Old economy firms will triumph over dot.coms says Morgan chairman

Old economy firms will triumph over dot.coms says Morgan chairman

Winners in the digital revolution will be large, established, brick-and-mortar companies if they can truly embrace the new technologies of the Internet, says Douglas Warner, chairman & CEO of J P Morgan.

In a speech given to members of the Asia Society in Hong Kong, Warner said: "Traditional 'brick-and-mortar' companies that thrived before the Internet boom - the so-called "dinosaurs" - actually have advantages in the race to profitability and market leadership over the dot.coms if they can truly embrace the new technology and its implications -- that is, if they can 'get it."

After a slow start, traditional businesses are now reasserting themselves in their marketplaces by using the Internet to leverage existing advantages not available to new dot.com startups. By incorporating the Internet into their existing business, expenses may go up modestly in the short term, but these companies soon realise Web-based efficiencies to their existing businesses. "For the 'dinosaurs' the Internet is all upside. When pre-Internet companies really get the Internet religion, their advantages will be hard to beat," he said.

New Internet start-ups, on the other hand, must overcome significant technological, marketing and branding start-up costs, while also developing a sustainable source of revenue.

Recognising the Internet's daunting implications to the future of the firm, Warner gathered a group of J P Morgan's top employees last December to assess where its competitive advantages lay in the digital world.

"What we discovered over the six weeks was that e-business provided Morgan with whole new dimensions of opportunity; to connect with many more clients; to match buyers and sellers of capital in new ways; to innovate customised solutions quickly and economically, and to reap the advantages of scale," said Warner.

From the 'off-site' discussions, a series of new Internet initiatives were launched including the formation of LabMorgan, a separate e-business unit that takes ideas from inside and outside the firm, incubates, and invests in them.

"LabMorgan uses Morgan's brand, financial markets prowess, and global client reach to build those ideas into scalable ventures," Warner said. "Since LabMorgan opened in March, it has logged in more 1500 ideas from entrepreneurs inside and outside the firm, approximately 10 every business day. We have received more than 3300 resumes from people wanting to work there. As of 1 August, 30 ventures have already been launched and 90 ideas are in the first or second stage of evaluation," he said.

Reeling of a list of other Morgan e-business initiatives, Warner concluded: "We are still in the very early days, but there is no doubt of the revolutionary opportunities, 'getting it" has in store for us."

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