Ecommerce: the dotcom conundrum

By Julian Patterson

They never do anything quietly, these dotcoms. Born howling for publicity, they lead fast, noisy and - we're just coming to realise - short lives. Then they die, generating volumes of post-mortem media coverage that most companies would, er, die for.

Nobody needs reminding that confidence in the dotcoms has taken a bit of a knock recently, but was that really the internet revolution that we've just experienced? A brief period between the founding of lastminute.com and the foundering of boo.com?

Well, no, it wasn't. What we saw was simiply the warm-up act, a rather costly and distinctly hammy rehearsal. The main event will be less glitzy and less spectacular, but will run for years.

The lessons of the past few months are clear. But the future will be shaped by those companies that assimilate them the fastest, whether they are 'pure' dotcoms or established businesses with ecommerce ambitions.

The first and perhaps most important lesson is not to confuse investment opportunities with business. Greed on the part of institutional and private investors and venture capitalists was what created and inflated the dotcom bubble. A lot of people, with a very superficial understanding of the new sales channel and what it could deliver, talked up the market - and got what was coming to them.

Most of the dotcoms started with a single good idea. It is now apparent that it takes more than an idea, even a very good one, to make a business. One of the founders of boo.com is supposed to have said that, had the company appointed its finance director six months earlier, it might have survived. In other words, when it got started boo.com saw no need for a financial expert. Oh dear.

There is no doubt that having attractive, articulate personalities to front an operation can help. The younger and more photogenic they are, the better. The trouble is that the average fashion model isn't likely to have clocked up many years of management experience.

It will undoubtedly be harder for the dotcoms to raise money now, but not impossible. Ideas, however brilliant, will be scrutinised more carefully. Investors will want to know who is in charge and who will be bringing up the rear. Depth and breadth of experience will be at least as important as length of skirt and style of dress. Founders of dotcoms tend to be pictured in jeans, albeit with a crease neatly ironed in. It is strongly rumoured that the business suit is about to make a comeback.

Then there's the f-word. That's f for fundamentals - and it keeps cropping up in smug, wise-after-the-event reports like this one. Good management is one of those fundamentals. Adequate business processes and systems to support them is another. It's about more than the durability of the original idea, but of a company's ability to transform that idea into a sustainable business.

Which brings us to the technology. On the face of it, many dotcoms have been breathtakingly na‹ve. They use nicely designed websites and expensive advertising to whip customers into a frenzy of anticipation, then struggle - or fail - to deliver. It is becoming a clich‚ to say that the dotcoms forgot about fulfilment. They didn't forget. They just underestimated the difficulty of doing it. Most understand the importance of integrating back-office systems with the bit the customer sees, the website, but this isn't always easy. Often, the most important parts of the puzzle are outside the company's control. Think of an online retailer that has to ensure its computers talk to those of the dispatch company ultimately responsible for delivering its goods. Or think of an online bank that has to build realtime links to a credit bureau run by someone else.

The same technology that created the opportunity for dotcoms is responsible for most of their birthing pains. Building systems that work is hard enough. Building systems capable of growing to meet demand and changing to reflect different business requirements is even harder. To make matters worse, there is a widespread perception that ecommerce technology is cheap. It isn't, and if technology is your chosen competitive weapon, you'd better be prepared to shell out for the best.

So far, so bad, but it's not all gloom. It's easy to forget that the dotcom show has only been running for a couple of short years, during which time the rest of us have learnt a lot. Established businesses looking to take their goods and services online have had the opportunity to gauge what works and what doesn't. They have every reason to be grateful to the pioneering startups that showed the way.

The dotcom backlash was inevitable and richly deserved, but it won't prove terminal. What it will do is send home the message that virtual companies operate in the real world and need to pay attention to the same things as boring old bricks and mortar concerns. There is no difference between an internet entrepreneur and the regular variety - it just took the failure of a few companies and the loss of a few hundred million pounds to make us see it.

Of course, there will be dotcoms in future, but the current period of disaffection will guarantee that they will be less numerous from now on and more robust. What is and isn't a dotcom will soon be a matter of purely academic interest as dotcom principles (well, some of them) are applied to existing businesses. Fear or envy of the dotcoms has boosted many other ecommerce initiatives, and although people sometimes confuse the two concepts, the dotcom 'movement' is only a tiny subset of all ecommerce activity.

It used to be said that: "All I want is an unfair competitive advantage". If the dotcoms had their own version of this motto, it would be: "All I want is an unreal competitive advantage". It was unreal alright.