Creative destruction, so nineties!

I have a fairly long history with digital business creation. At university I had my first trials of chat, email, file transfer etc. via the internet and when I joined McKinsey some of the first projects I did as a consultant was related to what big (and not always fast moving) corporations should do with the digital technologies that came out in mid-90's. My very first business engagement where digital was at the forefront was in late 1994 for a big Scandinavian media company, and I remember how I analysed the potential for using proprietary dial up networks (who remembers Minitel?). Then in 1996 with the Yahoo! stock listing all hell broke lose, "internet" became a word everybody had head, but few people understood. That was an extremely exciting time, because no-one had a clue about what this new media could be used for, but for the dreamers and the ambitious there was no end to what this could lead to. I  got my own dial up modem, and using the Mosaic browser (and the hot, new Netscape browser) I surfed together with the first tens of millions internet users. It was a bit more hype than actual progress, but there was still such an obvious potential if we could get faster access and more choice, i.e. professional services for e-commerce, music, community (before it was called social media), film, etc. So, I joined the internet revolution full time in 1997 - and I like most others still didn't know exactly how all the potential should be unlocked. There are so many fun and interesting things that has happened the last 15 years as part of my journey through the digital revolution, and even just going through what happened in the rest of the nineties would fill a couple of thick books. This weekend just gone by, I had to move a lot of old boxes from one storage room to another, and I always find it is impossible to resist peeking into the boxes and check out old stuff that I apparently for some reason wanted to store away many years ago. So, I found some 1997-98 vintage internet reports. Extremely funny to read, check this out: a Warburg Dillon Read report from June 1998 says the following of mighty AOL:

"The online race is over, and AOL has won. AOL is the largest and fastest growing online service provider, and it continues to gain market share. We believe that the company's brand name and highly skilled management team, make AOL the best investment in the online world. More importantly, the business model will likely only continue to improve".

aol decline

Woooooooow! The flat-rate-for-slow-and-proprietary-online-access model was killed over the next few years, and on top of that AOL entered into the disastrous merger with Time-Warner (mostly a disaster for Time-Warner). AOL definitely played a big and positive role in educating the masses about online services, but ultimately they lost their huge lead. The consumers were more sophisticated, ready to move faster than AOL. New technologies made broadband access available for most. Creative and risk willing entrepreneurs wanted to innovate on the free internet, not the controlled walled garden of AOL. All in all, consumers went for the best deal, the most exciting plays and in only a few years AOL went from the undisputed king to being one of many tier 2 companies. Only one year later, things had already started to change. In another report I found, Morgan Stanley in June 1998 ranks Yahoo almost at the same level as AOL in terms of company strength, and less than three year old Excite came up as one of the potential leaders of the future. No mention of Google, which had not even been incorporated at this point in time. 1998 was the year when it started to become apparent that the raw, free and chaotic version of online media would be the winner after all. What is the learning? There are plenty of angles on this, but for me some of the most important ones are:
  1. Don't underestimate the consumers ability to become more sophisticated over time
  2. Always assume there is innovation opportunities that can change your model, and then find/leverage them before competition
  3. Make sure you get the support from the best and biggest eco-system out there
It is easy to be smart in hindsight (I have made my fair share of wrong bets on technology speed, consumer sophistication, etc.), and today AOL is starting to look in better shape again, even though it is not one of the top dogs. But it does make you wonder a bit, when you are running a successful internet company that things can change so fast. One year master of the universe, two years later a dog. It is easy to read the above "learning's" and agree, but it is something entirely different to make sure you stay on top in practice. At JUST EAT we know we always have to watch out, change and improve. The big challenge is not the steady-steady incremental challenge, but the change that is needed when the underlying assumptions change. When the mental model of the market change. When technologies takes a leap. When consumer behaviour pivots. Ask Nokia. Ask Compaq. Ask the newspaper publishers. But exactly this dynamic is also what makes the digital area so super interesting. This is one of the key reasons I joined the revolution in the first place. And it is one of the reasons why JUST EAT today has great prospects: change is good, and over time even fundamental change will most likely be good, especially if you adapt accordingly. Creative destruction as good old Schumpeter would have said. It's tough in the short term, but there are great opportunities in the long term. Who knows, maybe AOL will figure something out and take advantage of future technology and consumer behaviour changes and again make analysts say "AOL has won". Today, we cannot say "the online race is over" and X emerged as the clear king, the situation is fortunately more fluid and fragmented than that. Apple, Google and Amazon can all claim their fair share of success, but the overall internet eco-system supports literally hundreds of niches that are still up for grabs even though the big guys tries to make their semi-proprietary eco-systems influence the outcome. Have fun, just like in the nineties!


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