Online businesses still need old-fashioned managment
One of the big news items while I was in the USA was the failure of internet darling and online bank Netbank. It has effectively crashed, not because of its online business model, per se, but because it failed in the basics of banking - borrow long, lend short, spread your depositor and borrower portfolios, and keep a tight grip on the risk factors in your borrowers. The current credit crunch exposed these weaknesses, just as they did with more conventional financial institutions like Northern Rock in the UK and New Zealand’s weaker finance houses.
The internet and other new tools enable a service business to start up with very little infrastructure. Old school businesses grow slowly, but learn how to control and manage their business at the same time. Rapid growth businesses don’t have that luxury. They can have thousands or millions of customers in a very short period after beginning. Often the people involved in such technology-based start-ups have had limited exposure to the nuts and bolts of running large businesses.
You might argue that’s fine - that’s the price of innovation. I’d argue differently. The problem isn’t with the new business idea or the new channels. It’s with the lack of basic old-fashioned management disciplines. If you’re affecting other people (customers, investors, suppliers and staff), you’re beholden to manage your business well. To anything less is basically negligent, and sometimes even illegal.
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October 6th, 2007 at 7:58 am
Or another way of putting it Jim, and with my Economic Development hat on, all the good ideas in the world are worth nothing unless the enterprise has the acumen to transform them into real world products or services.
A killer app with poor execution will always be eclipsed by an 80% solution with great execution. That’s not to say that we should be blase in our product offerings but don’t forget the all important execution.
It’s also another reason why independent governance and building core business skills is hyper important for start-ups.
October 6th, 2007 at 3:34 pm
Ben said…
A killer app with poor execution will always be eclipsed by an 80% solution with great execution. That’s not to say that we should be blase in our product offerings but don’t forget the all important execution.
I agree here ben, but I think its also got something to do with people’s perceptions. You see the popularity of the TV2 show called Sensing Murder, it is not because you could easily demonstrate to the gullibles that the laws of Physics such as energy/mass conservation can’t allow paranormal phenomena to take place, but because people perceived such phenomena to be actually true, no matter what explanation is given.
There is nothing complex about devising a business strategy for success and I have to say, the trend are mostly standard anyway (perhaps Jack Welch could point us to that) but once you roll out a product (poor or otherwise), then start to gain a market share, people (customers) will stick with you regardless (I say mostly) if anything emerges that is much better.
I don’t have an MBA, but reading a few articles from some successful business people, what they described in their articles of why they were very successful, got nothing cutting edge or is something that is unknowable at all about their conducts, see if they tell you exactly the steps of how they do it and if anyone tries to emulate that exactly, it doesn’t guarantee a success. Why? People’s perception comes into play here.
See, market is a complex systems and it is dynamics, economists have recognized this for a long time and perceptions is a major drive there. A popular phenomena that scientists & economists are adopting these days in trying to analyze the market is to study the emergent behavior and try to predict it. It is very hard, but there it been advanced in recent times. At the moment it is still in its infancy.