As the media look forward to the next dot com failure, we look at the reality behind the headlines, what went wrong and if there is any hope on the net.
Colin Duguid MICM (Credit-to-cash.com)
and Caroline Tresman (Homeworking.com)
report from the inside with their emerging websites showing there is more to the dot com than doom!
1. THE MEDIA
The new buzzwords being spewed out by all and sundry are 'dot.com failure'. No sooner than the venture capitalists stop pouring truck loads of cash into anything looking remotely like tomorrow's sliced bread bin, we have to suffer the 'I told you so club' from the media and those who can't tell a web page from a web site. Currently we have Cutting Edge on Channel 4 (UK TV channel) informing the viewers that no UK Net company has made a profit and show us why this is so through following a number of web start ups that were obviously going to encounter problems from day-one. We know viewers want to see disasters and Channel 4 duly oblige with their version of a cross section of UK Net businesses.
2. GROWTH
In terms of 24-hour evolution, the Internet is somewhere around 1-hour-old. We have seen a lot in a short time and at 1-hour-old the Net is no bouncing baby. The technology used today is sufficient in most cases to act as a catalyst for the next five-years of Net advancement, and given that most people have more to learn than forget about Net technology, any talk of Internet depression is premature. A comparison with normal business failures will bear this out: it is said that 33% of off-line businesses fail to last six-months and 45% fail within the first three years. At the time of writing, PricewaterhouseCoopers
(PwC) have just released a report that claims well over half of European dot.com companies are ALREADY making a profit.
3. LESS HASTE, LESS WASTE
It used to be true that 'three-months in the Net business was like twelve-months in the real world' however, it is definitely not the case now, nor has it been for some time. The enforced speed came about from the weekly
unravelling of the latest technology promising further prosperity. Added to this, marketing the web product using a hotchpotch of established marketing concepts had a major effect on the pace of overall Net development. Following the latest calming trend, recent NOP research (early December 2000) suggests that marketing strategies on the Net are changing to convert existing registered users (i.e. those who use and get updates from
Lastminute.com) to become customers rather than acquiring new users.
In the dot com gold rush of the last 18 months the long-standing real world culture of 'short to medium-term planning and execution' was trampled over and in its place… well, often nothing! Sticking to a business plan in the real world is difficult enough, but certainly attainable. The prospect of flying by your pants in a Net business was probably an exciting thought as you then had little accountability, but of course, failure would and did result.
4. DOUBTS
Could we expect an 18 year-old dot.com owner to dispense the duty of an executive corporate officer, regardless of whether he/she was a millionaire? Would we expect that same person to negotiate and win hard bargaining situations with established suppliers and financiers? Could the graduate pull the rabbit from the hat when business operational needs and technological limitations clashed? What about the experienced business owner trying to run both on and off-line ventures so as to protect their market and position!
So what is to be understood by a number of dot.com failures that we don't already know? We already know that badly planned ventures fail, as do under-funded ones. Poor and/or inexperienced management never stood a chance, and skill shortages will always hold back the progress of good and bad enterprises alike. A solid business is not maintained just by its shop front (a Net presence) or by its product (Net venture), but by basic business skills through its management and staff. If, as we have seen from many Net ventures, the management has little or no skills but "a great idea", how long would it last and could they see what would otherwise be simple business problems?
5. COULD THINGS HAVE BEEN DIFFERENT?
The stranglehold on the development of UK telecoms by the monopoly of British Telecom (BT) has a lot to answer for. Why was BT not at the leading edge of Net development in the UK? Why did the government allow anyone with two cans and a piece of wire to set up Internet Service Provider (ISP) services in what was obviously a 'big boys' game: with many customers changing telecom services as much as 6 times in one-year in an attempt to gain unlimited access. How did the UK's telecom standards drop so low and end up as a price war between under-funded start-ups?.
The amount of confidence and drive in the Net that has been lost, by both commerce and the public, can be measured in the price of technology shares with many big names yet to fall. The 'knights on white chargers' (BT and the government) may be last out of the stables but at least they are now in the game, a game that only now has a level playing field. However, with all the dead entrepreneurs heaped up in one half of that table, the opposition is a lot less aggressive! One can't help thinking that one couldn't have planned such an effective strategy to deal with competition.
6. THE FUTURE AS IT WAS ALWAYS MEANT TO BE!
Large corporations like dealing with each other - one order, one delivery, and one cheque - dealing with 'Joe Bloggs shoeshine' is not on their agenda. However, it now appears that large corporate suppliers having failed to persuade the large corporate buyers to utilize Net technology as a trading tool are instead to target the sprat and mackerel (that's small-to-medium sized businesses to you and me).
Considering that small business has always been the largest group in numbers - if not in turnover or purchasing - the talk of re-grouping resources to mount an attack on small business is not so much a timely saviour of technology investment, but an acknowledgement that small business should always have been the prime target user of We-Can-Do-Business-Together.Com.
7. THERE ARE STILL PROBLEMS!
The most critical area in Net development has not been software or hardware capabilities, but order fulfillment. Would you trust the Internet to deliver that present for your 10th anniversary, or your child's main Xmas present? When dealing with a large number of dispersed purchasers, order processing and distribution is highly unprofitable in most instances. It is only a matter of time before the Net company finds the resources of cost, time and space totally crippling.
Order fulfillment is not something that can be read about in a book and then implemented, it's about having the infrastructure in place akin to the Royal Mail: and that is not attainable by many. The traditional carriers will have to be allowed to compete on a level footing with the Royal Mail and so spread the cost of numerous and wide distribution.
So what's different now? You may soon be picking up your chair that you ordered from any number of 'pick up points' such as the local garage, public house or post office. Those who provide the 'pick up point' may well do it for free as they gain by your presence in their establishment. So, instead of stopping off on the way home for "a few pints with the lads", you actually go there to "pick up the shopping" (as we will).
8. ARE THERE ANY MORE PROBLEMS?
Oh yes! Every area of the Internet has growing pains, and this is particularly so in three key areas.
a) Un-metered Calls
The cost of using the Net in the UK is nothing short of scandalous. The UK's telecom monopoly seems to have been allowed to drag its heels over the request by Internet Service Providers (ISP) to offer affordable un-metered calls to its members. Had BT taken its role as the lead player in the UK Net program three-years ago, perhaps we would all be using one of the cheapest Net services in the world.
b) E-mail Reliability
A report in June 2000 stated that out of 77 million letters posted daily, the Royal Mail was losing up to ONE MILLION letters per DAY. The Royal Mail's own figures were 600,000 which I'm sure is a relief to you all. Now, what figure are we looking at with email?
As with any business, nothing is 100
percent. But how can you deal with a situation where your email provider stops you from getting email messages because you have 'exceeded your limit'.
Which messages did you not get? As web publishers we get our messages returned regularly as the intended recipient is 'over quota'. Add to this the ban on, say, the Credit to Cash Newsletter because the supplier of your email services thinks the Newsletter is spam because it is sent to many users of the same email service, i.e. FreeServe, Lineone, AOL etc.
c) Service Providers
'Trust' is a big word when it comes to using a Net service for your business. There are no criteria for what or who can set up in business, as such, some horrors will occur. With a holiday company you have ABTA (an association), and a central fund that gets the holiday-makers home if the holiday company goes bust. With the new technology we trust and hope that we escape if (or when) companies go belly up.
Being small business commentators, we are only too aware of the strangulation of red tape, but sometimes it is for our own protection. There is a need for some regulation for ISPs.
If a web hosting company became insolvent, the chaos and damage would be no less dramatic on business than a terrorists bomb!
9. FINALLY...
With the fall of Breathe.com (UK ISP offering unmetered access with 500,000 subscribers) last week, with debts of UKP50m, those left running are the accepted 'big boys' of the Net: AOL, Microsoft, Freeserve (Wanadoo, France) and of course British Telecom.
What this does mean is that the services that are
unravelled by these companies will 'probably' be reliable, good quality and plentiful, however, the cost of their services is unlikely to bring much cheer. Is it worth the price? Yes. Stability is preferable to cost saving, at least for a while.
There is no doubt that the Net will continue to grow as a resource in all parts of life. Commercial meetings will be attended by virtual salespersons, and your bed will be warmed from your mobile. As with off-line business some dot coms will crumble whilst the rock solid dot coms will continue to grow. Tried and tested off-line businesses who started out carefully dipping their toes into the surf will thrive. Whatever happens next, it still comes from the exuberance (I'm in a kind mood) of venture capitalists, the naivety and brilliance of 18-year-olds, and also from the second-generation of Net-preneurs who are better informed, prepared and equipped to achieve success in what is still the most probable way of making a million. Try it!
