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e-Business Strategies for Virtual Organizations
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conversation. They show how the rise of the Internet has
enabled people to restart conversations in a global world. The
basic message of this book is that the balance of power is rapidly
moving away from giant impersonal corporations and shifting
toward well-informed and articulate consumers. One of the
main reasons behind the increase in power of the consumer is
the fact that the Internet provides a means whereby they can
group together into powerful virtual communities. One of the
messages in this book is that the large suppliers who try to
ignore this change will do so at their own peril.
One could argue that the balance of power, at least on the
Internet, moved away from the giant corporations to articulate,
well-informed and above all, well-connected consumers several
years ago. This argument is supported by the 1994 Pentium
fiasco. In June 1994 Intel engineers discovered a division error in
their new Pentium chip. Intel managers decided not inform
anyone outside the company on the grounds that the division
error could only affect a very few customers. On 24 October Dr
T.R. Nicely, a math professor in Virginia (who double-checked
all his work by computing everything twice, on two different
computers), detected the error and contacted Intel technical
support to report the error. Intel did not get back to Dr Nicely
and so on 30 October Dr Nicely e-mailed a few people to inform
them of the bug he had discovered. On 3 November Terje
Mathisen of Norsk Hydro posted a message entitled ‘Glaring
FDIV Bug in Pentium’ on the Internet newsgroup comp.sys.intel.
By 24 November the story had been reported by the New
York Times, more than 200 other newspapers as well as on the
radio and TV news networks.
At this stage Intel made an offer to replace a Pentium processor
only after Intel had determined that the processor would cause
a problem in the application in which it would be used.
On 12 December IBM issued a press release announcing that it
had halted shipments of Pentium-based PCs and Intel stock had
dropped by $3.25 that week.
By 20 December Intel finally agreed to replace all flawed
Pentiums upon request. Intel had to set aside a reserve of $475
million to cover costs of the Pentium recall.
On 18 January 1995 the Wall Street Journal (cited in Hoovers-
Online 1994) reported that Intel’s flawed Pentium chips resulted
in their profit falling 37% in the fourth quarter of 1994.