Review: Dot Vertigo

Dot Vertigo: Doing Business in a Permeable World
by Richard Nolan
John Wiley & Sons, Inc.
September 2001
256 pages, $29.95

As Richard Nolan, a Harvard Business School professor explains it, “Dot Vertigo” describes the disorientation and dizziness experienced by established brick-and-mortar firms as they attempt to formulate new business strategies and processes for the Internet era. In the wake of the demise of the dot-coms, his advice is well timed. He suggests that companies must remake themselves into what he calls permeable organizations, designed to let customers, via technology, interact directly and work collaboratively with the company in developing products and managing problem fixes. Making this possible, he says, is the I-Net, a term Nolan has coined to encompass intranets and extranets combined with the Internet.

To be sure, there’s nothing new about the concept of wiring up the entire corporation to the Web, from factory floor to marketing focus groups. But where Nolan sets out to teach companies how to do that, he doesn’t quite deliver. The reason: Too many of the case studies he provides (Amazon.com vs. Barnes & Noble, IBM and its transformation) provide little in the way of new insights, having been outlined in many other business books to date. Another example is his Chapter 4 discussion of the software vs. hardware business models. “While software is expensive to create, once developed, its manufacturing cost is extremely low,” he writes. “Thus, the gross margins of successful software companies can result in extremely profitable businesses.” This rather obvious conclusion has been made dozens of times in earlier books.

These criticisms aside, there are nuggets of value in the book for CIOs. Chapter 8, for example, focuses on drugstore.com, and explains how it overcame numerous competitive challenges to become the leading online drugstore. Nolan clearly links drugstore.com’s initial success with its IT strategy, which allowed drugmakers to introduce new products immediately through a national online site, rather than wait several months to get products into brick-and-mortar drugstores. Nolan points out how the drugmakers could also aim product promotions directly at customers, rather than depend on pharmacists to impart information. Drugstore.com provides a relatively fresh example of the author’s “permeable company.”

Another nugget can be found in Chapter 9, which analyzes Cisco Systems’ linkage of existing back-office systems with new front-office systems, a move that brought in customers and suppliers. Nolan draws Cisco CIO Peter Solvik into a detailed, insightful examination of the process Cisco used to make its well-publicized move to the Net, including a customized ERP implementation and a restructuring of business processes. The author also describes how Cisco enlisted Yahoo Inc.’s search engine to push up-to-date information to employees. Of course, the current news about Cisco’s excess inventory and failure to forecast decreasing customer demand suggests that the fully permeable company has yet to arrive.

Nolan’s concluding chapter contains provocative global thinking about why it would be a mistake to think that the U.S. and the English language are (and will remain) supreme in the online universe. Overall, however, Dot Vertigo spends too much time rehashing well-known material before moving on to new ground.

Karen Southwick is the executive editor of Forbes ASAP and the author of three business technology books: Silicon Gold Rush, High Noon and The Kingmakers, all from John Wiley & Sons, Inc.