Launching the Net Company

    May 6, 2003

One of the most common questions I get from readers is, “What does it take to start an Internet business?” The assumption is that launching an Internet business is somehow different from starting an offline business. In truth, getting a business off the ground is no easier or less expensive online than it is offline.

The Internet has certainly changed one fundamental thing. Suddenly, the pathway to success has more to do with getting along with others than it has to do with getting one up on others. This is a subtle-but-profound shift. In a conversation with Fred Bugling, author of “The Supply Chain Network @ Internet Speed” and a VP at Cap Gemini Ernest Young, he jumped on his soapbox about the failure of business schools to prepare students for this change.

Bugling pointed out that business instructors still teach students the lessons of control domination when they should be teaching the lessons of cooperation. He believes MBA students come out of school unprepared for the reality of bartering, which has become more important than asset acquisition. This shift in how we view the competitive forces around us may be the single most powerful change brought about by the Internet economy.

Other than this major change, most of the basic principles of business are the same for web-based companies as they are for traditional enterprises. You have to find a clearly defined niche and study the needs of your customers. The Net companies that rise to the top and stay there share the same philosophy that helped Wal-Mart overcome Kmart: know your customer and devout your time to serving them.

Alta Energy, an marketplace serving the energy market, is one of the few independent exchanges that has broken through to customers and generated a high volume of transactions online. At last count, the site was handling $2 billion in trades each month. Founder and chairman Rusty Brazil has a very simple explanation for his company’s success, “We executed this thing flawlessly.”

By this, he means he figured out what his customers needed, developed a system to deliver it, and communicated to his customers effectively. “There are a lot of B2B exchanges doing a poor job executing their business model,” says Brazil. Amen

Just in case you want a quick 101 course in business launches, here are the high points of success in the Internet economy:

No amount of money is enough

Don’t be surprised when you run out of money. Every new business does. One owner noted that an entrepreneur doesn’t really learn how to run a company until the money runs out. True enough. Often the new owner forces the fledgling company to delivery earnings only when loans and investor funding options are exhausted.

Study the market before your launch

You won’t have much time to examine your market in great detail once you launch. You’ll be spending all your time reaching out to customers and serving their needs. The time to examine all the details of your niche is before you launch.

Seek your competition

Watch your competition carefully. You may be able to partner with established companies if you can find ways you complement each other. If you ignore your competition, you could miss an opportunity. Also, studying your competition’s marketing efforts can be a great education.

Live for your customers

Don’t wait for your customers to tell you what they need. Ask, implore, badger them for information on how you can perform better. All successful companies share a passion for service. You can’t succeed without this passion, so cultivate it within your company.

If these points seem self-evident, good. They should be. They are the foundation for good business, offline or online. Great technology won’t carry you far if these principles are not at the heart of your enterprise.

Rob Spiegel is the author of Net Strategy (Dearborn) and The Shoestring Entrepreneurs Guide to Internet Start-ups (St. Martin’s Press). You can reach Rob at