Most people have been hearing or saying things that past 10 years as the new economy, the internet economy. And after the .com bubble-burst, most people were saying; there was no new economy, there were no new rules.

I think people were wrong, both times. There was a new dynamic in the economy, it wasn’t just what people thought it would be.

If we go back in history, this is quite common when there is a major change or shift in how certain things can be done. It does not happen linearly and it happens in a different way than people predict. One good example is a comparison I saw 2 years ago, that compared the size of e-commerce between 1999 and 2005, the interesting thing was that besides the outcome, it also had a comparison with the estimated size of e-commerce in 2005 (as estimated by many .com-companies and market researches in 1999). The real outcome compared to the estimates? 10 times as much. But the big growth in e-commerce did not happened where people thought it would be, it was more geared towards companies buying and selling between each other, than people buying cloths over the Internet. It was a lot of electronic goods (music, software etc) but mostly procurement that have been revolutionized.

I have been an entrepreneur in the information technology business since, one of the most lucrative business ideas was selling software. This was due to the enormous scale-factor of software. Build the innovation once, and duplicate it with almost no cost. The same holds true for some other business such as the music industry. This was a time when me and many other looked at Microsoft and thought “I want to be just as big, but not as ‘evil’…”.

The Internet did not change this, but it revolutionized another factor, namely distribution. With the Internet, I can distribute a product (that can be delivered in digital form) for almost nothing over the Internet and stocking fees are next to nothing. But most importantly it changed the game of how you reach your target audience, it made it both cheaper and more complex. Many large corporations have still not understood Internet marketing and sales, and if you ask me; until they do, they are slowly dying, and just waiting for somebody else to sweep in and take their customers.

What happened next, was the real killer for a company like Microsoft, way try to build products that can run reliable in a remote hardware environment, which you know nothing about and can not control, while every customer blames you for the ability to do so or not?
Why not only deliver the service or usage of the product? And keep the software running in a controlled data center, with IT-gurus that eats Linux, Windows, AIX, Solaris or whatever for lunch?
Not only have we reduced the complexity, but also pooled costs for things that add very little value to manage yourself for most companies, namely servers, data centers, platforms and infrastructure. But most importantly, we can make very complex software and solutions available to customers for a fraction of the previous price due to marginal distribution, stocking and support costs, many costs which have no been directly related to the actual product you are selling.

This spiked the real growth for companies like Google, and more importantly the birth of companies like SalesForce. SalesForce builds a CRM application that costs very little to use and own.
CRM used to be extremely expensive (I had a software company in 2000 that built software products for Enterprise Content Management, one of our major clients was Compaq, they spent millions of dollars to install Siebel, and then the same amount again to use it, and then again to manage it). Our 20+ people software company was too small to use a CRM system at that time.

Today a one person companies can use a powerful CRM tool the manage their sales, leads and customers interactions, and there is even a “SalesForce for dummies” book! This is the long-tail in effect. There is room for a lot of more services like this, for managing everything from business productivity to personal information and entertainment to almost any niche.

Now it gets really interesting; we are in a state of development, where there are a lot of inexpensive tools available to use, and we are also in a position where it’s is rather cheap to build new Internet services (effective software development tools, RoR, Seam etc); to distribute them even to a very small niche (almost free distribution over the Internet), a growing number of people using the Internet, Internet has already become the most dominant media (in favor of TV, Radio and papers).

The most interesting part is that I think we are only in the beginning, only about 5-10% of the most interesting things with the Internet have happened so far, 90-95% of the opportunities is yet to come.

In China it’s a curse, but I like challenges and shy away from too much conformity and safety; “We are living in interesting times”, and I think we might be really living in the most interesting times ever.

In the past year there have been a lot of emphasis on economic down-turn, I think it’s important to keep the big perspective; globally poverty is in decline, wealth on the rise, and there are more opportunities for Entrepreneurship than ever.

1 reply
  1. Wille
    Wille says:

    In the past year there have been a lot of emphasis on economic down-turn
    A lot of the doom mongering is probably not too far off, it is likely that we are seeing one of the biggest downturns since the Great Depression.

    BUT, that in itself is an opportunity – “necessity is the mother of all inventions” holds very true.
    When people are up against the wall, pressed for money, they will be more likely to both come up with innovation that breaks the mould of incremental improvement on the pre-existing, and they will also be more likely to adopt it if it saves money, time or increases productivity dramatically.

    Reply

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