Leisureplanet.com: organization and HRM in the new economy.

Methodology

The first author served as the senior HR manager of Leisureplanet.com during its last, and critical, phase of evolvement. Through the lens of his role we present events of which he had first-hand experience. We also make use of official business plans and documentation which are in the public domain since the company went into receivership. The second author interviewed in person five key members of the organization (though not the founder and CEO, Pierre Kleinhans, who remains uncontactable). We wrote this report with the benefit (and bias) of hindsight, some 18 months after the company collapsed. Our account was read and approved by two former employees of the company.

A Brief History of Leisureplanet.com Founding Phase (1992-1995)

Leisureplanet dates back to December 1991, when it was established in Belleville (Cape Town), South-Africa by Pierre Kleinhans. (1) The company started as an electronic publisher of multimedia hotel information for the travel industry. Leisureplan, as it was then known, was born in a consumer society with a keen appetite for leisure and travel. It was among the first to the market with a multimedia CD-ROM "aimed to assist travel professionals and individuals in the selection and booking of hotels and other travel products." (2)

Leisureplan's business model was founded on its key asset, a hotel database; however, for hotels to be willing to pay for a listing in a CD-ROM publication, it had to have a large distribution segmented to different customer groups. In turn, for customers to be willing to access the database, it had to have a wide and attractive selection of hotels. Hence, the only way to convince hotels and customers alike to step into this (ad)venture was by selling upfront something that was not quite there yet. This inbuilt paradox of business startup, by itself not unique to the new economy, echoes what characterized the dot.com boom of the late 1990s. It also became the blueprint for Leisureplanet.

Profits were therefore non-existent "because (the company) has been engaged in developing the software, human resources, systems, and processes which form the asset base..., Leisureplan's financial records reflect a period of major investment with no overall profits having been produced." (3)

Second Phase (1995-1997)

By 1995, the expanding capabilities of the Internet and its lure to investors started to become evident. The physical CD-ROM was gradually moved to become an Internet site (launched in April 1996), though its key asset remained the database, and the core activity still focused on the acquisition of content (participating hotels) rather than actively engaging customers. Thomas Cook and Philips Multimedia invested US$4.7 million during this period.

The company, headquartered in Cape Town, had a European operation base in Belgium and altogether employed 45 persons.

Third Phase (1997-1999)

Moving from a passive database to an interactive Web site marked the onset of global ambitions for the now-renamed Leisureplanet--ambitions fuelled by the NASDAQ "bubble" and the rapidly unfolding new technology, the now-renamed Leisureplanet marking this change. Whereas earlier on, real customers and advertisement revenues defined growth projections, potential realization now became the hallmark. Growth rates soared to triple-digit figures (nearing 200 percent per annum), funding leapfrogged, creating a spending frenzy, requiring in turn ever-bigger business plans. The activity hype during that period led to global reach through partnerships with the flagship companies of the Internet and media: Yahoo!, Lycos, and CNN, investing in total some US$50,000,000 in cash and partnerships. (4)

The significant departure from measuring potential customers to counting potential hits (site visits)--a common measure for the first wave of dot.coms--signaled increasing detachment from reality testing and the veracity of the marketplace.

At this stage the company numbered 80 employees operating from Cape Town and Leuven in Belgium, seat of its headquarters since March 1999.

Fourth (Final) Phase (2000-)

By now the company reached the pinnacle of virtuality. From an interactive platform, Leisureplanet.com was to transform into a "global village" of leisure travelers (5) and the key performance measure became the number of active community members, defined as actual contributors to the domain (much in the same way Amazon.com readers, for example, provide book reviews for the benefit of other potential customers). Whereas previously, annual business plans ranged from US$20 million to US$50 million, the 2000/1 business plan assumed an additional investment of US$250 million. (6)

There were now 231 employees operating from three sites: Leuven, Cape Town, and London, and the need for a formal operating structure and binding organizational procedures became pressing, heralding the appointment of the first author. (7)

The burst of the NASDAQ "bubble" in March 2000 triggered an immediate funding crisis and an abrupt slowdown. Until that moment, growth and momentum had been the only tangible and the slowdown meant the breakdown of the company. Collective dismissal and bankruptcy caused the company to cease operations on August 28, 2000. Its realizable assets (the databases) amounted to no more than US$'/2 million (out of a total investment of some US$70 million).

Virtuality

Virtual corporation: A temporary network of independent companies, suppliers, and customers, linked by information technology to share skills, costs, and access to one another's markets.

Virtual Office: Simulated by communication links between dispersed employees and freelancers.

Virtual Company: Has been used in the sense of both virtual office and virtual corporation.

--The Oxford Dictionary of New Words (1997)

Virtuality as Habitus

We wish to evoke here a notable thinker of the late 20th Century, Marshall McLuhan (1911-1980). McLuhan, the guru of communications ("the medium is the message"), foresaw globalization and the explosion of communication technologies and coined one of the key phrases of the new era - global village: "'Time' has ceased, 'space' has vanished. We now live in a global village...a simultaneous happening" (McLuhan, 1967, 63).

McLuhan believed that the use of electricity extends our central nervous system to affect a universal connectivity that transcends the individual: "We live mythically and integrally...In the electric age, when our central nervous system is technologically extended to involve the whole of mankind and to incorporate the whole of mankind in us, we necessarily participate... in the consequences of our every action" (1964, 4). His mysticism, anchored in religious belief, was influenced by the Catholic philosopher Pierre Teilhard de Chardin, which, notes Wolf (1996) "...led him to hope, as had Teilhard, that electronic civilization would prove a spiritual leap forward and put humankind in closer contact with God" (1996, 125), though later he reversed himself, calling the electronic universe "an unholy impostor...a blatant manifestation of the Anti-Christ" (op. cit.).

Hence "electronic civilization": IT and the World Wide Web is the Savior and Satan incarnated in one. Belief has played an important role in our case and religious mysticism has molded the idea of virtuality, to produce a habitus. (8)

The Business Context

The business context in which the first wave of dot.com organizations operated was critical to virtuality becoming an organizational building block, the equivalent to bricks & mortar of the old economy, which, at their time, shaped organizational structures and processes.

By the late 1990s, NASDAQ -- the fountain, engine, and temple of the new economy, had been on a spiraling rise over several consecutive years, growing by an astonishing 250 percent in 15 months, peaking in early 2000 at an all-time high of over 5,000 points. The market mood was unquestionably "bullish" and it followed from the premise that the new economy was not supposed to abide by standard economic rules. Whereas in traditional stocks, market value was linked to a company's actual performance, material assets, and future prospects, most values listed on NASDAQ had no real assets to underpin their speculative growth. Market capitalization of up to 1,000 times a company's (future) assets was not unusual in NASDAQ's boom days, underlying the spectacular belief in the future of the Internet and its spawned organizations, the dot.coms.

They seemed to be defying conventions and basic organizing principles. This new breed of organization -- the dot.com -- has been replacing the machinery of sales apparatus, distribution networks, and storage facilities with the computer screen and the wizardry of a new technology, which eclipses time and space and does away with brick-and-mortar infrastructures. The critical novel feature of dot.coms was their real-time connectivity to whomever and wherever.

The Industry Context

The particular business sector in which Leisureplanet.com operated added its own contribution to Leisureplanet's virtuality habitus.