Tech Talk with AOL Time Warner's Former CTO

Surprising advice for tech upstarts from Michael Dunn: Focus first on the business model, not technology

Michael Dunn, the chief technology officer at Time Warner before it was acquired by America Online (AOL ), is in the uncomfortable position of being merged out of a job. But he seems pretty comfortable with the development. In a recent interview with BusinessWeek Online Associate Editor Amey Stone, Dunn says he'll continue to help with the merger in a transitional role but will turn up as CTO at a new company soon.

Meantime, he's serving on the advisory boards of several small tech companies. On May 29, he joined the board of Internet Capital Group (ICGE ), a once high-flying but now struggling holding company for business-to-business startups. Not surprisingly, he has lots of ideas for how businesses can use the Internet to both save money and improve customer service. But his most important advice is somewhat of a surprise: Don't put too much emphasis on technology, he warns. Here are edited excerpts of Stone's and Dunn's conversation:

Q: What is your current role at AOL Time Warner, since America Online's guy got the CTO spot?


I've spent the past year working in a variety of different technology groups in AOL helping integrate the technology of the two companies and finding synergies. But there really can only be one CTO in an enterprise. Bill is a fine CTO. I've moved more into an advisory role. At some point, I will be offering my services to another company.

Q: When will that be?


It's at my discretion. Relatively soon. I'm a career CTO. It's what I like to do. I've always been drawn to aspects of technology that allow you to be heavily involved in the business model while finding the technology that helps companies meet business objectives. A lot of CIOs [chief information officers] are more involved with operations, but I like to have the operational, plus the tactical and strategic responsibilities.

Q: Have you been joining the advisory boards of more companies in the meantime?


I've been involved on the advisory boards of several companies for the past year, year and a half. That's a normal thing for a CTO to do. It's very valuable to get exposure to other business models and see new process-related issues that you might not get exposed to in your normal workday.

Q: What's some of the advice you'll be offering Internet Capital Group in your newest advisory board position?


The help I will bring is that I've done a ton of technology due diligence and can quickly ascertain the core advantages of technology deployments. But ICG already has a smart management team. An advisory role is not like a management role. You give very quick-hitting assistance. A lot of times, being an outsider, you can see something that is not clear to people running the company.

Q: Are you confident there is a future in B2B?


B2B still makes very good sense. At the end of the day, companies want to create efficiencies, cut costs, and create solutions that are reproducible. That's what B2B software allows them to do. If you partner with the right companies, technology development can occur very quickly now.

Q: Do you think information technology spending will pick up soon?


I think what we've had is more of a reassessment of the projects than an elimination of projects. Companies are taking a deeper look at their objectives and their budgets, the costs, and the returns. That reassessment went on through first quarter. It does look to me like that has eased up a bit in the second quarter.

Q: Will investors' enthusiasm return?


I think we will have logical valuations of companies going forward. Those with predictable business models, strong revenue trends, and straightforward partnerships will be rewarded. The saddest thing that may be occurring now is that companies that have excellent technology but that don't have strong management teams and that haven't been able to obtain funding are not going to be around in six months. Some very good technologies may fall by the wayside.

In ICG's case, it was a matter of the stock going through the roof and then falling back. So it is now undervalued. It has been grouped with some other companies that don't have the same strength of management. I think investors will eventually see how much value there is in the company.

Q: What are some other tech companies that you think are undervalued?


I've always been very impressed with Cisco Systems (CSCO ) management and technology direction. The company's internal procedures, like their use of an integrated order system, is brilliant. I'm incredibly surprised that the stock is as low as it is. AOL Time Warner is another. Even though I've taken more of an advisory role, I still believe in the industry and model, and think the management teams work well together. The company is very solid.

Q: Where do you think a lot of e-commerce companies went wrong?


Customer service has had good days and bad days. There are times when e-commerce does it well. At the end of the day, customer service is the most important thing. Those companies that understand that and don't decrease their efforts in that area will be very successful. Some companies are cutting back on their customer service now to save money, and it is a big mistake.

Q: What other advice do you have for companies starting out today?


Focus on the business model and the potential revenue stream derived by a product first and everything else will follow. Every once in a while, small green companies get focused on the wrong things, like funding aspects or the technology "wow" factor before they have a solid business to push forward.

A solid business model is the first thing you need, even before great technology. As a technologist you might think I would say the opposite. But to be a good technology company you have to do what's right for your business. You can't just have great technology. You've got to create teams, focus on what you're going to deliver, and out of that will come your value.

Edited by Beth Belton