Sunday, August 2

Winners and Losers - Creators and Causalities of the Age of the Internet - By Kieran Levis

This was my next read and very interesting one indeed. I loved to read through all the stories and it was inspiring. Stories of Amazon, WebVan, Google, Craigslist, Britannica Encyclopedia, Microsoft, Encarta Encyclopedia and many more. This book was a case study on all the companies, it very well explained how things worked and I as always, was very surprised to read about such companies and their strategies to gain a control over market. The startup world is way to awesome, challenging, exciting and has been here for a long time now.

Kieran Levis reveals how a few innovative, far-sighted entrepreneurs and companies succeeded in creating entirely new markets and dominating them, while so many others failed. He shows how Amazon and Google rose from nothing to revenues of billions, whilst IBM, Kodak and AOL suddenly faced disaster; how Nokia and Sky bounced from near-bankruptcy to global leadership; and charts the incredible rise, fall and rise again of Apple.

Particularly speaking, WebVan and Britannica were the two companies that excited me throughout the book. How WebVan started and how it failed. What was the reason. I see such companies now in the news here, and am not sure if I should relate them.

Excerpt of WebVan story from the book,

WebVan is the classic case - it paid almost no attention to why customers should use it, and who exactly they would be. Webvan's business model to work, it had to appeal to a mass market. It had to persuade enormous numbers of consumers to abandon established grocery outlets and to order their groceries online, in most cases paying a delivery charge.
However, so far as customers were concerned, what was on offer - the convenience of home delivery - was nice rather than need to have.

The big problem was demand : only for a narrow market segment of well-headed, but time poor, consumers was the convenience of avoiding a trip to the supermarket seen as a significant benefit.

Most consumers preferred to choose fresh produce themselves and look for best offer.

Comparison between webvan and amazon is striking. Jeff Bezos of Amazon starting point was his insight that an online bookstore could offer customers greater choice and convenience and lower prices that conventional bookstore.

The proposition must be exceptionally strong to persuade customers, particularly the first ones, to change long-established habits, to desert trusted supplies or to try something new. In many cases they are taking a chance with a business they do not know and therefore may not trust greatly.

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Britannica, started as a encyclopedia selling a series of books. Everyone wants to have best of knowledge, true. However I was shocked to read, that the core of Britannica was not the product, but the people selling that product. The Sales team was very well trained and made sure that it would convince the customer to buy all the books, no matter how costly they were. The parents would of a young child would buy the book considering it as a long term investment. They would think and of course believe that their child would get the best of the knowledge, later realizing that  it was not a useful investment. The research had shown that, almost none of the customers who bought the books every used them and it just lay there eating dust.

Such is the capability of a Salesperson. I actually was of the opinion that the product, if good, would sell itself. To some extent, it may be true, but reading the Britannica story, I would reconsider my knowledge, and now I believe that, no matter what the product is, you need to be able to sell it. Hook or Crook. Period.

Some of the excerpts from the book below, as always.

The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, & still retain the ability to function.
- F. Scott Fitzgerald, The crack-up

The fundamental test for any new business is the story it has to tell to customers. If it does not provide a compelling reason why they should buy, all the capabilities in the world will be of little avail.

Value proposition define a business more sharply than mission statement ever can. The most fundamental question any business needs to ask of itself are : what exactly do we have to offer to customers and why should they buy from us rather than someone else.

What it takes?
The fatal flaw of both webvan and netscape was their business model. Neither had a realistic plan for attracting enough paying customers. A business model describes how a business works, in particular how it creates value for customers and makes money for itself.

The eight essential attributes of market creators are summarized below.
1) A clear strategic vision based on a radically different way of meeting a large, previously unsatisfied customer need.
2) A set of highly distinctive capabilities - technological, marketing and logistical - tailored to the needs of market.
3) Value proposition that are so compelling that they change customer behavior and shift loyalties.
4) An entrepreneurial but disciplined organization that balances creativity with practicality, is innovative but pragmatic and creates effective teams.
5) A robust, radical business model that is not easily imitable.
6) Genuine concern for the quality and consistency of the customer experience.
7) Leadership that ensures that clear communication of strategic direction and consistent implementation.
8) Sharp focus on the chosen market.

First mover advantage?
The most hyped of the new concept during the internet boom was the first mover advantage, when being the first to enter a market was seen as synonymous with winning leadership of it. Microsoft, google were not first into their respective business. First mover advantage that is far from being a universal rule. 

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