When the captain jumps ship

While there is much potential for e-commerce ventures, the diagnosis for many start-ups is far from healthy and not helped when a...

While there is much potential for e-commerce ventures, the diagnosis for many start-ups is far from healthy and not helped when a leading B2B exchange's captain abandons ship

David Bicknell

Viewpoint

The week commencing 8 January was a seminal one in the history of the new economy. It was the week the doctors attending the dotcom "patient" finally shrugged their shoulders resignedly and admitted there was little prospect for a reasonable recovery.

That is not to say that Internet-driven business will not continue, or that business-to-business (B2B)e-commerce cannot thrive. But it has been obvious for months that for many start-ups the condition is terminal.

The latest to struggle for breath, Letsbuyit.com, will not survive in its original form - and certainly not with its original management, which has already quit. Ironically, Breathe.com, which should be a dead duck Internet service provider, has now been resuscitated by Great Universal Stores (GUS).

Having already bought Jungle.com last year, GUS has begun to earn itself a reputation as a bricks-and-mortar business with the courage to snap up a failing dotcom or two, irrespective of their tarnished reputations. But the killer blow to the (old) new economy happened in the US, when Joseph Galli quit VerticalNet, which owns and operates B2B exchanges, to join Newell Rubbermaid, which makes cookware, consumer storage products, and Little Tykes toys. The news of Galli's move should chill the bones of many of those working in start-ups and marketplaces.

Galli, who was president of Black & Decker's tool business, quit to become number two at Amazon behind Jeff Bezos. He then went on to become the president and chief executive of VerticalNet.

Now, he has gone back to the old economy, in a vote of no confidence to where the new economy is headed. If ever there was a case of leaving the sinking ship that is the dotcom new economy, this was it.

Galli only joined VerticalNet in July, and within six weeks had shaken up the company, creating three new business units - Markets; Exchanges and Solutions - to add to VerticalNet's process for developing new products and services.

Galli also planned to set up a separate software division to help VerticalNet supply software to large purchasing consortia serving basic industries. Now, four months after putting his plan in place, he has gone.

What is more, in his new role at Newell Rubbermaid, Galli said he has no plans for the company to sell its housewares and toys directly to consumers on the Net.

"We are not going to sell products directly to consumers," Galli told Reuters. "Our retailers do that."

It is almost as if he had forgotten his recent career and moved directly to Newell Rubbermaid from Black & Decker.

Galli's hasty departure from the new economy did not impress some. One US analyst commented icily, "The sinking of a large ocean-going vessel tends to split crew members into two groups.

"Crew members in the first group work feverishly to maintain order among passengers, assess damage and salvage whatever possible. Those in the second group use their insider's early warning to be among the first to grab the life raft. Joe Galli has proved to be a crew member of the second variety."

Last year e-commerce companies that were built to be sold on were categorised as "built to flip", rather than "built to last". Galli took it a stage further: don't flip the company, just quit it for the traditional world.

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