The Power of the Web

Executive Summary

  • Companies are losing money and customers through poorly conceived internet marketing efforts.
  • Today firms are using the internet to market existing products to existing customers in the existing way.
  • The results are lukewarm, at best.
  • To succeed, firms might be wise to look at new ways to get new customers with new products.

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The Power of the Web

Clayton Christensen's book, "The Innovator's Dilemma," rocked conventional business thinking when it came out in 1997. Christensen, a professor at Harvard Business School, showed that new technologies often failed because the companies offered new technologies to the existing customer base. Counterintuitively to conventional thinking, Christensen documents that customers rejected new technologies. The adopters of the new technology were not the existing customers.

Yet, just ten years prior to Christensen's book, Waterman and Peters in their bestseller, "In Search of Excellence," suggested that firms succeeded by being close to their customers.

Not long ago the dot-com bubble burst because there was no solid revenue model.

Can the prudent business leader learn anything from this?

Let's look at the record.

1. Xerox, still a small firm, went to IBM and RCA to get a corporate partner to commercialize the electrostatic copy process. That was in the mid-1950's. IBM did a market study. They predicted that by the year 1985 the total world wide market for Xerox-type copy machines would be under a thousand machines and these would be purchased by large governmental organizations.

2. The pocket calculator was perfected by electronics firms such as Hewlett-Packard (HP) and Texas Instruments (TI) and not by the manufacturers of mechanical desktop calculators-Monroe and SMC. Although the marketing departments at the electromechanical calculator companies explored the possibility of going electronic, they estimated that the price for such a product would have to be $10,000, each. Today, a grade schooler can get the equivalent of an old Monroe or SMC for under ten dollars. The calculator of 2005 runs off room light and can be carried in a shirt pocket.

3. Yet when Jobs and Wozniak took their idea of the "Home" computer to the same HP, HP passed and only years later came after this market and then after a major corporate restructuring and re-visioning.

4. Wang "owned" the word processing market. Wang has not survived even though they had capable managers and marketers who produced a system very similar to the word processors what turned out to be today's desktop and laptop computers.

This list goes on and it is legion.

Xerox becomes powerful and then fades away. Wang emerges and rules the roost, and then goes under. Polaroid becomes a dominate player, but it does not survive. IBM becomes a household word, but few words get processed by IBM's in households.

Christensen looks at a number of industries. The disk drive industry is a touchstone. Disk drives got ever smaller, but when disk drive manufacturers asked their customers if the customers wanted the smaller and more powerful drivers, the customers said no. Their collective answer was, give us the same thing, only cheaper. That is, the eight inch disk drive people stayed with eight-inch disk drives. The five-and-a quarter-inch disk drive people with the five-and-a quarter-inch disk drives. The three-and-a-half-in-disk-drive people with three-and-a-half-in-disk-drives.

Today firms are using the internet to market existing products to existing customers in the existing way. Their marketing efforts are lukewarm to disappointing and it has taken Amazon years to struggle toward breakeven along with heroic marketing efforts. If people judge a book by its cover, it is best judged in person and not electronically, even if a customer can click to "Look Inside."

To succeed, firms might be wise to look at new ways to get new customers with new products.

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