Select your localized edition:

Close ×

More Ways to Connect

Discover one of our 28 local entrepreneurial communities »

Be the first to know as we launch in new countries and markets around the globe.

Interested in bringing MIT Technology Review to your local market?

MIT Technology ReviewMIT Technology Review - logo

 

Unsupported browser: Your browser does not meet modern web standards. See how it scores »

Now, of course, a growing number of people don’t want to visit a bookstore, or even telephone a travel agent or a stockbroker. But this doesn’t mean that stores and sales agents are irrelevant. They aren’t. Consider bookselling again. Borders and Barnes & Noble are everywhere. What does Amazon.com do when bricks-and-mortar people personally deliver books to your home? What happens when the company assigns person to me? An electronic agent is one thing; a human being is (still) something else again.

Take Dell.What made Dell Computer’s revenues rise from nothing in 1984 to $18.2 billion last year? The key to Dell’s success isn’t the Web; it’s that fabulous, cutting-edge, e-commerce gadget: the telephone. Customers phone in orders, setting off a chain reaction among suppliers that culminates in the assembly
of a Dell personal computer. Where’s the Web in this process? Hardly visible. As of late last year, just 5 percent of the company’s daily sales come over the Web. Sure, this percentage will grow. But my point is that Dell will benefit from the Web because it’s a leader already-it won’t become a leader because of the Web.

What’s important for entrepreneurs to realize is that chasing the ideal Web business isn’t the path to success. What they need is a good business in the first place.

But wait, aren’t those “good businesses” under attack by the Web? Aren’t existing industry leaders usually muscled aside by upstarts because the giants are reluctant to destroy their old businesses in favor of the new?

Well, Amazon.com took a big lead in the electronic sale of books. But the big booksellers quickly responded. The story is the same in other industries,where leaders adopt Web-selling techniques even at the price of hurting their traditional sales and service networks. The effect is to blunt the advantage of the upstart and remind us again that the Web is a tool open to all-especially the rich and powerful.

A great example can be found in online music distribution. In Britain, EMI plans to make its entire back catalog of recorded music available via the Web. Customers will download tunes onto recordable CDs in music shops. EMI’s partner in the deal is a small company, musicmaker.com, which sells customized discs over the Web. The problem is these discs must then be mailed to buyers, which takes at least two days. What musicmaker.com needs is stores, so buyers can get the discs instantly. EMI makes an ideal partner.

I’m bearish on businesses built solely on the Web. The coming years will see many of them wrecked. Failed virtual companies and worthless net stocks will mark the end of an era even as well-run real businesses follow the advantages of e-commerce wherever they may lead.

0 comments about this story. Start the discussion »

Tagged: Web

Reprints and Permissions | Send feedback to the editor

From the Archives

Close

Introducing MIT Technology Review Insider.

Already a Magazine subscriber?

You're automatically an Insider. It's easy to activate or upgrade your account.

Activate Your Account

Become an Insider

It's the new way to subscribe. Get even more of the tech news, research, and discoveries you crave.

Sign Up

Learn More

Find out why MIT Technology Review Insider is for you and explore your options.

Show Me