SpectatorBytes

A good friend of mine, who works in digital media, recently expressed its frustration with Web businesses: ” Why can these businesses be more simple; They are just not easy businesses.” Any digital media entrepreneur or executive is likely to agree with this statement. Building or operating businesses on the Web continue to be a complex task.
The main reason for the complexity of Web businesses is that overall industry dynamics continue to evolve rapidly. Basic business rules appear undefined as disruptive innovations consistently create new challenges for incumbent products and businesses. In addition, hybrid nature of the Web, half media and half echnology and media, contributes to this complexity.
As a result, successfully operating Web businesses require following a new set of rules, which will likely appear to be counterintuitive. In an effort to start codifying these operating rules, here is an initial list:

- The consumer Web is a hit-driven environment. Building or developing products requires more than capital and disciplined execution. It requires deep understanding of the target audience and talent. The dynamics of the Web is likely to look pretty similar to those of Hollywood with franchises, hits and misses.

- Offer your customers best-in-class products, even if it requires partnering with one’s competition. Please know that best-in-class is determined by the users. Exit/divest products or businesses in which you are not best-in-class. Non-best-in-class products will likely find extremely difficult to scale.

- A collorary of the above point is the following: Double-down on “hit” of “A” products and exit quickly “B” products. Don’t try to package “B” product with “A” product. This will prove detrimental to your “A” products in the long-run. Moreover, this will also be detrimental to your operations. Management time should be dedicated on maximizing the value of hit product rather than be distracted with “B” products. Traditional media struggles with this concept because many of the media businesses have been built around packaging “A” product with “B” products (television, music, print). Given the nature of the Web, consumers don’t have to consume B products since they are too many hit products available for them to enjoy.

- Brands should be assigned to a single product. Consumers increasingly define a product by its brand. If a business has more than one product, it would benefit from having multiple brands. Avoid having a single brand for all your products. As long as you are offering a product that resonates, brand building is not difficult on the Web.
- Eliminate (or do not establish) a Marketing function and focus on maximizing distribution. Make sure your consumers are able to find your products. If they are good, early adopters will become your “outsourced” marketing team. The Web is a transparent environment and marketing spend can prove extremely inefficient. Use these resources to create strong business development teams focused on securing strong relationships within the relevantWeb ecosystem. Caveat: Smart PR among early adopters (this does not mean tech folks only but within your target segment) is still pretty helpful. Also, having distribution does not translate in product success, it simply enhances your chances.
- Build your organization around talented specialists. Competing on the Web requires teams whose product and or technology knowledge is cutting edge. This is critical to stay ahead of the competition and foster an environment of constant evolution. The more specialized your teams, the better they are able to build hit products and protect their positioning once those products have become best-in-class.
- If you have a portfolio with multiple products, focus on establishing a highly decentralized and distributed organization. Emphasize independence and specialization over corporate normalization. This may mean establishing a structure of many small teams. While this structure may be hard to manage, it is the optimal structure to foster innovation and overall competitiveness.
- Relentless focus on cost efficiency. Disruptive competition on the Web often centers on delivering the same value to users at much lower cost. However, this does not mean eliminating redundancies or consolidating similar operations across products or services. Rather, foster an environment in which operational practices are constantly being reviewed and revamped (if needed) to match the market. For example, publishing is an area in which lower cost models are constantly emerging (through technology innovation and new operating practices). Thus, publishers need to constantly revisit their level of efficiency to stay competitive.
- Business leaders need to have a deep understanding of technology and its capabilities. This is critical to be able to drive the product vision. Business folks should be able to work closely and challenge the engineering teams. Without deep understanding of technology, business teams may prove unable to anticipate new market trends. Given the continuous state of evolution in the Web, this is of the upmost importance.

- Lastly, leverage portfolio of products to provide advantages across products. However, do not force relationships, let them compete freely; Do not provide any crutches. The Web is a pretty Darwinistic environment. If a business, service or product is not forced to compete for users and or clients, it may lose out in the long-run to competitors who are.
There are likely to be rules for managers of Web businesses that I have missed. Please share any that may come to mind.