september 20 th, 2000 why internet start-ups fail? shayne gregg partner, e-centre
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September 20th, 2000
Why Internet Start-ups Fail?Shayne GreggPartner, e-Centre
e-Centre
Who am I?
Partner responsible for e-Centre Business & Technology consulting for 12 years Developed Secure eBusiness practice Past-President of CIPS Vancouver Focus on acceleration and turnaround
e-Centre
Something to think about…
Ontario68%
British Columbia
10%
Quebec14%
Alberta8%
Manitoba0%
Ontario62%
British Columbia
16%
Quebec12%
Alberta6%
Manitoba4%
Ontario52%
British Columbia
20%
Quebec14%
Alberta8%
Manitoba6%
1998
1999 2000
Source: ComputerWorld Sept. 22, 2000
Deloitte & Touche‘Fast 50’
Why Internet Start-ups Fail
e-Centre
Why Are They Failing?
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
People
Visionaries who can’t stop After launch date Constant focus on new market opportunities
There’s no substitute for management depth and experience The COO must manage Structured minds hate chaotic environments Lack of focus can blur the landscape No sense of urgency… but everything’s at webspeed Human resource issues are not the last problem to resolve
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Product
Marketing myopia
Intuition should support the research, not replace it
Getting them used to a rhythmic release strategy
Launch date is not the finish line
Release strategies are made to be adhered to
Narrow, non-competitive vs. bundled, diverse offerings
Lack of understanding or experience in the marketplace B2B players don’t understand how industrial buying really works
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Technology
Architectural flaws are fatal in high availability businesses Poor project management & QA – a recipe for failure Bifocal technology strategies – short term growth / long term flexibility Ready, fire, aim Speed & specificity vs. generality Volume / load testing Demonstrate your security Lack of scalability Redundancy means more than backups Not everyone uses IE5.0 Bad software development practices breed contempt Document everything
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Alliances
Building the imputed stock value through credibility? Long term alliances must bring value:
Intellectual Property Capital Skills Credibility Customers
Poor partners made in haste Quality and value Integrity of character
Managing Expectations No risk & profit sharing model
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Market
Where’s the market research? Value Proposition – elevator pitches are about the customer Understanding the difference between:
Sales Force Strategy Branding & Awareness Strategy Marketing Strategy
No hybrid (traditional/cyber) approach Inexperienced help doesn’t help at all Strong reliance on few channels Inability to migrate up the market The VP of Marketing doesn’t work for the CFO
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Customer
Customer experience management
Reacting to feedback – more than having a ‘thick skin’
Losing control of the customer contact points
‘24x7’ means human availability
Limited knowledge of the customer
The investor is not a customer
Advertising dollars buy awareness but certainly not loyalty
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Financing
A formal business plan is a living document Detailed financial projections Sensitivity analysis Poor positioning Shopping the idea Ongoing financial monitoring seems to be a rare event The best stock option models may not be the most practical Investors like new ideas, not old ones re-packaged If it doesn’t make cents… it doesn’t make sense
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Competition
We’re the only one doing this Differentiation analysis Understand the substitutes as well as the competitors Build the IP fast Understand the barriers to entry Incumbents see the Internet as an enabler not a threat
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Structure
No structure is not the same as a flat corporate structure No bricks… no clicks Adopting the Fortune 500 structure Communicate, collaborate and eliminate the silos A common vision does not equal common goals Manual processes are ‘bottlenecks’ A complete website is not a back office Recognize an e-Business is ‘inside out’
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Time
Internet time waits for everyone Re-writing history takes time and patience Time to market is no excuse for poor business discipline First mover advantage is meaningless unless you’re ready Learning e-Business is easier than learning Business Incumbents get to mess it up many times, start-ups only
once
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Conclusions
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Some final thoughts… The dot.com era is over… the Internet era has only just started The real Internet companies have not yet arrived Disintermediation is not a threat when the customer becomes king Software companies and consultancies got it… both ways Pure-plays are becoming very ‘physical’ The network effect only works in true Internet businesses Its almost nearly impossible to institutionalize entrepreneurship Decide whether you are in it for the company or the cash Dot.coms will change their spots… to become invisible Everyone will become an internal e-Business consultant The “e” will soon be gone
“There won’t be any Internet companies. All companies will be Internet companies, or they’ll be dead” Andy Grove - CEO, Intel Corporation
Why Internet Start-ups FailCopyright ©2000. Deloitte & Touche LLP. All Rights Reserved.
e-Centre
Questions
Shayne [email protected](604) 640-3261
Copyright ©2000. Deloitte & Touche LLP. All Rights Reserved.