Web 2.0 was NEVER a Business Strategy

You saw the craze. People built up Web 2.0. It’s frequently a term that people used to avoid business principles and focus entirely on technology without any end goal. I have always disdain it. Many folks surprisingly jumped in with funding for some of these ideas, likely more due to existing dot bomb relationships that business principle.

Yet Internet startups who focus on the following business issues closely will always have a good chance at succeeding:

1. Have a clear value proposition that meets some area of unmet need: Something that says, “We provide a first in industry solution to the problem of blah, blah, blah”. Not “This is kinda like part Digg, Youtube with a bit of Facebook – just way better”. I meet lots of people that say this stuff in the second category, I cringe when I hear it.

2. Realize that Internet companies are marketing companies first and technology companies second: I can’t tell you how many startups I see who hire a programmer, program something and then go hire a salesperson. They go through the whole process without a well crafted, customer focused value proposition.

3 . Have a clear data model that focuses on data integrity and creating a monetizable store of value:
Does your Internet startup attempt to focus on data integrity issues? Will it eventually create a monetizable store of value? I ask this question in the startups that I’ve assisted. It comes from my background in financial services where not having accurate information can cost you millions in an instant, the true Internet time.

4. Have a business model for the company as a stand alone entity. Key partners invested in your outcome? Good.

5. Have people that have worked in high performance startup cultures on your team who understand that real-time iteration of your offerings are critical to your success!

6. Look at and study the history of business and technology innovation. Then use it in your transactions and execution.

These are the five that are most critical, though I’m sure you can think of more critical drivers. Please join the conversation. I can also think of several blogs that focus on buzzwords instead of business principles that are now more than a bit obsolete. It’s time to focus on business success principles at the party. it’s a smaller party, but one that will drive hundreds of new Internet startups for years and years.

9 Responses to Web 2.0 was NEVER a Business Strategy

  1. Jay November 5, 2007 at 2:07 pm #

    Very true…

    The fact that the internet can be used to channelize the marketing resources is what small businesses need to emphasize on…

  2. Steve November 6, 2007 at 6:08 pm #

    Web 2.0, if used properly, can be a very effective marketing tool. Still you should always have a solid business plan to back you up.

  3. Jason Jacobsohn November 7, 2007 at 1:02 am #

    Great points David. One other thought that comes to mind is “are people building companies or just Web applications?” Most of the Web 2.0 stuff is just a tech guy building a cool app. If he is lucky, then someone may buy it. Regardless, many of these developments never have a business strategy attached to it. Therefore, many of these people have trouble monetizing these ideas into businesses.

  4. Rod November 7, 2007 at 6:49 am #

    It’s [web 2.0] frequently a term that people used [sic] to avoid business principles and focus entirely on technology without any end goal.

    By “technology” here you imply “product.” Would that belief then also apply to financial institutions? Organizations that “… focus entirely on (finance) without any end goal.” The bigger question is what is the “end goal” of a business? Web 2.0 has nothing to do with it whatsoever. The principles are universal or not. In fact, you too are using Web 2.0 as a buzz word. What I assume you are really suggesting here is that the end goal of a business is some type of increased profitability. Put another way, it’s about revenue. If not, perhaps you could define what is the proper “end goal” of a business. Would your theory hold to the political enterprise of Ron Paul, or Steve Jobs’ initial Apple start-up, or even something more basic as WordPress?

    How would your argument apply to the arts or arts as a business? Whatever that might mean. Is profitability the end goal of artists or even a museum? Almost never. They are almost always subsidized. This is a struggle that artists have faced for generations. Is it always necessary to have such an end goal? For some, it is “intrinsically” valuable to simply create even at a loss. Do not free-ware an open source developers do this every day? My experience is that many in the Web 2.0 space are moved by artistic, creative, innovative and utilitarian expressions often beyond their desire for wealth or sustainability. For many, their “product” may reap only minor profits and non-sustainable ones and they are more than happy to accept that outcome.

    Some theorists emphasize sustainability or longevity as the end goal measurement (Jim Collins). Tom Peters has been stressing the role of design as the ultimate competitive advantage and has little interest in sustainability, but instead nimble businesses that grow and die intentionally and predictably. Still, others like Stephen Covey believe that businesses exist to increase all stake-holders value (i.e. community, employees, shareholders and customers). Each hold the end goal differently. Consequently, each emphasize different measurements as well. It is possible that each may be correct when applied to the proper context.

    To your second point:

    Realize that Internet companies are marketing companies first and technology companies second.

    Are you actually arguing that a company that has this “elusive” “undefined” “end goal” hire sales people before they develop a product or service? This is putting the cart before the horse don’t you think? When Peter Drucker argued that businesses have two major “functions” being marketing and innovation he was not suggesting that they were the end goal or the “purpose” of a business. Instead, they were the means by which a business served its product or service. The end goal as defined by Drucker is what the benefit obtained from the product, service or technology is! That he understood this so well is what allowed him to be such a powerful voice in the non-profit sector. Facebook, Digg, YouTube, WordPress and the like have created value for consumers even if their “end goal” is not clearly understood, defined or even sustainable. If marketing people came first, there often would be no technology nor the product.

    Again, by “marketing” you meant no doubt sales. By which you imply again “some type of sustained revenue.” Yet, marketing, technically, is not sales and so you confuse the two. Nevertheless, one can neither market nor sell what doesn’t exist. I suspect Dave you are tying to argue that the marketing function is to demonstrate that any given business enterprise must first prove its financial viability before building the product. That is a good goal. And perhaps for VCs this is a solid requirement, but obviously it hasn’t been. But more to the point, if we were to apply your argument across the board then Ron Paul’s investors would be throwing their money to the wind, Steve Jobs would have closed down Apple a decade ago and the blogging software you use here would not even exist.

    I ask you this: When your daughter has a lemon stand outside the house what was the end-goal? Was is profitable? Certainly not. It was entirely subsidized by mom. But a lesson was learned and skills were gained perhaps for another day and another enterprise. That is valuable. That is a good end goal. But even more, it was enjoyable to the child. It holds intrinsically its own end goal that has nothing to do with marketing. Many of these businesses you are chiding live in a similar world. Thank God for them.

    Thank God some people believe in having audacious goals that move forward with a zeal that do not necessarily make financial or other rational sense. Thank God there are people willing to challenge the status quo and start a revolution in audio, video, publishing or politics when number crunching nay sayers argue it isn’t viable or possible. Thank God there are some politicians like Ron Paul, no matter how much I may despise some of his policies nor want him elected, that challenge the notion that we should do something “with a clear value proposition” as an end goal.

    Your final argument that we should look at “history of business and technology” as a role model is an excellent one. Unfortunately, I am afraid you haven’t. Most of the radical innovations that we rely upon each day came about from those bold, radical, free thinking, passionately absurd people who chose to do what their hearts desire led them to regardless of a clear value proposition.

  5. Marc Meyer November 14, 2007 at 1:31 pm #

    Rod, that was a great response. A value proposition though the goal of some is certainly not the goal of all. Web 2.0 is just a new way to push information, that’s it.

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