Digital Darwinism: 7 Breakthrough Business Strategies for Surviving in the Cutthroat Web Economy
240
Digital Darwinism: 7 Breakthrough Business Strategies for Surviving in the Cutthroat Web Economy
240eBook
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Overview
The dramatic boom that took place in the Web economy is over. The glory days when companies with strong ideas and weak business plans could easily get millions to launch their businesses are long gone, and in today’s tougher, more cutthroat economic arena, natural selection is rampant. Companies need to be smarter, faster, more innovative, and more adaptable than ever before just to survive, let alone succeed. In Digital Darwinism, Evan Schwartz provides seven business strategies that can make or break any Web business. In a new preface and updated case studies, Schwartz discusses the dramatic rise and fall of the Web and analyzes the companies that have made it and those that haven’t, from Priceline to Pets.com, and spells out step-by-step techniques such as building your brand, remaining flexible as supply and demand fluctuate, and integrating the Web into every part of your business.
The perfect source for everyone from novice entrepreneurs to corporate CEOs, Digital Darwinism provides a comprehensive and unflinching look inside the highly competitive world of e-commerce and distills the critical strategies that Web-based businesses need to follow in order to survive in what has become the world’s fastest, and most dangerous, marketplace.
Product Details
| ISBN-13: | 9780767909624 |
|---|---|
| Publisher: | Crown Publishing Group |
| Publication date: | 02/19/2002 |
| Sold by: | Random House |
| Format: | eBook |
| Pages: | 240 |
| File size: | 379 KB |
About the Author
Read an Excerpt
Introduction: Frenetic Evolution
We will now discuss, in little more detail, the struggle for existence.
--Charles Darwin, The Origin of Species
When Charles Darwin presented his theory of evolution in 1859, he described a world in which only the fittest survive, a world in which species must constantly adapt to their changing environment or face extinction, a world in which organisms must continue to grow in a profitable direction and develop new skills and traits or perish, a world in which life-forms must look around and learn with whom to cooperate and with whom to compete, a world in which the surrounding conditions for life can, suddenly and drastically, improve or take a turn for the worse. Darwin even wrote that we are all "bound together in a complex web of relations."
This lexicon applies unmistakably to the digital business landscape now flourishing and mutating across the World Wide Web. "Many more individuals of each species are born than can possibly survive," Darwin wrote. "Consequently, there is a frequently recurring struggle for existence, and it follows that any being, if it varies however slightly in any manner profitable to itself under the complex conditions of life, will have a better chance of surviving, and thus be naturally selected." And just as Darwin observed that competition for food and resources leads to principles of natural evolution, we can see that brutal market forces in the increasingly cutthroat Web economy lead to new strategies for economic survival.
Indeed, the Web is in the throes of an especially frenetic evolution. As an environment that can sustain economic life, the Web has given birth to entirely new species of start-ups and enterprises that could not have existed previously. These new economic organisms are, in turn, forcing older corporate species to evolve in new ways, producing new business models and characteristics necessary for their own survival.
Still, evolution takes time to manifest itself in a significant way. In the natural world, often it takes thousands of years for major or even slight changes to become apparent. The Web may be a universe of digital information in which companies can change their appearance and switch their survival plans in a matter of weeks, but evolution writ large still requires a more significant time frame to produce outcomes, results, effects, and lessons learned the hard way.
We are already moving beyond the commercial Web's era as a marshland for single-cell organisms. Corporate creatures founded on one simple, untested idea--selling a certain product or service online, for instance--have been happily splashing about in the early Web's primordial soup, perhaps not realizing that they are really just simmering themselves before drowning or becoming somebody else's lunch. At the same time, their rivals are clawing their way to prosperity, developing higher forms of intelligence, and inventing breakthrough business tactics especially suited to their swiftly shifting surroundings.
What will the Web economy look like as evolution escalates and we witness real conflicts, surprises, new developmental stages, and turning points?
Will it be uncertain? Absolutely.
Unpredictable? Most assuredly.
Unusual? Rather so.
Unruly? Quite often.
Unsustainable? It has been thus far.
Uncluttered? Far from it.
Undramatic? No chance.
Unsafe? Bloody awful.
Unrewarding? Not if you listen closely.
In the Beginning
In various forms, the Internet has existed since the late 1960s. But the emergence of the World Wide Web transformed the Internet's stark environment of drab databases into a fertile, living-color infosphere inhabited by vast numbers of consumers and companies. While the Web was conceived in 1989 as a scientific data-sharing tool, the commercial browser software that appeared beginning in 1993 provided the first inkling that far more could be accomplished here. And as a serious field of endeavor, Web commerce came into being in 1995, the year Netscape's stock went public in a bit bang, if you will, that ignited interest and sparked new forms of economic life around the world.
Since then, the Web has evolved with mind-numbing quickness, achieving mass acceptance faster than any other technology in modern history. It has made its way into the homes of one-third of the U.S. population and ended up in the hands of 100 million users worldwide in a shorter span of time than even personal computers managed to accomplish the same feat. It has infiltrated people's daily lives faster than the telephone or the fax machine, faster than radio or television, faster than the automobile, even faster than electricity itself.
At first the Web was an unformed mass of frivolous expression, free publications, corporate brochures, and piles of pornography. People treated it as if they were early cave dwellers witnessing fire for the first time. They were simply afraid of it--afraid to send their credit card numbers over it, afraid to trust any information on it, afraid that their privacy would be obliterated, afraid to let their kids near it. As a result, virtually all of the original predictions and forecasts for actually doing business on this untested terrain were, in retrospect, quite humble.
But looking back, its evolution seemed to progress in a logical order. Fear naturally gave way to experimentation. High-tech early adopters began downloading software and researching new computer and networking gear. They began placing real orders for PCs and Internet traffic-routing hardware that soon added up to millions of dollars per day in revenue for some companies. Physical software stores closed up shop and reopened their doors on the Web, while other computer makers scrambled to alter their business models to sell online. In the $500-billion computer and software industry, buying through traditional channels may soon become the exception.
Successful experimentation soon led to confidence. Frequent travelers attempted to book their airline flights on the Web's numerous new online reservation systems. They entered their credit card numbers and reliably received their tickets. The airlines then began encouraging online booking as a cost-saving move, providing frequent flier points as special incentives. Within several short years, about 5 percent of the massive $126 billion in domestically booked travel reservations were being sold online. And that percentage is expected to be as high as 25 percent just a few years into the new millennium.
Confidence inspired trust. What first captured the public's imagination was online sales of books and CDs. Literature and music are in many ways the repositories of culture itself, so when people began shopping for these items on the Web, the digital commerce landscape began to radiate a shiny new aura. With online sales of books and music already surpassing $1 billion annually, those industries have begun to restructure themselves for the day when an even more significant share of their business would be transacted this way.
Trust led to faith. The public began taking seriously the product and pricing information presented on the Web. And so it became a primary research forum for big-ticket purchases--from cars, to homes, to corporate procurement--transactions that often ended up being completed offline. A new breed of online auto-buying services already drives more than $12 billion in new car sales, and they're causing the $1-trillion global auto industry to begin changing the way its products are marketed and delivered to consumers.
Faith led to mass acceptance. When you consider that the Web has already become a popular new tool for finding a job, for performing banking and personal finance tasks, for getting global and local news and information, and for dozens of other everyday chores, you can begin to see how shortsighted the early skeptics were. At the dawn of the Web economy, few would have predicted that members of 20 percent of all U.S. households would be shopping the Net by the end of the century and that a $250-billion online consumer marketplace could loom on the immediate horizon.
The emergence of new entrepreneurial life-forms has attracted the attention of the corporate giants. The world's biggest companies are now gazing toward a future in which much if not most of their purchasing, invoicing, document exchange, and logistics will be transferred from stand-alone computer networks connected by people, paper, and phone calls to a seamless Web that spans the globe and connects more than a billion computing devices. Industries as diverse as commercial real estate, electronics, office supplies, and food services have begun to settle the new terrain by constructing sophisticated business-to-business applications.
As a result, online business-to-business spending is expected to explode, becoming the centerpiece of a mind-boggling multitrillion-dollar Web economy. As even technologically lagging industries such as healthcare, education, and legal services begin to do more and more business over the Web, the opportunities have become too big for anyone to ignore. Add it all up and electronic commerce has already surpassed 2 percent of the gross domestic product in the United States. Within a few years that figure is expected to soar past 10 percent and account for 20 percent or more of the total economic activity in many of the world's top industrial nations.
But even as life on the Web flourishes on the surface, danger lurks beneath. With the raw fear largely gone, with the primitive experimentation mostly left behind, with the original novelty of Internet shopping and e-commerce wearing off, with the technology no longer appearing so futuristic, the digital business environment has taken on an air of indispensability, of inevitability.
Here is where the most intense struggle for existence begins. When just about everybody is convinced that just about anybody can sell just about anything via the Web, when success in the Web economy becomes a foregone conclusion, when confidence leads to overconfidence and then to sheer euphoria, we naturally progress to the next stage of emotion: one of pure greed and naked ambition.
Such passions are hardly foreign to Darwinian evolution or the world of business--in fact, they make the marketplace function quite well. But as Darwin himself forewarned, don't be surprised when some of today's most dominant creatures are rendered helpless in the face of rapid, unforeseen change. "So profound is our ignorance, and so high our presumption," the British naturalist wrote, "that we marvel when we hear of the extinction of an organic being. . . .[But] every being must suffer destruction during some period of its life."
Table of Contents
Introduction: Frenetic Evolution1. Build a Grand That Stands for Solving Problems
2. Allow Your Prices to Fluctuate Freely with Supply and Demand
3. Lot Affiliate Partners Do Your Marketing for You
4. Create Valuable Bundles of Information and Services
5. Sell Custom-Made Products Online, Then Manufacture Them
6. Add New Value to Transactions Between Buyers and Sellers
7. Integrate Digital Commerce with Absolutely Everything
Epilogue: The Great Sorting
Acknowledgments
Appendix: A Directory of Business Models
Notes
Index
What People are Saying About This
Darwin was a remarkable observer of change, and the Web is forcing remarkable change upon every business. Digital Darwinism defines market leadership methodologies that work in the complex world of Web commerce. In the end, the fittest will be those who read this book. (Jeffrey Taylor, founder and CEO, Monster.com)
If you only have time to read two web marketing books this year, read Digital Darwinism--twice. (Mark Kvamme, Chairman, USWeb/CKS)
A killer guide to the critical factors of success -- and failure -- in the Internet economy. (Marc Andreessen, cofounder of Netscape and Chief Technology Officer, America Online)
If the early momentum supported by new companies such as America Online, Yahoo!... is sustained, we are indeed in the early stages of Digital Darwinism. Evan's impressive descriptions of the rapid business changes impacted by the evolution of the Internet is an important read. (Mary Meeker, Managing Director, Morgan Stanley Dean Witter)
Introduction
We will now discuss, in little more detail, the struggle for existence.
--Charles Darwin, The Origin of Species
When Charles Darwin presented his theory of evolution in 1859, he described a world in which only the fittest survive, a world in which species must constantly adapt to their changing environment or face extinction, a world in which organisms must continue to grow in a profitable direction and develop new skills and traits or perish, a world in which life-forms must look around and learn with whom to cooperate and with whom to compete, a world in which the surrounding conditions for life can, suddenly and drastically, improve or take a turn for the worse. Darwin even wrote that we are all "bound together in a complex web of relations."
This lexicon applies unmistakably to the digital business landscape now flourishing and mutating across the World Wide Web. "Many more individuals of each species are born than can possibly survive," Darwin wrote. "Consequently, there is a frequently recurring struggle for existence, and it follows that any being, if it varies however slightly in any manner profitable to itself under the complex conditions of life, will have a better chance of surviving, and thus be naturally selected." And just as Darwin observed that competition for food and resources leads to principles of natural evolution, we can see that brutal market forces in the increasingly cutthroat Web economy lead to new strategies for economic survival.
Indeed, the Web is in the throes of an especially frenetic evolution. As an environment that can sustain economic life, the Web has given birth to entirely new species of start-ups and enterprises that could not have existed previously. These new economic organisms are, in turn, forcing older corporate species to evolve in new ways, producing new business models and characteristics necessary for their own survival.
Still, evolution takes time to manifest itself in a significant way. In the natural world, often it takes thousands of years for major or even slight changes to become apparent. The Web may be a universe of digital information in which companies can change their appearance and switch their survival plans in a matter of weeks, but evolution writ large still requires a more significant time frame to produce outcomes, results, effects, and lessons learned the hard way.
We are already moving beyond the commercial Web's era as a marshland for single-cell organisms. Corporate creatures founded on one simple, untested idea--selling a certain product or service online, for instance--have been happily splashing about in the early Web's primordial soup, perhaps not realizing that they are really just simmering themselves before drowning or becoming somebody else's lunch. At the same time, their rivals are clawing their way to prosperity, developing higher forms of intelligence, and inventing breakthrough business tactics especially suited to their swiftly shifting surroundings.
What will the Web economy look like as evolution escalates and we witness real conflicts, surprises, new developmental stages, and turning points?
Will it be uncertain? Absolutely.
Unpredictable? Most assuredly.
Unusual? Rather so.
Unruly? Quite often.
Unsustainable? It has been thus far.
Uncluttered? Far from it.
Undramatic? No chance.
Unsafe? Bloody awful.
Unrewarding? Not if you listen closely.
In the Beginning
In various forms, the Internet has existed since the late 1960s. But the emergence of the World Wide Web transformed the Internet's stark environment of drab databases into a fertile, living-color infosphere inhabited by vast numbers of consumers and companies. While the Web was conceived in 1989 as a scientific data-sharing tool, the commercial browser software that appeared beginning in 1993 provided the first inkling that far more could be accomplished here. And as a serious field of endeavor, Web commerce came into being in 1995, the year Netscape's stock went public in a bit bang, if you will, that ignited interest and sparked new forms of economic life around the world.
Since then, the Web has evolved with mind-numbing quickness, achieving mass acceptance faster than any other technology in modern history. It has made its way into the homes of one-third of the U.S. population and ended up in the hands of 100 million users worldwide in a shorter span of time than even personal computers managed to accomplish the same feat. It has infiltrated people's daily lives faster than the telephone or the fax machine, faster than radio or television, faster than the automobile, even faster than electricity itself.
At first the Web was an unformed mass of frivolous expression, free publications, corporate brochures, and piles of pornography. People treated it as if they were early cave dwellers witnessing fire for the first time. They were simply afraid of it--afraid to send their credit card numbers over it, afraid to trust any information on it, afraid that their privacy would be obliterated, afraid to let their kids near it. As a result, virtually all of the original predictions and forecasts for actually doing business on this untested terrain were, in retrospect, quite humble.
But looking back, its evolution seemed to progress in a logical order. Fear naturally gave way to experimentation. High-tech early adopters began downloading software and researching new computer and networking gear. They began placing real orders for PCs and Internet traffic-routing hardware that soon added up to millions of dollars per day in revenue for some companies. Physical software stores closed up shop and reopened their doors on the Web, while other computer makers scrambled to alter their business models to sell online. In the $500-billion computer and software industry, buying through traditional channels may soon become the exception.
Successful experimentation soon led to confidence. Frequent travelers attempted to book their airline flights on the Web's numerous new online reservation systems. They entered their credit card numbers and reliably received their tickets. The airlines then began encouraging online booking as a cost-saving move, providing frequent flier points as special incentives. Within several short years, about 5 percent of the massive $126 billion in domestically booked travel reservations were being sold online. And that percentage is expected to be as high as 25 percent just a few years into the new millennium.
Confidence inspired trust. What first captured the public's imagination was online sales of books and CDs. Literature and music are in many ways the repositories of culture itself, so when people began shopping for these items on the Web, the digital commerce landscape began to radiate a shiny new aura. With online sales of books and music already surpassing $1 billion annually, those industries have begun to restructure themselves for the day when an even more significant share of their business would be transacted this way.
Trust led to faith. The public began taking seriously the product and pricing information presented on the Web. And so it became a primary research forum for big-ticket purchases--from cars, to homes, to corporate procurement--transactions that often ended up being completed offline. A new breed of online auto-buying services already drives more than $12 billion in new car sales, and they're causing the $1-trillion global auto industry to begin changing the way its products are marketed and delivered to consumers.
Faith led to mass acceptance. When you consider that the Web has already become a popular new tool for finding a job, for performing banking and personal finance tasks, for getting global and local news and information, and for dozens of other everyday chores, you can begin to see how shortsighted the early skeptics were. At the dawn of the Web economy, few would have predicted that members of 20 percent of all U.S. households would be shopping the Net by the end of the century and that a $250-billion online consumer marketplace could loom on the immediate horizon.
The emergence of new entrepreneurial life-forms has attracted the attention of the corporate giants. The world's biggest companies are now gazing toward a future in which much if not most of their purchasing, invoicing, document exchange, and logistics will be transferred from stand-alone computer networks connected by people, paper, and phone calls to a seamless Web that spans the globe and connects more than a billion computing devices. Industries as diverse as commercial real estate, electronics, office supplies, and food services have begun to settle the new terrain by constructing sophisticated business-to-business applications.
As a result, online business-to-business spending is expected to explode, becoming the centerpiece of a mind-boggling multitrillion-dollar Web economy. As even technologically lagging industries such as healthcare, education, and legal services begin to do more and more business over the Web, the opportunities have become too big for anyone to ignore. Add it all up and electronic commerce has already surpassed 2 percent of the gross domestic product in the United States. Within a few years that figure is expected to soar past 10 percent and account for 20 percent or more of the total economic activity in many of the world's top industrial nations.
But even as life on the Web flourishes on the surface, danger lurks beneath. With the raw fear largely gone, with the primitive experimentation mostly left behind, with the original novelty of Internet shopping and e-commerce wearing off, with the technology no longer appearing so futuristic, the digital business environment has taken on an air of indispensability, of inevitability.
Here is where the most intense struggle for existence begins. When just about everybody is convinced that just about anybody can sell just about anything via the Web, when success in the Web economy becomes a foregone conclusion, when confidence leads to overconfidence and then to sheer euphoria, we naturally progress to the next stage of emotion: one of pure greed and naked ambition.
Such passions are hardly foreign to Darwinian evolution or the world of business--in fact, they make the marketplace function quite well. But as Darwin himself forewarned, don't be surprised when some of today's most dominant creatures are rendered helpless in the face of rapid, unforeseen change. "So profound is our ignorance, and so high our presumption," the British naturalist wrote, "that we marvel when we hear of the extinction of an organic being. . . .[But] every being must suffer destruction during some period of its life."