At the height of the dot-com boom, I joined a few academic colleagues in a meeting with senior executives of a large insurance company to discuss how they might respond to the challenges posed by the Internet. The group was glum—and for good reason. Founded early in the twentieth century, the company had laboriously built its preeminent position in the classic way, office by office, agent by agent. Suddenly, the entire edifice looked hopelessly outdated. Its several thousand agents, in as many brick-and-mortar offices, were distributed across the country to optimize their proximity to customers—customers who, at that very moment, were logging on in droves to purchase everything from tofu to vacations on-line.

A version of this article appeared in the September 2003 issue of Harvard Business Review.