The Third Wave an Entrepreneur’S Vision of the Future by Steve Case
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The Third Wave An Entrepreneur’s Vision of the Future By Steve Case Steve Case’s journey began shortly after college when he cofounded America Online (AOL) with his computer programmer friend Marc Seriff in 1985. At the time, only three percent of Americans were online, many of them using Commodore 64s. It took nearly a decade for AOL to achieve mainstream success. It became one of the top performing companies of the 1990s, and at its peak AOL hosted more than half of all household Internet traffic in the United States. Later, after Case engineered AOL’s takeover of Time Warner, he became chairman of the combined business. There, he oversaw the most powerful media and communications conglomerate in the world. In his new book, The Third Wave, Steve Case takes us behind the scenes at AOL. He documents some of the most consequential business and technological happenings of the last 30 years, while offering incredible insights from his work as an entrepreneur, investor, philanthropist and advisor to presidents. While a lot has obviously changed on the technological front since 1985, Case argues that the underlying business lessons of that time are far more relevant to today’s entrepreneurs and corporate leaders than one might think. In many important ways, we’re going back to the future. Back To The Future Steve Case believes the world is entering a new era, driven by what he calls the “third wave” of the Internet. The first wave saw pioneering companies like AOL, Cisco and Microsoft lay the technological and legal foundations for consumers to connect to the Internet, starting with dial-up modems and eventually with cable. Together, they were building the on-ramps to the “Information Superhighway” (remember that hackneyed term?). The second wave of the Internet began at the turn of the twenty-first century, just in time to inflate the dot-com bubble and then see it burst. It’s what Case refers to as “the Internet’s first real extinction event.” This era was about building software on top of the Internet: First, search engines like Google made it easier to explore the sheer volume of information available on the Web. And then, sites like Amazon and eBay turned the Internet into a virtual one-stop shop, promoting an explosion of commerce, as well as convenience. To purchase a personal subscription or corporate license, please visit us at www.TheBusinessSource.com or fill out the simple request form 1 at www.TheBusinessSource.com/contact-us. All Rights reserved. Reproduction or redistribution in whole or in part without prior written permission of The Business Source is strictly prohibited. The Third Wave It was during the second wave that social networking truly came of age. Where Google sought to organize most of the Internet’s information, social networks like MySpace and Facebook aimed to help us organize ourselves (while attracting billions of profitable users along the way). And it was also during the second wave that Apple introduced the iPhone, Google introduced Android, and a whole mobile movement was born. This convergence sparked a new era of growth, as smartphones and iPads became the engines of the new Internet, creating a new digital economy that would soon flood the world with millions of mobile applications, from Angry Birds to ride-sharing and everything in between. Today we’re entering into a third wave of the Internet. “Decades from now, when historians write the story of technological evolution, they will argue that the moment the Internet became a ubiquitous force in the world was when we started integrating it into literally everything we did. This moment marks the beginning of the third wave,” writes Case. The third wave is when the Internet stops belonging to Internet companies. It’s the era in which products will require the Internet, even if the Internet doesn’t define them. It’s the era when the term “Internet-enabled” will start to sound as ludicrous as the term “electricity-enabled” (as if either term was ever an especially meaningful differentiator). It’s the era when the concept of the “Internet of Things” (i.e. adding connected mobile sensors to real world products, like watches and fridges) will be viewed as too limiting, because we’ll realize that what’s emerging is the much broader Internet of Everything. According to Case, the entrepreneurs of the third wave of the Internet are going to challenge and re-invent the biggest industries in the world – from healthcare to transportation to education and beyond. They’ll create products and services that make our food safer, our lives longer and our daily commutes easier. The scale of disruption to these and other established industries will be unprecedented. The nature of entrepreneurship will also change during the third wave. Third wave company-creation stories are less likely to begin with college dorm-inspired apps that go viral, as they so often did over the last decade or so. Instead, third wave entrepreneurs will need to build robust partnerships across sectors in a way that second wave companies never had to. They’ll also need to navigate a complex policy landscape that most second wave companies could happily ignore. And they’ll need to do it all in a space where the barriers to entry are far greater than anything ever experienced during the second wave. The playbook these business leaders will need is the one that worked during the first wave, when the Internet was still young, when the barriers to entry were enormous, and when partnerships were not just niceties, they were necessities. But before we delve into the third wave playbook, let’s take a moment to re-examine our roots. It’s amazing how far we’ve come. 2 TheBusinessSource.com All Rights Reserved © The Third Wave Getting America Online With The Third Wave, Case didn’t set out to write a pure memoir of his days with AOL and Time Warner. But he did want to share a few key stories from that time, believing that, as Shakespeare famously said: “What’s past is prologue.” In other words, there are important lessons to be learned from the formative days of the Internet. He also didn’t want to write a step-by-step guidebook for budding entrepreneurs, as there are plenty of those. And he didn’t want to get too wonky on policy, because then no one would want to read his book (but Case does believe America is at risk of losing its lead as the world’s most innovative nation, and he felt it necessary to explain why and what we can do about it). Consequently, the Third Wave is part autobiography, part entrepreneurship playbook, and part policy manual – with his lessons from AOL serving as the unifying theme throughout. “The rollout of the AOL service in the late 1980s was a little bumpy,” writes Case. “Different computers all had somewhat different needs, and it took us nearly a year before we got much traction. Our growth finally accelerated once we launched a Windows version.” In late 1991, Case and Seriff decided they needed to take AOL public to raise the money they needed to fuel their rapid expansion. Following the IPO, over the next three years or so, AOL grew to over 4,000 employees and was creating about 200 new jobs each month. By 1998, AOL had 25 million customers and was one of the most highly valued companies in the world. For those readers who don’t remember (or who simply were not old enough), it may be hard to appreciate how significantAOL’s role was in ushering in the Internet age. In the late 1990s, AOL was the way most people did just about everything there was to do online. If you were online then, the odds are high that the first time you connected to the Internet, the first time you sent an e-mail, the first time you did a search, the first time you received electronic news, the first time you bought anything online, the first time you heard music or watched a video online, the first time you saw, sent, or stored photos online, the first time you connected with friends online, it happened on AOL. For most Americans, AOL was, for its time, Twitter, Amazon, Spotify, YouTube, and Instagram all rolled into one. Of course, it wasn’t all smooth sailing. On the business side of the equation, Case writes about a near-death experience the firm went through during its first year of operation when a partnership deal they’d entered into with Apple suddenly went south. The author notes that things would have turned out very differently for his company had Steve Jobs been CEO at the time, but Apple had recently fired him. Fortunately for Case, a threatened lawsuit against Apple netted AOL a $3 million settlement, which was just enough money to keep AOL afloat long enough to refocus its business. On the technological side of things, AOL also had its share of challenges to overcome. 3 TheBusinessSource.com All Rights Reserved © The Third Wave Not long after AOL went public, the company’s core software was struggling to keep up with its tremendous growth. On one hand, it was a nice problem to have. But Case and his team knew that if they didn’t adapt their code to keep pace with how the market was evolving, they wouldn’t be able to sustain AOL’s growth curve. Initially, AOL’s code was written to support a business model that charged users based on how much time they spent online.