells me that we’re not providing customers with what they’re looking for. When you talk with consumers, it’s clear that something has shifted — and businesses haven’t moved with them. My conclusion is that we need to take the front end of the new-economy companies — their innovation, their way of becoming solution providers instead of product pushers — and marry that with the back end of the old-economy companies — their consistency, their execution, their reliability. It’s the old-economy delivery with the new-economy customer connection.

Mary Lee Schneider: It all comes down to putting customers first and really understanding what they need. We’re a 137-year-old company. And we’ve gone through an accelerated learning process. We’re learning to partner. For example, we work with a company called ScreamingMedia to take customers’ content, which was once print only, and make it available for online syndication. We use the same tools, the same people with new skills, and we help our customers find leverage in a multichannel world.

Lars Nyberg: Every one of our businesses is commoditizing. And that makes it a struggle every quarter, every year. But it raises a question: Are we talking about one market with millions of customers, or are we talking about millions of markets with one customer? We’re number one in the world of ATMs. But when you think about it, ATMs are pretty stupid machines. Every time you walk up to one, it asks you the same question. It should know you. It should know what you want. The networked world makes it possible for you to know every single customer and to treat each one differently.


Eric C. Dean: So far, I’m hearing that our job is automatically to give customers something that they want. But people are so dissatisfied because it’s just another product. I don’t care how fancy it is or how slickly tuned it is to what I want. I don’t want another product. What I really want is to be able to connect with other people. But business keeps retreating from the notion of human beings contacting other human beings. We get better and better voice-mail systems, but it becomes harder and harder to find a human being to talk to. The Web started out as a mechanism for people to collaborate directly — people to people. It has become a facade that blocks people from reaching others. Speeding up in order to do more of that will just alienate more people. Instead, we have to learn how to let people touch other people.

Brad Brinegar: I think that we’re putting too much emphasis on technology. To me, the issue isn’t so much human connection as brand connection. People don’t buy products or services. They connect to the whole experience of the brand. But the technology boom has created some problems. We’ve taken our eye off of how to connect with people as brands and put too much emphasis on how to push things out the door.

Amy Williams: When it comes to the best of both worlds, technology enables an old-economy company such as ours to do things at the front line that make our brand experience more consistent. Before, we had only face-to-face people and feet on the street. Now we can use technology to create a consistent brand experience across different channels. Whether our customers contact us through their agent, go over the Internet, or use a call center, they get the same experience, price, and service capability. And if they prefer one channel over another, we’ll learn that and work with them to provide what they need.

Betsy Cohen: For Ralston Purina, the best of both worlds means that we not only have pet food, but we can also use our Web site to respond to all of our customers’ pet needs. Those needs may mean working with an entrepreneurial group called “Petfinder” to adopt a pet, or they may mean learning about training, housebreaking, or taking care of the pets that our customers have. We have 100 years of history. We understand nutrition and behavior. We have trainers and veterinarians. But previously, our customers never knew that. All they knew was what we put in a bag. Now we have dialogues where our customers can interact with experts. When we launch a new product, we can bring in the whole team in order to make the nutritional information available online. The Internet allows us to bring our knowledge forward.

Mary Lee Schneider: One thing that distinguishes us as 100-year-old companies is that we view the Internet as a means to an end: It enriches the customer experience and bolsters the brand. For so many new-economy companies, the Internet was seen as an end unto itself.


Warren Holtsberg: The whole point of technology is to make your life more efficient and more enjoyable — and to save what has become the most valuable commodity for all of us: time. So it’s not about the technology, it’s about the application.

Eric C. Dean: We’re not going to solve anything with the next technological device. I have my cell phone, my PalmPilot, and my laptop. I have more devices to carry around now than I know what to do with. We don’t need another device. We need to figure out what we’re trying to do for each other, how to deliver that, and how to make it easy to get there.

Fred Crawford: When I look at technology in the Information Age, it’s like watching a train wreck. There are a hundred different technologies and a thousand different options that I can choose to carry. The problem for consumers is that every time they are handed a new technology, their lives don’t get better. They get worse. So it turns out that consumers are informed and aware. They are plugged in, but they’re also confused and cynical. That means that we need to use the technology to make the mundane stuff mundane, and use the freed-up time to allow for a little human connection. People want community and connectivity.

Essay Question 2: The Promise vs. the Performance

Alan Webber: The best of both worlds is the ideal, but too often we get a far inferior reality. So what are the obstacles that the hybrid companies — the blend of old- and new-economy organizations — have to overcome?

Jim Sappington: We’ve all seen a lot of great innovation, but we haven’t yet seen the great execution. We come up with great ideas for our restaurants, but too often we’re not delivering the great service or the great food. We can use technology to try to have a positive impact, but in fact, it isn’t a focus on the technology that will make the difference.


Lars Nyberg: One of our biggest challenges is that top management needs to understand what technology can do. It needs to have the vision to change the company and allow the organization to benefit from what the technology has to offer. If top management doesn’t understand and appreciate the promise of technology, it will get beaten by somebody else who does.

Amy Williams: The biggest challenge I see is making investments in the people and in the technology — which is huge when you have 20 million customers and 13,000 distributors. Top management has to understand the potential of those investments and have faith that they can generate additional earnings. Without that faith, it’s very hard for top management to buy into making those investments, either in people or in technology.

Mary Lee Schneider: One-to-one marketing is a great aspiration. One-to-one databases don’t exist in a cohesive and coherent way. It’s a wonderful dream. At Donnelley, when we work with our customers, we find out that the average response rate for a direct mail piece is 1.5% to 3%. In general, 40% of all magazines that are printed end up being returned unsold from the newsstand and destroyed. There’s a huge amount of inefficiency there. So the real challenge is revolutionizing communications effectiveness to give people the right information at the right time in the right format.

Lars Nyberg: I have to challenge that. There are companies that do use technology to understand the data they have about their customers — and they double or triple the responses they get, compared with the numbers that you mentioned. You can use technology to gain market share or to shave costs. And if you get a 9% response rate instead of a 3% rate, you get more revenue. So yes, it’s ambitious. But it’s also clearly possible.

Warren Holtsberg: It sounds like we’re painting technology as the devil here! I would unequivocally state that technology makes my life better every day. But you know what? Technology does not solve every issue that I deal with. Ultimately, it goes back to individual accountability. It’s up to us to decide what we want technology to do and to recognize what it can’t do. I would remind you that the wireless devices that we sell have a great feature: It’s called an on-off button.


Eric C. Dean: Speaking from the technology perspective, I think that one of the biggest obstacles we have to overcome is the information systems of varying vintages that our companies have. Some of the oldest systems perform some of the most important tasks for the company. But it’s hard to pinpoint the return on investment of rebuilding the old monsters. All you can say is that if you don’t do it, one day you’ll realize that you should have started to rebuild it several years back. That is one thing we can blame the dotcom era for: It distracted us from the important idea that we really need to train to run a marathon. Instead, we all got great at running wind sprints.

Warren Holtsberg: One of the big lessons that we’ve learned is that despite our capabilities and expertise in engineering, we don’t have to do everything ourselves. Some of these startups with 20 or 30 people who think that they’re going to change the world just might be able to change your world. They might be able to accelerate what you do, bring you to new technologies, new markets, and new talent.

Brad Brinegar: That is one of the biggest challenges our industry faces. For 30 or 40 years, we were the marketing partner for our clients — everything from soup to nuts. We have to stop believing that we can solve all of our clients’ problems and instead focus on our core competencies. We need to learn to leave certain pieces of business on the table. If we put together the right package of services for a client, whether we own them or not, the business lift will help all of us.

Lars Nyberg: The real question is whether senior management is willing to cannibalize a good business before somebody else does. Usually, the answer is no. It’s hard to take a big moneymaker, stop it, redefine the business model, and do it without knowing how you’re going to come out on the other end.

Lightning Round 3: The Monday-Morning Test

Alan Webber: We’ve heard great examples and good theory. Now let’s get practical: What do I do on Monday morning?


Amy Williams: Assume that you just bought your company. It’s Monday morning: What is the most fundamental thing about the business that isn’t working? Now, how are you going to solve that problem? Look at your biggest risk from a different perspective than before. And then go to work and solve it.

Fred Crawford: On Monday morning, I would suggest taking a look at three places in your budget where you can shift your spending a little bit. First, spend a little less money on R&D, advertising, or promotion. Second, use that money to do a few things that let you fit more smoothly into your customers’ lives and make things a little easier for them. Third, spend a little more money on training your people, so that the interaction is easier, more relevant, and more appropriate. It’s not a matter of blowing things up and starting over. For old-economy companies that are here to stay, it’s a matter of emphasis.

Jim Sappington: I think that you do have to be prepared to do a little bit of blowing things up. You have to assume that you’re going out of business if you don’t go through significant change. As companies get big, they start to get slower. They start to lose their passion. You need to get the energy and passion back into the business. And to do that, you have to move people out of their comfort zones.

Warren Holtsberg: It’s basic: Don’t lose sight of the fundamentals. What do you do that people will pay money for? And will they pay more than it costs for you to manufacture, market, and deliver it? It’s a simple equation. I don’t care how new or how old a company is. It’s still about business fundamentals.

Betsy Cohen: I want to suggest something that is more tactical. We have a cross-functional group that meets every month. We’ve established metrics that we have all agreed to be held accountable for. It has made a huge difference. It inspires people to move forward together, to take risks, to share the fun, to be more passionate, and to get rid of complacency.


Lars Nyberg: We tend to forget who pays our salaries. It’s the customer. We should remind ourselves constantly that we need to deliver what they want. And we need to be able to deliver different things to different customers. The minute we forget that, the reason for our being here is gone.

Eric C. Dean: You have to challenge your people to break their habits of not cooperating, not listening, not understanding. You simply can’t accept the excuses that people give you for why they can’t do something. You have to be persistent.

Mike Brennan: If you’re looking for something very practical that you can do to work more closely with your partners, you should simply try putting some of your people in the middle of their organizations. Pick people who are bridge builders, who will transfer knowledge back and forth across both organizations. You’ll end up tapping into the passion and great ideas that are going on in both organizations.

Mary Lee Schneider: These are clearly interesting times. I’m sure that none of us is pleased with our own earnings expectations right now. But that means there’s an opportunity for collaboration with our customers. They can come forward and start to talk about the challenges in their own businesses that they need help with. It all comes down to customers’ needs.

Brad Brinegar: Leo Burnett was a prolific writer who left us with a lot of thoughts. He believed that we need to sort out the things that are constitutional and timeless from the things that are just of the moment. I think that’s true of any company that’s been around long enough to create and sustain culture and value.

About the author

Linda Tischler writes about the intersection of design and business for Fast Company.