| 1- Script
of Recording
What
We’ve Learnt from the Dot-Com Bust
March 12, 2001.
@ www. ZDNET India. Com
http://www.zdnetindia.com/imsearch/gresult.html?searchword=the+dot+com+bust&grp=1&sort=dtPostDate&start=34
Script
Companies based on pretty
good ideas, which include Amazon. Com, Yahoo and even Webvan are
in trouble. Thousands of dot-coms are dead. And even mega corporations
like AT&T and Disney have suffered big internet-related losses.
The whole idea of an AOL Time Warner merger seems considerably less
lustrous today than when it was first proposed even if it makes
sense in the long run. Business to business e-commerce has not panned
out that much better than the business to consumer variety.
We have entered a phase that I’ve heard people calling B2R, Back
to Reality. I think I’ve learnt a few things lately.
One, it’s the same economy,
stupid. Notice how nobody talks about the New economy anymore. That’s
because there is no such creature and there never was. The Internet
is not as much a new way of doing business as it is an extension
of your existing business.
Two, it’s the same rules.
We still live in a world governed by supply and demand and when
the demand never caught up with the supply of internet businesses,
something had to go boom. And it did.
Three, venture capital
is not the right foundation. Venture capital plays too big a role
in the creation of new businesses and extracts too high a price
for its contribution. Maybe I’m wrong but it’s hard to say many
of today’s newly rich actually contributed anything of value for
the wealth they received.
Four, the free ride
days of the internet are over. Expect to see more pay-as-you-go
services. This is a healthy development because it ties customers
directly to the products and services they want and encourages meaningful
and profitable innovation over just doing something that seems cool
at the time.
Tomorrow start-ups will
be built on firmer foundations because money won’t be there for
the taking. That means the ideas will have to be better and more
tied to customer reality. When some see a market place in turmoil
and an industry in disarray, I see people learning to be honest
with themselves and with their investors. And that seems very healthy
to me.
End of script
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A note on Webvan from Wikipedia:
@
Wikipedia, the free encyclopedia
Jump to: http://en.wikipedia.org/wiki/Webvan
Webvan was an online
"credit and delivery" grocery business that went bankrupt
in 2001. It is often considered an archetype of misapplying Internet
technology to an existing form of business. It is also considered
a classic example of a company trapped by sudden demands from venture
capitalists for short-term profitability, instead of growth and
market share.
Webvan was headquartered
in Foster City, California, near Silicon Valley. It delivered products
to customers' homes within a 30-minute window of their choosing.
At its peak, it offered service in nine U.S. markets: San Francisco
Bay Area, San Diego, Los Angeles, Chicago, Seattle, Portland, Atlanta,
Sacramento, and Orange County. The company had originally hoped
to expand to 26 cities.
Webvan was founded in
the heyday of the dot-com boom in the late 1990s, and its original
investors encouraged it to build rapidly its own infrastructure
to deliver groceries in a number of markets. The idea of online
grocery shopping was sound, as established retailers have since
proven with their own Web sites. The mistake Webvan made was trying
to build everything on their own, instead of partnering with existing
supermarket chains, wholesalers, or a network of small chains or
independent grocers. Some journalists and analysts blamed this serious
error of judgment on the fact that none of Webvan's senior executives
(or major investors) had any management experience in the supermarket
industry, including its CEO George Shaheen who had resigned the
top spot at Andersen Consulting, a management consulting firm, to
join the venture.
While Webvan was popular,
the enormous amount of money spent on infrastructure far exceeded
sales growth, and the company eventually ran out of money. For example:
Webvan placed a $1 billion (USD) order with engineering company
Bechtel to build its warehouses, bought a fleet of delivery trucks,
purchased 30 Sun Microsystems Enterprise 4500 servers, dozens of
Compaq ProLiant computers and several Cisco Systems 7513 and 7507
routers, as well as more than 80 21-inch ViewSonic color monitors
and at least 115 Herman Miller Aeron chairs (at over $800 each).
[1]
To the company's credit,
as part of its shutdown process, all perishable food was donated
to local food banks. Webvan's legacy consists of thousands of colored
plastic shipping bins for groceries that are still sitting in customers'
basements and closets, and a lucrative severance package[2] for
ex-CEO Shaheen.
The online grocery market
sector has seen many other failures, including Grocery Gateway and
Publix Direct. However, there have been a few successes. One company
founded around the same time as Webvan that still exists today is
SimonDelivers in the Minneapolis-St. Paul region of Minnesota and
Wisconsin. The New York City market is increasingly served by FreshDirect.
Some other companies, such as Peapod, primarily serving the Northeastern
United States, existed before the Internet became popular, and adapted
their business models to the new medium.
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