Voted off the Dot-Com Island

Many of this year’s dot-com failures have been somewhat unsurprising if not predictable. Unload dump trucks full of money on anyone who can register beta waves on an EEG, and you’re bound to witness a few colossal financial failures. Momentum-driven investors fueled many grandiose dreams of being “bigger than eBay,” when in reality they provided only a false sense of competency.

However, when picking the dot-com wannabes from the dot-com survivors, there are occasional surprises. A more recent example came from the news that Pets.com was among the latest to be voted off the dot-com island. Pets.com may have been far from profitable, but it often ranked among what many might call legitimate contenders. This begs the question: “Is any sock puppet safe?”

On the bright side, there’s more to be learned from failure than from success. Surviving e-businesses would be wise to seek lessons from these failures and from the changing nature of the marketplace.

Slow and Steady Wins the Race

The Internet revolution is dead; long live Internet evolution. With the focus on profitability and smarter marketing expenditures, unchecked meteoric growth plans create an immense risk of failure that’s just as spectacular. Investors are weary of risky gambles, and the VC spigot has now turned to more of a moderate trickle. Hence, massively leveraged growth isn’t even an option for most e-businesses anymore.

It’s the difference between building a bonfire through careful layers of kindling, ensuring that one layer is sufficient to ignite the next, and dousing everything with lighter fluid, hoping that something big will catch after an eyebrow-disintegrating blaze of glory.

Good Employees Are Still the Scarcest Resource

Despite the many high-profile dot-com layoffs, a sufficient supply of good employees will make or break even the best of e-business plans, but concerns over company health and a greatly reduced interest in stock options now make dot-com recruiting even more of an uphill battle. E-businesses must mature beyond the dot-com slave-ship mentality if they are to attract and retain key people.

With so many company options now under water, the emphasis on retention is particularly critical. We’re still amazed at the number of e-businesses that continue to think they can simply hemorrhage the brain trust of experienced employees for new replacements. Such views on the interchangeability of labor went out with the robber barons of the late 1800s.

Take the “E” out of “E-Business”

As we’ve said before about businesses, the Internet should be no more of a key competency than using the telephone. If you can’t support a business plan without the hocus-pocus of Internet hype, your business has no leg to stand on. Any old-school business with a dot-com veneer by any other name…

One of the reasons why Pets.com failed may be that pet supplies never achieved critical mass with consumers as a mail-order business. Whether due to a lack of interest or yet-to-be-learned consumer habits, why should we expect a web site to be such a transaction magnet if consumers couldn’t be bothered to call a toll-free number for similar orders and delivery?

Whether online or offline, a business must establish relationships with customers and continue to find ways to satisfy their needs and interests.

The False Sense of Competency May Have Faded, but the Incompetents Haven’t

With the change in the economic climate, there are a lot of good acquisitions and alliances out there that were once priced into the stratosphere. But be careful, as not all of the incompetents have been driven out.

There’s a restaurant in San Francisco called asiaSF that’s known for its serving staff of Asian drag queens, whom the restaurant likes to call “gender illusionists.” We like to call many of these dot-incompetents “business illusionists.” And if the latest research in the field of incompetence proves correct, most of them don’t realize it.

As always, do your due diligence. It just might save your sock puppet.

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