For many of us in the Net biz, it’s shaping up to be a not-so-merry holiday season. The stock market’s plunging faster than a Jennifer Lopez awards-show gown. Layoffs have gotten so plentiful that the Industry Standard’s Layoff Tracker now has 23 (!) pages of layoff news. Industry giants like MarchFirst, Viant, Scient, and iXL are closing offices, laying off workers, and seeing their valuations hit rock bottom. Dot-coms are turning into dot-bombs everywhere you turn.
Merry freakin’ Christmas, right?
The ripple effect from the dot-com shakeout is starting to move through our industry like a tsunami. While a few months ago, many of us were chuckling at the daily reports of goofy e-businesses going belly-up on sites like FuckedCompany.com and WebMergers.com, now it looks like the flood of doom isn’t stopping at little or goofy sites.
Biggies like Garden.com, Pets.com, and Furniture.com are biting the dust every day. (Side note: Looks like having a killer domain name DOESN’T guarantee success after all, huh?) And as they go, they’re taking those of us who’ve gotten fat on the endless stream of venture and public market money flowing out of these companies with them.
So what can we do? If your company is still going strong (and many, many are), good for you… but don’t get complacent. If your company is on the skids, my condolences. But don’t worry too much because there’s still a big need for smart people out there.
No matter what your current situation is, you need to start looking forward by looking backwards at the mistakes that were made in order to keep your business above water in the stormy (at least for the moment) future. You need to focus on the fundamentals of what actually builds successful businesses and solidify your strategies for future success. Here are eight things to consider as you figure out how to head into 2001:
Business models. Do you actually know how you’re going to make money? Really make money? I don’t mean cooking up a scheme that’s never been tried before that sounds good on paper and impresses your friends and business associates with its ingenuity. I mean figuring out a way to actually sell something that other folks are going to pay money for.
Plenty of past ideas sounded mighty clever on paper. Priceline wowed the world with a neato model that had never before been attempted, and plenty of B2B exchanges sprung up because connecting buyers and sellers via the web and taking a cut of transactions seemed like such a great idea. Many I-builder companies sprung up to service these VC-fueled attempts without any clue of how to sell, how to market themselves, or how to sustain growth when the marketplace allowed through-the-roof pricing to whoever could sell the spiffiest spiel.
The party’s over, folks. Now it’s time to look at actually creating value that has a market.
Knowing the customer. Do you know who your customers are? Really? Similar to the business-model problem, many companies got started because they had a neat domain name registered and had a service that got people excited. The only problem was that nobody actually wanted to buy it, or buying it simply required too much of a change in lifestyle to be viable.
For an interesting take on this, check out this BBC News article. The principals of these companies simply assumed that because they liked the idea, everyone else out there would, too. Unfortunately, very few companies took advantage of mining the data of the customers who came to their sites in order to determine what their customers really wanted. Very few companies did the hard research (beyond breathless analyst projections) to determine if what they were selling actually had a marketplace.
One of the biggest examples of this today is what’s going on in the wireless world. Do people actually want “the Net in their pocket”? Maybe, but until the wireless Internet improves, a lot of folks are going to be disappointed. As we move into this next year, it’s vital that we truly understand who we’re selling to, what they want, and how to get it to them. This applies to service companies, too. Can you identify your main target markets and say that you truly understand their needs?
Fashion victims. When we look back a few years from now and see the names and work styles of a lot of formerly successful companies, we’re probably going to laugh. “E-this” and “-ient” that and “I-everything” companies rode the trend of fast and hip straight to the trash heap. And the technology trends that never went anywhere… sheesh! Remember “push technology”? Remember everyone offering free email on their sites? Chances are if “everybody’s doing it,” you should think twice about jumping into the fray. The companies that build solid plans based on research and solid business principles will thrive. Fashion victims won’t.
The product. Do you actually have a product? This isn’t a totally crazy question. A lot of companies were built around shaky alpha versions of technology that never quite worked. And if you’re in the service business, you need products, too, if you’re going to avoid becoming a commodity and being priced out of existence. Think about what you do. Is your tech rock solid? Can you differentiate yourself because of your unique offerings? If not, you’d better start thinking about how to move ahead of the mob in your offerings.
Short-term thinking. I’d bet that you’re probably thinking hard about how to cool down your burn rate these days. Simply spending all your cash on quick-fix solutions is a recipe for disaster. Last year, a lot of companies bet the farm on huge ad campaigns that generated a lot of one-time traffic to their sites but gathered very few repeat customers. Short-term thinking says, “We need lots of traffic now; we’ll worry about what to do with it later.” You have to build value for your customers and give them a reason — a real, compelling reason — to come back. Customer service isn’t a cost to be dealt with. It’s the long-term, often unglamorous way to build a business for the long haul.
Hype. By now, who hasn’t heard of a company that’s billing itself as the “premier provider” of “B2x services” that isn’t set to “dominate the industry”? Hype leads to high expectations. If those expectations aren’t met, the effect is far worse over the long haul than if they’d never heard of you at all. If you’ve got a good story to tell, tell it like it is. A truly compelling story is one that doesn’t need puffery. Mom was right. Honesty really is the best policy.
Other people’s money. This is getting harder to get, but if you’re plowing through your investors’ money like it’s going out of style, stop. Regardless of what you think, that money is now YOUR money, and you ought to start spending it accordingly. Think long and hard about your priorities. Is that company DJ/chef really necessary? Is the salary of that young whippersnapper with two weeks of experience outside of business school really worth it? Do you really need to have that new furniture right now? Every dollar you spend needs to be able to account for the bottom line. I know, I know… this sounds like kid’s stuff. But past behavior by many companies shows that this basic fundamental was (and is) often ignored. Demand accountability, and make the tough decisions that need to be made when you’re not getting value.
Growing too fast. Finally, it looks like “Internet time” might be a myth. Just like having a great domain didn’t guarantee success, being the first and the biggest doesn’t necessarily lead to long-term success, either. A brief stop at the Standard’s Flop Tracker shows plenty of companies that were, at one time, the biggest dogs on the block. When I hear of one dot-com or another laying off hundreds of employees, my first reaction is always “What the heck were those people doing anyway? Wasn’t the Net supposed to breed unheard-of efficiencies? Weren’t we actually supposed to be able to do more with less?” Growth on investment money isn’t necessarily real growth. In many cases, it might just be a major monument to major egos. Look at your growth strategy. Is it working? Do you really need all those people? How efficient are your processes? Is size merely masking the symptoms while the company rots from the core?
All in all, none of this stuff is rocket science. Building a business for the long term is the same today as it ever was. You have to make something that people want to buy. You have to keep those people coming back to buy more. You have to earn more money than you spend. You have to have a viable strategy to grow into the future. The Net is changing a lot of stuff, but it hasn’t changed the fundamentals. Let’s learn from the lessons of the past to keep growing into the future.
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