Lessons from the Fall (of the I-Builders)

The Industry Standard has collected a series of articles that examines the current plight of the I-Builders — IXL, March1st, Razorfish, Organic, et al. — once the wunderkinds of the industry, now known more for their hair-raising charts from hell. What happened?

They tried to grow too fast. Faced with a demand for their services from every Tom-, Dick- and Harry-dot-com these companies launched a blitzkrieg of acquisitions, swallowing virtually every web studio with a permanent address and an iMac. In the process they suffered from tremendous differences in internal information systems, processes, benefits and cultures. Especially cultures.

The result was a hodgepodge of environments, in which consultants regularly hopped from one pond to the next, looking for better work environments, a different class of clients, and a culture which fit. Those companies that did succeed in integrating systems and cultures did so at the expense of their own employees, and as a result…

They commoditized their employees. In a business environment in which a project might require “one IA, one PM, two IDs and two SEs” there’s no room for building cohesive teams, much less saying “let’s put Tommy G. on this one… he’s done a great job on just this kind of project.” So what happens when you commoditize an asset that has feet? It walks away. Employee churn rates at thse comapnies is best described as staggering. Management churn rate? Sometimes triple digits.

Of course, employees aren’t commodities, and one IA, or ID, or SE is not just as good as another. It didn’t take their clients very long to realize this, either.

They became dot-snobs. Faced with demand that far outstripped their ability to supply services, our I-Builders started to cherry-pick their projects. One of the self-evident truths of the I-Builder game is that “you are who you do.” And since everyone wants to be a highly glamorous pure-play Internet company (’cause that’s what’s sexy, and that’s what Wall Street rewards) they turned down work that didn’t break new ground, or that didn’t have a company name that ends in dotcom. After all, one must mind one’s client portfolio. Nevermind the opportunities with a Fortune 500 company with a pocketful of cash. It’s more glamorous to take an equity stake in an start-up for services. “Damn the cash flow, full speed ahead!”

They lost sight of their customers. If they ever had a real grasp of their customers and their customers’ needs, they quickly lost sight of them in the glare of the rising sun that haloed their stock price. Wall Street became, not a barometer of their industry, but a daily performance indicator of the company itself. Ultimately these companies largely succumbed to the myth that their customer lived on Wall Street. They drank the Street’s kool-aid. They drank every drop.

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