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Thursday, December 15, 2005 |
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Bubble-2 ?
In The Bubble - Reconsidering the Boom and the Bust, I made the point that the bubble burst had nothing to do with the Internet. It had to do with flawed business models. There were CEO's who had lost of sight of making money the old fashioned way -- by gaining revenue that exceeded costs and expenses. In fact many of them got confused between revenue from customers and incremental investment funds from venture capitalists. Many had a vision of making water run up hill or turning sand into gold. It was a belief in these radical ideas that caused the bubble, not the promise and potential of the Internet. The reason I don't think we are entering "bubble-2" is that entrepreneurs and investors alike have learned a great deal from "bubble-1". One of the lessons of the bubble is that the basics of business have not changed. I have always thought of making money as requiring five simple ideas. First is to segment the market and understand the needs and wants of customers in each segment. Second is to have pricing that meets the competition. Next is to manage to a unit cost structure that is less than the price. Efficient distribution is key whether the product is physical, data-based, or service oriented. Finally, is the essential ingredient of great customer service. If a business can do those five things it will make money, otherwise it will lose. If you are interested in forming your own opinion about new technology companies and their prospects for making money, I highly recommend that you attend the Demo Conference. Demo conferences allow entrepreneurs to show off new gadgets, software, hardware and business ideas and enables the press, analysts, investors, and technology enthusiasts to assess what they see. Demo has always been my favorite conference and I am looking forward to the next one -- to be held in Phoenix, February 6-8, 2006.
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