New Research by Bestselling Harvard Business School Author Pinpoints New Criteria for Success On the Internet.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 8, 2000

"After The Gold Rush," a Major Research Initiative Sponsored By

Concrete Incorporated and Authored by Clayton Christensen,

Reflects on Lessons Learned in the New Economy

Harvard Business School Professor Clayton Christensen, author of the bestselling The Innovator's Dilemma, has presented new findings and recommendations for companies already in or about to do business in the Internet Age. Concrete Incorporated, a leading Internet consulting firm, commissioned the research for "After the Gold Rush," Concrete's leadership conference held today in New York for senior corporate executives and financiers.

Six Papers Offer Insights Into The Likelihood of Internet Success

In a series of six papers, Professor Christensen and his colleagues from his research and consulting firm, Innosight, give a clear assessment of what can be learned from the early years of the Internet - "the Internet Gold Rush of the Roaring `90's". The papers chart the course for the period ahead, distinguishing the criteria that will separate the winners from the losers.

Picking up where The Innovator's Dilemma left off, Innosight make its arguments using case studies of such corporations as Merrill Lynch, Charles Schwab, Dell Computer, DLJ Direct, Yahoo, and AOL, and industries including pharmaceutical retailing, stock brokerage, retail banking, real estate brokerage and auto dealerships. The six papers are:

#1: Where You Are Going on the Internet Depends on Where You Sit #2: "Cramming," versus "Enabling" #3: Position Along the Prevailing Basis of Competition #4: Design to Exploit the Basis of Competition #5: The Problem With Portals #6: The Death of Differentiability

In the introduction to the research, the Innosight team wrote: "Now it is finally time to take stock of what we have learned, make some sense of what happened, take a moment to chart the course anew, and move on."

Aaron Cohen, Chief Executive Officer of Concrete Incorporated and host of today's invitation-only conference, welcomed the timely insights from Professor Christensen and his Innosight team. "We saw the need to bring together a group of senior business managers and members of the finance community involved in supporting this new economy to take a hard look at where we go from here. Today's conference, which we titled `After the Gold Rush,' is taking an honest, pragmatic, yet highly optimistic assessment of what lies ahead for all of us. To help us do that, Clay Christensen's report gives us a specific and highly insightful assessment of what it takes to build a sustainable Internet business."

Key Findings

Among the papers' key findings are:

-- A critical step in analyzing a company's prospects for Internet success is
to confirm the internal workings of that company - its resources, processes,
and values. With this insight, one then must ask the question, is the Internet
sustaining or disruptive to these characteristics?

-- Companies must be careful that their approach to doing business on the
Internet is not merely a repetition of their offline businesses as this exposes
an enterprise to numerous risks and fails to fully utilize the capabilities of
the Internet. "Does the new business enable a larger population of less skilled
or less wealthy people to do things for themselves then they could do before?
If the new enterprise satisfies that criterion, there is a greater probability
that it will get traction in the market," the Innosight report states.

-- The research argues for the creation of separate business units designated
to manage the Internet organization. "As long as the Internet business unit is
part of an existing organization - particularly if the Internet is disruptive
to that organization's processes and values - the resulting Internet business
will be a `cram job.' Formation of a separate subsidiary to pursue an Internet
venture often frees the imagination of mangers to maximize their use of the
unique attributes of the Internet to capture business."

-- The successful Internet enterprise must facilitate competition along the
prevailing basis of competition, whether that basis is functionality,
reliability, convenience or price. Companies that compete on the wrong basis of
competition face fundamental problems. For example, by offering convenience to
a customer who wants reliability, companies demand a behavioral change. But
consumers will not alter their behavior until they have been over-served along
the existing basis of competition and will resist innovations they do not
value.

-- In retailing, "disruptive enterprises" have historically shared six
qualities that may forecast success for e-retailing: 1) they were all enabled
by technology advances; 2) they reshaped the prevailing business model to earn
profits in a new way; 3) they served customers as the portals of their day; 4)
they enabled customers to do things that only specialists could do before; and
5) they tended to migrate up market as 6) branding opportunities shifted from
the product to the retailer.

-- The stage at which the Internet will make money will migrate over time. Once
the characteristics of a business improve to the point where mere functionality
and reliability cease to be an issue, innovators need to find other ways to
compete for customers. Very often, speed to market becomes critical. Moreover,
the ability to customize to the specific needs of customers in ever-smaller
market niches becomes crucial. To that end, scale-intensive back-end subsystems
will appropriate the bulk of the profits over time.

"We are pleased that Concrete Incorporated has given us the opportunity through their sponsorship of our research as well as today's conference to pick up where The Innovator's Dilemma left off," said Clay Christensen. "The Internet continues to produce enormous impacts and changes. We think these six papers can help business leaders understand the Internet, and as a result, make the best possible business, technology and investment decisions."

Methodology

The Innosight team that prepared the six papers are: Clayton M. Christensen, Harvard Business School professor and author of The Innovator's Dilemma, Innosight Senior Writer Carl Johnston, and Innosight Director of Content Amy Barragree. The team used a combination of case-study methods, published material, and updating of research done previously by professor Christensen and Innosight. A variety of source material is cited in the papers, including footnoted references to a variety of articles in the national business media.

About Concrete

Concrete Incorporated is an Internet consulting firm that helps clients shape, build, and grow Internet-based ventures - its clients range from large, multi-national corporations to venture-financed start-ups. The firm's primary service offerings include: strategic counseling, Internet-based product development, and application and infrastructure management. Concrete supports these service offerings with specialized expertise in business strategy, branding, project management, software engineering, software quality assurance, design, user interface architecture, interface development, and network operations. Corporate clients include Bertelsmann, Bechtel, The Princeton Review, Insignia ESG, and Le Monde. Venture-financed clients include BeliefNet.com, and GoCollect.com. Concrete was founded as an entrepreneurial venture in 1996 and has built and spun off its own market leading businesses, Bolt.com and GirlsOn.com. Concrete is privately held and its investors include Warburg Pincus, Wit Soundview Partners, and i-Hatch Ventures. The company currently has offices in New York and San Francisco

About Innosight

Innosight was founded in January 2000 by Harvard Business School Professor and bestselling author Clayton Christensen. Through extensive consulting work with some of the world's best companies, Christensen recognized the need for a results-oriented, in-house innovation resource. He saw that, in managing innovation, most companies rely on outside consultants, outsourced management learning programs, and a patchwork of incompatible business publications. He also saw that those approaches weren't working. So Christensen set out to create a cost-effective, solutions-oriented tool that companies could use to address the real, day-to-day innovation challenges that they face. The result is an entirely new approach to learning and problem solving--an approach dedicated to making a material difference for participating companies.

Note to Editors: A copy of "After the Gold Rush" may be obtained by contacting Emma Murphy, Public Relations Manager, Concrete Incorporated at [e-mail] or telephone [phone].