Monday, 10 February 2003 8:30 am
I finished writing The Slingshot Syndrome: Why America's Leading Technology Firms Fail at Innovation in October 2001, and it became available for retail purchase in January, 2002. It struck me in retrospect that some of the things in the book that were most controversial only 12 months ago are now treated by everyone as fact, while some of the things that were treated as fact at that time now appear to be the most controversial. It's amazing just how much our collective worldview has changed in only 12 months.

The most controversial part of my book 12 months ago was my analysis of how serious the problems were in the telecommunications industry, leading to my conclusion that the leaders were at serious risk. I know that it was controversial at the time, because I had multiple discussions with the leading business journalists who specialized in telecommunications industry stories. They argued that many industry insiders, such as Joe Nacchio, CEO of Qwest, were saying that there was no bandwidth glut. But today, after the WorldCom bankruptcy, the firing of Joe Nacchio, and the fall in value of Lucent and Nortel stock to, at times, below $1, the bandwidth glut is treated as a fact, and the seriousness of the problems is no longer controversial.

On the other hand, what has become controversial now is my assertion that small high tech startups would be the winners against their larger, more established competition. The problem that startups have run into is the current financial climate where it has become next to impossible to obtain additional capital on reasonable terms. IPOs have been impossible for a couple of years now, with no letup in sight. Acquisition activity by the larger companies has slowed as those companies deal with their own balance sheet and survival issues. With no liquidity events, venture capital has frozen into a holding pattern that is becoming more destructive as it persists. 

The book predicted that companies which are evolving toward the prescribed "distribution company" model such as IBM, Cisco, Microsoft, and Dell would trounce their competitors, and this appears to be happening as those companies turn in better financial numbers and increase their market share. Although less easy to see at the moment, I believe that some of the survivors of the startups will become the household names of a decade hence. Venture capital will have to return as well, although that industry may have to go through a rebirth first. Schumpeter's creative destruction cycle, a key theme of the book, has rarely been more obvious than it is today. So I continue to stand by the analyses and recommendations published in The Slingshot Syndrome - I see no need for updating them.