Techknow: Lessons from Silicon Valley

Techknow: Lessons from Silicon Valley - Middle-aged executives slaving away inside a large corporation wondering why know-nothing kids are raking in millions by setting up loss-making internet companies - now is your moment.

by ROGER TAYLOR
Last Updated: 31 Aug 2010

Middle-aged executives slaving away inside a large corporation wondering why know-nothing kids are raking in millions by setting up loss-making internet companies - now is your moment.

Experienced executives from traditional industries are suddenly in demand in Silicon Valley. The reason: the explosion of business-to-business internet companies that bring together buyers and sellers in manufacturing, agriculture and other non-internet industries. The business done by these companies is expected to rise to over dollars 1 trillion in the next three years, dwarfing online consumer retailing, which has attracted most attention till now.

Business-to-business e-commerce companies cannot succeed on the adrenaline of 20-year-old computer programmers alone. They need industry insiders - people who know the jargon and the secret handshakes. The result has been a string of seasoned managers, such as Ellen Marram, former CEO of Tropicana, forming internet start-ups. The net's not just for the under-thirties ...

FRED SMITH, chief executive of FDX, parent company of Federal Express, complained at a recent dinner hosted by Weiss, Peck and Greer (the venture capitalists that backed FDX) that web companies such as Amazon.com are worth dollars 26 billion on only dollars 1 billion of sales, while FDX is worth a mere dollars 13 billion on dollars 17 billion of sales. FDX was briefly in vogue as an internet stock earlier this year when investors realised it would benefit from the packages being delivered to net shoppers. But then shares were dumped when earnings were hit by rising oil prices. The only reason companies like Amazon, also in the business of moving stuff around, were not affected was because they don't sell much stuff yet. 'These businesses won't be able to ignore the physical laws of distribution,' Smith warned.

TRADE SHOWS are finding it hard to keep up with progress. Every November, the computer industry converges in Las Vegas for Comdex. In January, Las Vegas hosts the Consumer Electronics Show for makers of stereos, TVs and so on. But in a world where your microwave may be connected to the internet and your camera is also a hand-held computer, companies are finding it hard to decide which show to attend. Last year Apple attended the Consumer Electronics Show, saying that the PC is another consumer goody. This year Nobuyuki Idei, chief executive of Sony, headlined at Comdex. Both companies have helped turn the computer into a designer consumer item - Apple with its iMac and Sony with its Vaio laptop. How long before Apple brings out a hif-iMac?

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