Intelligence and common sense are sometimes divorced from each other, and common sense - like a Stussy T-shirt - never goes out of fashion. The names have been removed to protect the guilty.
I remember meeting with a partner in an incubator fund in April 2000. Business was so brisk at the agency I worked at that we used to vet prospective clients since we could not work for them all. We got to the end of the discussion, and I asked the partner how the business was going to win out over his competitors. He said "Ged, I am really surprised you asked me that. I thought you would understand we are too busy to think about that. We are trying to move at Internet speed, you know." Last I heard, the guy was working as head of new media for a large UK media company.
If you can't understand a business model within five minutes, it isn't a business model that will work. I was asked to launch a content network/data backbone business in Europe for a large U.S. energy concern. During client briefings, we did not have a clue what these people were on about in terms of making money. So I called in favours with journalists and leveraged the parent company's name (which at the time was flavour of the month) to get briefings. At the end of one briefing, a senior telecoms journalist held me back and said, "Do you have a clue what they were on about?" I admitted that I didn't. Fortunately for me, the journalist decided not to cover the story, the rest of the journalists wrote profile pieces, and the client went away happy. The company went under drastic restructuring in late 2001 and is no longer in the data network business.
Quicken charts never lie (unless you cook the figures). I worked on a telecom carrier that was NASDAQ listed for my first two years working in PR. I got on really well with the client and got to work directly with the CEO who was a fast-talking charismatic gentleman. The business growth was financed by a lot of bond debt and vendor financing. It was great PR experience. Unfortunately, the telecom sector was one of over supply and constantly declining margins. As a consequence, the cost of sale was constantly rising. On Quicken.excite.com there was a chart that showed losses and revenue. The curves mirrored each other through the X axis of time, meaning that never the twain shall meet. This was the case through '98 and '99 with major equity analysts still issuing buy orders on the stock. The business eventually hit the buffers in 2000.
Even great ideas can be scuppered by poor technology. My first online shopping experience was with a site called Boxman. Boxman bought CD's all over Europe to get the lowest price and then passed some of that difference over to the customer. Makes sense. It seemed to be a focused business and handled its transactions in an efficient way. Unfortunately, the business was underpinned by a problematic IT infrastructure courtesy of IBM. It is noticeable that the music industry is taking action against companies like CDWOW and Play.com doing a similar thing to fight against the threat of a perfect market and support fatter margins in markets such as the UK.
Content is cheaper in a boom. Media have more pages of editorial to sell to meet the advertising, online sites do not need to use subscriptions to get content, professional services organisations like PwC and the major banks put out high quality content for free because it brings back a large amount of benefits.
Ged Carroll, PR Consultant
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A version of this article appeared in the March 2004 issue of Fast Company magazine.