Dot.com or Bust

November 11, 2006

So, do we really know why we had such a horrific dot.com bust a few years ago?   I will share with you my theory:

Most dot.com Companies who started up during this time frame were not founded on the same principles of successful companies.  Many of them had no proven business models, were not truly unique in what they offered to customers thus they had no real sustainable competitive advantage, some had insufficient funding, and, importantly, most thought all they needed to do was come up with an idea, get venture funding and put it up on a web site. 

The reality is that an Internet business is no different then a bricks and mortar business in terms of what makes it successful.  First and foremost, it must meet an “intense” customer need and do so in a meaningful and sustainable way which is unique in the marketplace.   Let’s pull this sentence apart.  First of all the product or service must meet an “intense” customer need….  The service or product cannot simply be a good idea to succeed if no one needs or wants it.  The greater the intensity of need, the higher the probability of success.  As an example, if you developed a cure for cancer, you would obviously have satisfied a very intense need.  Incidentally, the greater the intensity and the better you meet the need the greater flexibility you have with pricing.

Next you must meet the need in a meaningful and sustainable way.  Once again, what ever your product or service is it must clearly meet the need and do so for a sustainable period of time.  Insulated competitive advantage is critical if you are looking to build a long term business.

Finally, your product or service must be unique in the marketplace.  Simply launching another dot.com book service with no real advantage to Amazon is a waste of time and energy.  You need to be sure your product or service has a unique and meaningful advantage versus competitive alternatives.

Thus the problem with many companies in the dot.com bust was they had no real reason for being.  They were just “me too’s” at best.  The one’s that succeeded like Amazon and E-Bay really provided something unique and meaningful and they met real customer needs.

Rich

Bizvice:  Strategy, Marketing & Entrepreneurship

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One Response to “Dot.com or Bust”

  1. Stan Berman Says:

    I caught up with my reading of your blogs. As usual they are very good.

    couldn’t you sllep on the 10th, I notice 2 blogs. What happened to the 4th and 6th.

    The third triggered an idea for you. “Close the sale”. After spending advertising money to get the customer in the store remember to approach and ask if you can help. The last 12″ between you and the customer can be what sal;es is all about.

    I’ll think of you on the ocean.


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