System Innovations

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Laura Brown – principal consultant
1112 Riverbend Club Drive - Atlanta, GA 30339
PHONE: 770-953-0534 FAX: 770-952-7863
email: lbrown@systeminnovations.net

Internet Strategies for the Small Business Investor:
7 New Rules of Play

Small business and individual investors must redefine the rules of play, if they hope to benefit from the many strengths of the Internet. Since many Internet strategists assume a starting price of $1-2 million per year to place a business on the web (see net.gain by John Hagel and Arthur G. Armstrong or the Corporate Internet Planning Guide by Richard J. Gascoyne and Koray Ozcubukcu) and follow-on costs of up to $15 million are considered reasonable, small investors must find ways to turn their weaknesses into strengths.

As in the competitive approach that David B. Yoffie and Michael A. Cusumano called "judo strategy" in the latest issue of Harvard Business Review, the small business or start-up can turn their opponents' resources, strengths and size against them.  Start-ups can be flexible, quick, and can use the Internet to level the playing field.   They can use "just in time" and "just enough" strategies to prevent wasting limited resources on premature expenditures of time and money.  And they can seek partners and allies for the strength of interdependency between equals.   What emerges is a new set of rules for internet start-ups:

Rule # 1: Think big, but start small and build, learning as you go
Rule # 2: Test the market, then capitalize on findings
Rule # 3: Develop just enough to achieve your goals
Rule # 4: Develop iteratively, testing and refining between iterations
Rule # 5: Use what's at hand, before investing in new tools
Rule # 6: Develop partners, allies and networks
Rule # 7: Take advantage of the unique strengths of the medium

Rule # 1: Think big, but start small and build, learning as you go

What I've learned is that you need to shift your way of thinking back and forth from big-business "corporate-think" to small-business "net-think". Or, if you like, from big-business hierarchical to small-business relational. Shifting back and forth means staying in the middle and it allows us to make a departure from the "all or nothing" way of planning.

We have to learn to take the next small step, without knowing what all the steps will be in advance. In project terms, this means planning for the next 30-90 days, and adjusting as you go. It means changing the way you think about commitment and investment. You make small investments, and see how they work, then you adjust, and make another small investment. The trick, I think, is holding your vision and the larger commitment to seeing it through, but letting the form of it shift and grow as you go. This is how iterative market research is done. What I've learned is that you need to shift your way of thinking back and forth from big-business "corporate-think" to small-business "net-think". Or, if you like, from big-business hierarchical to small-business relational. Shifting back and forth means staying in the middle and it allows us to make a departure from the "all or nothing" way of planning.

We have to learn to take the next small step, without knowing what all the steps will be in advance. In project terms, this means planning for the next 30-90 days, and adjusting as you go. It means changing the way you think about commitment and investment. You make small investments, and see how they work, then you adjust, and make another small investment. The trick, I think, is holding your vision and the larger commitment to seeing it through, but letting the form of it shift and grow as you go. This is how iterative market research is done.

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Rule # 2: Test the market, then capitalize on findings

Start by designing a sales version of your web site using presentation tools like Microsoft PowerPoint, Freelance Graphics, Visio, or CorelDraw to provide a "mock-up" design of the site, and do some market-testing to see if you can verify an interest.  The idea is to build the vision first, clarifying it through market-testing and customer interviews. Pre-sales marketing can involve focus groups, serial interviews of prospects or even direct mail sampling of target markets. If the sample yields a high enough percentage of responses, be prepared to follow up with the publication of your pilot site. Or conversely, you could roll out the pilot version as a "proof of concept" to strengthen your case when you go to present it to potential customers, investors and business partners.

Early marketing initiatives and market tests will yield valuable feedback which can then be incorporated into the prototype and pilot for your website. Prospects can also be surveyed to develop direct input to customer value models which will prove invaluable in defining product pricing and versioning, a process for targeting customer segments with products tailored to their perceived needs and values.

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Rule # 3: Develop just enough to achieve your goals

As the name of this rule implies, it's a good idea to define your goals for your website. Figure out what matters most to you in this endeavor. Decide on what you want the web site to say, to be and to do. Define your vision - why you wanted to build this site in the first place - and return to it often. Think through your motives: are they strictly business, or do you have other agendas as well? Perhaps you want to build a community, help non-marketers learn to market themselves, connect those in need of services with service-providers or enable social or political reform. These decisions and choices will determine the content of your web site, its look and feel, and the market, partners and sponsors you choose to target. Time spent in the early stages, defining and refining your vision, will pay off when you get to the design stage of your project. It will give you a basis for making all the technical and design decisions that you will face.

As you begin to lay out and understand your goals for this venture, now is the time to set priorities for achieving them. Prioritization alone will practically guarantee the fulfillment of the first 50% of your goals, because you're focusing your energies and organizing your time around what you really want. Try brainstorming a list of all the goals you want to accomplish, then start putting numbers beside them. 1 is top priority, 2 is near-term, 3 is long-term. Using just those three numbers, decide where each goal belongs, and assign its priority. If you get all 1s, you're not thinking big enough, or else not allowing yourself to assign true value. If you get all 3s, you may need to be more willing to experiment, remembering that you are making decisions for today, not forever. Play around with the numbers until you have a balance of 1s, 2s and 3s.

The way to stay focused at this point is to develop just enough to deliver your goals. Resist the temptation to continually expand the scope of your efforts, adding one "neat idea" after another to the design without going ahead and implementing any of the ideas. Now is the time to cut away the extraneous, decide what's really most important to do first, and go for it.

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Rule # 4: Develop iteratively, testing and refining between iterations

It's sort of like that environmental slogan: "think globally, act locally". It is important to keep your vision expanded, but implement it a little at a time: incrementally. That's called an iterative approach.

With your goals defined and prioritized, figure out what it will take to deliver the first set of goals - those with the number 1 beside them. That should be the ideal for the first iteration of your web site. Now you will have to consider how much of the ideal is practical to implement and how much will have to wait for future releases. A good rule of thumb is that iterations should not take over 3 months to develop. Now is the time to decide on the implementation compromises you can live with and how they will avoid stepping on the long-term vision.

Go ahead and set up a schedule for Release #1 by detailing the tasks to complete. Set milestones and decision-points within that timetable for detailing the following 30-90 day period. Then proceed to develop Release #1, your first iteration. Testing and publication of your first release will reveal changes and improvements which can then be built into future releases.

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Rule # 5: Use what's at hand, before investing in new tools

Many of us learn in large corporations that the first step to setting up a project is appropriations: figure out what you need and get a PO authorized to go and purchase it. "Net-think" reverses the order of events so that appropriations is often the last step we take. First we work with what we have.

You know where you're going because you've defined your vision, set goals and prioritized them. Now you need to see what you've already got that will do the job. A simplified version of your site, developed in tools you have at hand (authoring software or HTML edited with notepad) can be sufficient to get started.  Or look for sites with free software and tools available.  Many on the web believe that collaboration is the best use of the connectivity the web delivers, and offer freebies accordingly. 

If you expect to end up with high volume traffic and large databases, your long-term plan should reflect that.   But databases can be designed to start small and build.  And many ISPs offer graduated plans for stepping up as your internet traffic increases, so you only pay for what you need today, and upgrade tomorrow with no penalties.  In general, for bandwidth and applications, the longer you wait, the lower prices will be and the more likely the solution you need will be available at lower cost.

The key to upgradeable web sites is design. Databases and processes should be designed with open, relational structures so that adding components and objects is simple. The long-term vision should be identified and understood so that implementation compromises don't contradict the overall direction.

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Rule # 6: Develop partners, allies and networks

Market strategy always involves understanding competitors, locating suppliers and defining target customers. Internet strategy, perhaps more than other arenas, blurs the lines between these three agents, and requires that we collaborate with all three in new ways. The internet enables the business process that:

• Identifies companies operating in niche businesses that can work collaboratively with yours

• Stratifies the market in ways that allow competition to generate business for all

• Joins networks to establish strength and size, rather than building it all in-house, allowing your business to stay focused on core competencies

• Invites customers to perform significant components of your business process for themselves

• Allows suppliers to share in performing portions of your business process for themselves

Your Internet Strategy should define those avenues that will act as entryways for your site, referring business to you through passive or active links. Search engines, sponsors and advertisers, news media addressing the topic of your business off and online, and sites providing services complementary to yours should all be considered.

You may also want to develop partnerships with publishers, software providers or communications service providers that need fresh ideas and the execution savvy of a start-up company to generate new business opportunities. These partners can provide the leverage, credibility and market coverage that your business needs.

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Rule # 7: Take advantage of the unique strengths of the medium

• Interactivity - the world wide web excels in getting customers involved. It allows for high information selling and provides multiple opportunities for collecting customer information and preferences. Use brief, compelling capsules of information to pull surfers in, and in-depth knowledge to sustain their interest. Incorporate feedback mechanisms into your web design to create many channels for customers to talk to you and tell you what they want.

• Convenience - web technology can be used to organize and automate key shopping and product educational processes for customers. As technology makes vast amounts of information available to all, there is an increased need to filter and digest the information, making sense of the quantity for readers. Web design should organize the information-gathering process for customers, giving them checklists, cheat sheets, downloadable or printable reminders that they can take away with them from your site.

• Accessibility - both time and location limitations become irrelevant on the web. Use greater accessibility to extend your reach and availability to your customers.
  

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Copyright 1998, 1999, 2000. Laura Brown, LBPI, Inc. (DBA: System Innovations)

Last Updated: September 18, 2001