Four Ways the Internet Is Transforming Small Business
Much of my current thinking on
small business strategy has been shaped by how the nature of business
is being transformed by the Internet. Below are four internet-caused
business transformations that disproportionately benefit small
businesses that are prepared to leverage them.
Increasing Market "Efficiency": The most striking thing to me about the internet is how it tends to
make all markets more "efficient." The story I heard that really drove
this home for me was when I heard that eBay's founder started the
company because he was a rabid collector of Pez candy dispensers and
his rolodex did not include enough people of similar interest, so he
started a marketplace where people could trade this niche good. The
rest is history with eBay being the ultimate connector of sellers of
niche goods (vintage Burberry jackets, Fred Lynn baseball cards, Jerry
Garcia Band posters, etc.) to buyers of these niche goods who could not
otherwise find them in their mall or through their rolodex.
As
my co-founder says, the internet is great at connecting makers of
left-handed monkey wrenches with left-handed plumbers around the world.
It turns out that most small businesses (and startups) have relatively
niche-y products that they generally sell to companies in their
rolodex and companies two degrees away from their rolodex. The internet
disproportionately favors small businesses since it enables them to
position their niche goods to people shopping for that particular niche good regardless of the numbers of degrees of separation from their rolodex.
On the internet, no one knows you’re a small-business: At the risk of being cliché, I have included a cartoon that sums up
this transformation for me pretty well. When someone hits your website
for the first time based on a Google search, the surfer has no idea if
you are a one person company or a thousand person company, they are
just looking for a solution to meet a need.
Most small
businesses I know have a website that is a copy of their old brochure.
The problem with the website starts with the fact that it cannot be
changed without serious brain-damage, so it's positioning is as generic
(least niche-y) as possible. The rationale here is si
mple:
When small business owners write the content for their website, they
tend to play it “safe” and keep things generic so as to drive away the
least number of customers. Since they can’t change things, they feel
that keeping it generic is safer (because they don’t know when they’re
going to change it again). The other problem is that the website is not
seen by Google as relevant -- if you type in the name of the company it
is found, but if you type in the market description, it is buried,
which essentially means it is non-existent beyond your rolodex.
Changing Nature of Business Shopping: I had been consulting for a 25 person venture-backed security software
company in Boston for a few months on sales and marketing before
getting consumed by my current mission.
What struck me was how the folks running the software company were
using the "best practices" from the 1980's and 1990's to try to attract
prospects and convert them to customers and how utterly broken those
practices were in light of how the internet has transformed the way
buyers of their types of goods had changed the way they shop.
Ten
years ago, a potential customer for this type of niche/new security
software would likely go to a Gartner conference, talk to their IBM
rep, talk to their Symantec rep, or call Deloitte & Touche. If the
potential customer was referred to the software company by one of the
major vendors, the prospect would likely engage one of the vendor's
sales reps who would be their primary source of information on their
products. In other words, the entire sales process involved them
talking with humans.
Today, a potential customer for this type
of niche/new security software would likely start by searching the
phrase describing it into Google. They would then likely visit any of
the top vendor websites Google served up, they would likely consume any
blogs they found on the topic from the vendors or analysts or customers
of the vendor, and they would likely participate on the blog of the
vendor that most closely matched their criteria. Once the potential
customer had narrowed things down pretty well and was already well
educated, then she would likely "self-select" with that vendor through
a form on their website. At this point, a salesperson would engage the
potential customer and quickly realize that the potential customer knew
about as much about the products as he did.
The interesting
thing about this example is how ten years ago the whole sales process
involved a sales person from the vendor feeding asymmetric information
to the prospective customer. Today, the top half of the sales process
is completely out of control of humans on the vendor side.
It
was frustrating to hear the software vendor's salespeople wonder where
the leads were. The reality is that there are potential customers out
there for their products, but the prospects' self-identification just
occurs a whole lot later in the sales process. The problem this
particular software company had was that its website was not "seen" by
Google when you did simple searches on their marketplace because it was
not optimized, so they ended up having to spend a ton of money on
Google AdWords™. Their website was hard to change, so they stuck with
lowest common denominator language which put them in a shark tank from
an SEO (Search Engine Optimization) perspective. Also because it was
hard to change, they were not able to create custom landing
pages/messaging based on where the searcher came from. Their website
did not have a blog where potential customers could intellectually
engage with the founders and technical architects who they really
wanted access to (not the sales folks). …I see this set of problems
repeat itself in 99% of all small businesses and startups. Business has
changed and there needs to be a new set of tools to help you take
advantage of the change.
Changes In Knowledge Creation & Retrieval:
I spent much of my career implementing and selling knowledge management
systems. The problem with knowledge management systems is that everyone
wants the knowledge that collectively comes out of the system, but no
one wants to feed the system. It turns out that even just a few extra
mouse clicks to share a nugget of knowledge in a centralized system is
more than 90% of users are willing to do. I suppose there are a couple
of reasons for this. First, those few extra mouse clicks are a few
extra minutes at the office versus at home with their family. Those few
extra mouse clicks help the company, but might not do anything to
fundamentally improve their bonus that year. This is a somewhat
pessimistic view, but I suppose some of their rationale might be that
information is power and the lack of transparency increases leverage.
Much
has been written about the new crop of web2.0 applications. In my mind,
the thing that web2.0 companies got right is a new way of thinking
about knowledge management. For example, I use a product called
del.icio.us which has replaced my browser based web favorites.
Del.icio.us gives me a better way to organize my web favorites (via
tags v. folders) than my browser did which helps me personally. The
really sophisticated thing that del.icio.us does is that it leverages
my (and all its other users) self serving behavior to incidentally
create value for the network by giving users a powerful new way to
search on articles that is driven by the masses versus driven by some
media company. There are numerous other examples of these systems which
are fundamentally better at incentives to contribute knowledge which
ends up creating much more knowledge.
- Brian Halligan