On a summer evening in 2003, when half of North America was plunged into the most devastating power failure in history, Louise Guay, president and co-founder of the company My Virtual Model (MVM), was deep in thought, contemplating the future of her business. In the past four years, Ms. Guay and her associate, Jean-François St-Arnaud, current CEO of the company, had ridden the same roller coaster as so many other e-commerce businesses. Their company's greatest moments of glory came in 2000, when Virtual Model was showcased on Oprah, one of the most popular TV shows in America. Within hours of the broadcast, thousands of women visited the site of retailer Land's End, MVM's largest client, to create their own model (see Exhibit 1).
At the time, MVM had over 300 employees and was undeniably one of the most promising high-tech firms. The following years were more trying, however. Although the concept of a virtual model continued to interest the largest North American retailers, the company still had trouble making ends meet. In a world that had become practically hostile to e-commerce since spring 2001, MVM's financial situation had become precarious. Finding it increasingly hard to raise new capital, the firm was forced to curtail its activities in 2002 and again in 2003, in conjunction with a series of layoffs. By summer 2003, only 65 regular employees remained, along with many freelancers,