Book Brief: From .com to .profit

From .com to .profit: Inventing Business Models that Deliver Value and Profit
by Nick Earle and Peter Keen
Jossey-Bass, 2000
Hardback, 216 pages
Purchase USA | CA | UK | DE

What is the path to profit for companies doing business on the Internet? the authors ask. They write primarily for larger, existing companies that are struggling to find out how to "handle" the Internet. But the Internet is not just a different channel, the authors argue. It will soon be the basis of everything in the way that electricity rapidly evolved in the 1920s, and it has the power to upset and disturb basic business models. After examining hundreds of companies' experience with the Internet, the authors have identified six value drivers necessary for success. They correspond to six value imperatives:

1. Perfect your logistics. Leading companies have shown that they can transform their entire supply chain and related administrative processes to be much more efficient and lower costs.
2. Cultivate your long-term customer relationships. Sees no future in just sales transactions driven by low prices. With the cost of acquiring customers so high, you must retain customers by sustaining value to them. Success here results in higher sales margins.
3. Harmonize your channels on behalf of the customer. Rather than making suppliers' and vendors' needs paramount, focus on maximizing value for customers and giving them options, especially options that provide advantages for your business.
4. Build a power brand. This way you stand out and are differentiated from thousands of other websites. Strong branding is necessary so your company isn't forced to rely on search engines or high advertising costs.
5. Transform your capital and cost structures. Traditional accounting practices classify buildings and inventory as capital investments, and measure success as return on capital investment. The authors say that successful Internet companies view marketing and brand building (seen on Profit Loss statements as "expenditures") as investments that will pay off in the mid-term (3 to 5 years) as the company works hard to build efficiency and increase the margins on sales. The authors contend that marketing and brand building must be seen as "intellectual capital," essential in the same way that research and development costs drive future business in tech industries. Though this section was obviously written prior to the NASDAQ plummeting in April 2000, their insights are still valuable.
6. Become a value-adding intermediary -- or use one. If you don't add value to the customers, they will bypass you for hubs that will. The authors see value for buyers and sellers by providing a combination of information, recommendations, coordination, collaboration, and brokering that reduce costs and fragmentation in the buyer-seller relationship chain.

Smaller businesses will have trouble relating to the authors' premises, but middle to larger companies will find some powerful principles that will guide them as they seek to integrate the Internet into their businesses. I found the book mentally stimulating, and I believe the authors are on the right track in selecting the key areas for Internet companies to concentrate.

You may purchase a copy using one of these links:
US: http://amazon.com/exec/obidos/ASIN/0787954152/wilsoninternetse
CA: http://chapters.ca/Affiliates/ItemPage.asp?producttype=1&affid=104410&ISBN=0787954152
UK: http://amazon.co.uk/exec/obidos/ASIN/0787954152/732
DE: http://amazon.de/exec/obidos/ASIN/0787954152/wilsonweb