Tag Archives: Entrepreneurship

On E-commerce: Can every category be offered through e-commerce?

E-commerce and traditionally analog incumbents, especially those that are unspecialized, have been trying to penetrate into different industries and categories, thinking that many such offerings can be provided digitally.

Were they able to make it happen?

Of course, retail operations specific to some products have quickly utilized e-commerce practices, as well as omni-channel applications.
While computer software and video games have been moving into the “digital shelves” in a profitable way as they are innately digital, many other categories are lagging behind again because of their inherent analog nature.
There are only a few category killers and niche players that have been profitably disrupting innately analog businesses despite the presence of powerful, albeit unspecialized and broad-based, incumbents.

What are the categories that are/were tried and could not still be fully streamlined through e-commerce?

In this article, I draw on my experience at Amazon and elaborate on what it takes to be a profitable and viable e-commerce business. Furthermore, I also analyze companies such as 1stdibs, Etsy, and Wayfair and what kind of a future befall these companies, also expanding on what they were doing right and wrong. This article is intended to be another blueprint for those who plan to go online and launch their e-commerce business.

On Scaling Service Businesses and Digitization 💻

“Many businesses gain only limited advantages as they grow to large scale.
Service businesses especially are difficult to make monopolies.
If you own a yoga studio, for example, you’ll only be able to serve a certain number of customers.
You can hire more instructors and expand to more locations, but your margins will remain fairly low and you’ll never reach a point where a core group of talented people can provide something of value to millions of separate clients, as software engineers are able to do.”
➡️ Taken from Peter Thiel’s Zero to One
In this article, I try to disprove Thiel’s claim, providing a number of companies that are services businesses and have scaled through digitization successfully let alone have become monopolies despite inherently being service businesses. I elaborate on how these companies reinvented their business models and became successful while also sharing what they could have done better and some potential risks looming large in the future. I also demonstrate how these exceptional companies destroyed established trends and biases.

On Management Consulting Practices: Turnaround Projects followed by Business Transformation, Brand Revitalization, and Sustainable Growth. Focusing on Lego, Nintendo, and Sega

Studying successful turnaround projects will provide you with great lessons.

Many consultants tasked with turning around a business focus mainly on cost reduction projects and deem the mission complete after a successful turnaround.

However, natural and subsequent steps after a turnaround are business transformation and brand revitalization.

Business may have survived after the turnaround but whether it will reach a sustainable and organic growth phase ever again depends on following transformation and revitalization.
In this article, I elaborate on what needs to follow after a turnaround project for a business to continue to thrive in the future. I share how successful business transformation and brand revitalization look like, analyzing the history of Lego, Nintendo, and Sega in greater detail.

Businesses, States, and Governments 🗺️Why a Shinise like Nintendo differs from Boeing

Companies cannot thrive in failed states nor can they become global players.

Those that are relatively successful in a failed state cannot compete in global markets and their insignificant local success is bound by their ability to kowtow to their local governments.

Nonetheless, one should not ignore the fact that many global giants of today, despite them not being founded in failed states, have become such because of their relationships with their respective local governments and their state’s strong economic position in the global markets.

In today’s highly competitive markets, an innate monopoly, a wielder of a patented, well-protected, and inimitable proprietary technology, or a government contractor owning exclusive and never-ending business rights are players whose successes are surest.

Nevertheless, all such sure-to-succeed models, one way or another, are reliant on the very existence of governments and relationships with governments.
In this article, I will explain how companies with close ties to their respective governments thrive through these connections, providing real-world examples of innate monopolies, technology companies, and government contractors. I will elaborate on how these relationships impact the operations of the companies and why such companies succeed regardless of the political and economic system in the original country. I will also expand on why a shinise like Nintendo is an exception and the role of competition.

Securing the longevity of companies

If only you had known these before investing in a tech venture (or any private company)
Some well-known secrets 😉
#2
It is hard to assess how long a company will live.
Of course, any founder will want his/her company to live as long as possible but as is the case with people, companies cease to exist, too.
Sometimes, they evolve, holding a little longer and defying their fate.
However, for many tech ventures, the lifespan is short although they live by dog years.
How long was the average lifespan of a tech venture born in the original dot-com era after the venture had gone public?
It was 3 years.
In this article, I’ve focused on some of the factors affecting the longevity of companies, providing some real-world examples of successful and unsuccessful ones.

What to (and not to) make of Startups: Introducing additional well-known secrets of venture capital and start-ups

On the 9th of March, 2022 I shared a post on some well-known secrets within the venture capital:
https://bit.ly/3wEc80F
On the 15th of March, 2022, Bloomberg LP published the following:
Homebuying Startup Knock Scraps Plans to Go Public, Lays Off Half Its Staff
· Housing-tech firm instead raises $70 million in private round
· CEO says collapse of Zillow iBuying business spooked investors
“The business is doing great, but we built to be a public company, and there’s no IPO market right now,” Black said. “It does feel like money has gotten very scarce and very expensive.”
Link to the article: https://bloom.bg/3qG0D4O
**
Is your start-up ready for the many challenges ahead?
How can you make your start-up more resilient against unexpected circumstances?
Analysts, VCs, underwriters, or even your finance department, may assess a value for your company. Is it reliable?
I will try to answer these questions in this article. Also, we will take a quick look at what happened to Knock.

Businesses built around Network Effects Part 2: Diving a little deeper into E-commerce businesses

This time, the focus is e-commerce.
⬇️

Marketplace is a very important vertical for many e-commerce companies.

Some are solely based on it while others rely on it for effortless revenue (but most importantly profit) generation as direct retail operations in e-commerce are financially less viable.

Marketplace vertical, as is the case with social platforms, is reliant on network effects, and the accompanying proprietary tech is well-connected to network effects.

The connection is strong for both social media platforms and pure e-commerce businesses as almost any front-end feature of any platform can be replicated very easily and quickly by all players.

The similarity between two business models, however, is that proprietary technology and network effects facilitate mainly usage in one and mainly purchasing process in the other so that users build “necessary” habits and never quit the platforms.
In this article, I will dive deeper into e-commerce businesses including pure e-commerce business and e-commerce giants that have many adjacent and disparate business activities. I will try to analyze and assess the viability of different business models while also elaborating a little bit more on how network effects increase the sustainability and longevity of these different companies.

Businesses built around Network Effects Part 1: A guide to understand the strategy and compare some contemporary examples (both good and bad ones)

A company that is built around network effects has a demand-side comparative advantage. Some companies have also the ability to combine this demand-side benefit with supply-side capabilities (do you know who they are?).

In today’s digital environment, a proprietary technology complemented by network effects is deemed a sure winner-take-all model (until it is not as is the case with all these financially unviable business models).

Think of a social media platform whose sole monetization tool is advertising.

It has both great proprietary technology boosting targeted advertising metrics and returns and enviable fortress built upon network effects.

However, the prospect of success may still be uncertain even if it is a monopoly.

Proprietary tech can monetize through how frequently the platform is being used and how many monthly active users the platform has command over.

Regardless of whether you run analog, digital, or a hybrid business; capitalizing fully on network effects traditionally requires both frequent usage and number of users. Nonetheless, some companies, after reaching a critical mass of users, may think that usage is more important than the number of users (which companies are they?) and they promote regular use evolving into habit and addictions.
This article is intended to be the first chapter of a thorough guide helping you understand the network effect strategies of different contemporary companies and focusing on both successes and failures of network-effects-driven businesses.

If only you had known these before investing in a tech venture (or any private company): Some well-known secrets ;) Part 1 of many

If only you had known these before investing in a tech venture (or any private company)
Some well-known secrets 😉
#1
Tendency to stay private as long as possible not necessarily results from the motivation of glossing over “subpar execution” and “problems concerning financial viability of founders’ business model” although there are many cases in which these have been the real motivations of staying private. It has been driven mainly by excessive private capital, albeit currently drying up, incentivized by supplying easy, i.e. not smart, liquidity so that valuations shoot up before IPOs, which have become just down rounds recently.
So, now you know why many ventures are waiting for a decade or more on average before going public.

Free tip for all prospective entrepreneurs 🈺

Entrepreneurs who are copying business models from an original country and trying to implement those models verbatim in their own countries generally are not able to calculate the risks properly, actually that is why they are copying in the first place.

Obviously, different markets will have different market dynamics: purchasing power, demographics, openness to innovation, state-level regulations, capital accumulated, and the backing of a sound financial infrastructure. All will affect your copy differently.

However, there is one more important aspect.
Checking whether the business was financially viable in the original country!

In many examples these founders are just copying models that are not even proven to be financially viable in the original country, i.e. no prospect of positive earnings and cash flows despite the growth.
⚠️
A money losing venture growing more may eventually become a worse money losing venture.
Have the ability to check this first.
Only a handful of perennial money losers evolved and beat the odds.