E-business is risky only if you fail to act

Many of you may have read last week's Cover Story ("Risky Business"), which chronicled the precarious nature of the Internet startup and its relationship to IT, and thought: "There they go again, dumping on the glory of e-commerce."

Not true. What's really a risky business is covering an Internet marketplace in which dozens of pure-play startups and brick-and-mortar spinoffs are being born every week. We want to give every little guy a fair shake, but the realities of the Web economy mean that many startups will fail, fall flat (see "push") or become acquired by much larger companies that have little regard for their customer bases (see Intel and iCat).

Many IT managers have to go with a startup because that's where the technical innovation is. Compounding that situation is the fact that many startups, especially in today's economy of consolidation, are created only to be acquired and to make the founders rich. That's fair; the risk-takers should get some reward. Still, that leaves users without control of their own technological destinies.

Ultimately, disregard for the customer will lead any business down the road to ruin, whether it's a startup or an established brick-and-mortar business.

What our story did not point out, for lack of space, is that today's Internet economy is a risky business for any company, large or small, old or new. In fact, the challenges faced by established land-based businesses may exceed those of the startup.

Take, for example, Dell vs. Compaq: While Pfeiffer & Co. were trundling along, cranking out boxes and basically ignoring the Internet, direct sales, build-to-order and online procurement, Dell was doing all of that and, in the process, changing its own business to meet the demands of the Web.

Dell vs. Compaq is a typical example of what can happen to a company if it is too slow to react to the Internet, which is akin to not reacting at all. It's also the premise of a new book, "Dead Ahead: The Web Dilemma and the New Rules of Business," by Laurie Windham, CEO of Cognitiative, an e-commerce consulting company.

There are very few rules of the e-business game, but the few that do exist are critical. We have the Jeff Bezos Rules, in which he asks his Amazon.com folks "to wake up afraid and terrified every morning, with their bedsheets drenched in sweat." Certainly that will keep the troops motivated, but it's not applicable in all situations.

Windham's book is the first I've seen that spells out in clear language what companies are stumbling over as they make their plays for the Web. She breaks it down into six basic areas: meeting customer requirements, resolving strategic conflicts, internal leadership and funding, migrating brands online, implementing the right technology, and bringing international markets into the picture.

Of these, resolving strategic conflicts internally is the most critical, in my mind. Too many companies are too tentative when it comes to the Web, waiting to find out how a "toe in the water," as Windham puts it, fares before jumping in.

I can't think of any online venture that failed because it was first. But I can think of many that failed because they were second.

What's the best strategy? Write me at scot_petersen@zd.com.