How to use the unique characteristics of the Internet to achieve success

Jul 10, 2013

Table of contents:

1. The advantages of you
2. The advantages of the Internet
3. 1. Access
4. 2. Convenience
5. 3. Distribution
6. 4. Networks
7. Conclusion

Last week I talked about Killing offline business online. As the Internet continues to destroy the viability of offline businesses and creates opportunity for them to be replaced on the Internet, we will see entire industries replaced by a shift online.

It is my belief that whole industries will be replaced with online counterparts. Offline businesses continue to miss the opportunity of moving online and they neglect to understand the huge differences in distribution, marketing and customer acquisition that are available online. This puts people like you or I in prime position to rethink how these companies should evolve into the future.

But you can’t be naive and think that just because you understand the Internet better than your incumbents, winning will be easy. The Internet as a medium has some very specific traits that you must exploit if you want to maximise your advantage.

Understanding how to exploit the characteristics of the Internet to reinvent online business is a huge opportunity.

In this post I’m going to look at the characteristics of the Internet and what new opportunities you can bring to offline business models in order to exploit your advantage.

The advantages of you

Before I get into talking about the unique characteristics of the Internet that you need to exploit in order to be successful, it’s also important to be introspective and think about what advantages that you have over your competition.

If you are a regular reader of Culttt, I’m going to assume you are relatively young and you understand the Internet well. You probably grew up with the Internet for at least part of your childhood if not the majority of it.

Culttt is all about creating new opportunities online for business and technology, so I’m also going to assume that you are a relatively early adopter. In Geoffrey Moore’s excellent book Crossing the Chasm, early adopters are categorised as people who seek out new technology and ways of doing things that are bleeding edge. You don’t worry about ensuring every bet you place is a winner because little bets lead to big opportunities.

These two characteristics intuitively give you to huge advantages over your incumbent competition.

You understand how the Internet works - By this I don’t mean on a technical level, but more on a cultural level. In the early years of the Internet, many of the characteristics of the Internet seemed extremely weird to the wider mass audience. Commenting on websites, talking with people you didn’t know in real life and having an online presence are just three of the many new things the Internet brought to our society. Whilst many of these things have been adopted over the last 10 years, there are still thousands of things that the mass of people still just don’t understand.

You seek out new explosive opportunities - As Jay Z said, “You need to step of the boat if you want to walk on water”. By following the Little Bets approach and experimenting with new technology and opportunities to interact and leverage the Internet, you can find the next big thing long before the mass market. Following this approach you need to be trying a lot of new things and experimenting with what gets traction. By making lots of little failures, you will one day be able to synthesis all of your learning into one coherent strategy.

The next big thing won’t be something that has happened before. To find the next outsized success, you need to be pushing the boundaries of what hasn’t been tried before.

With these two characteristics, you are in prime position to find the next big thing.

The advantages of the Internet

The Internet is a whole new unprecedented opportunity we now have in our lives. In future generations we will look back at the printing press, or the steam engine, but nothing else will compare to the revolution of the Internet.

The most beautiful thing is, the Internet is still incredibly young and so there are thousands and thousands of opportunities for improving our lives and creating new companies.

Whilst there are many characteristics of the Internet that make it a huge opportunity, I believe there are four special ones that will have the biggest long term impact. These characteristics are Access, Convenience, Distribution and Networks.

1. Access

Ubiquitous access and the decentralised level playing field is the first major characteristic of the Internet that will define it’s success.

Firstly, broadband has now penetrated the majority of the developed world. This in itself is huge because certain opportunities were just not possible on slow dialup Internet. An even bigger impact is the adoption of smartphones which is spreading like wildfire across the world. This means that whole new demographics of people are now accessing the Internet every single day and the Internet is now more accessible for people in developing countries. These two changes have massively increased the amount of people who are using the Internet.

Secondly, an important quality of access is that the Internet gives equal opportunity to anyone who wants it. On the Internet, nobody knows you’re a dog, and with the continually lowering barriers to entry, anyone with access to the Internet can create, publish or curate to become a leader.

AWS has slashed the cost of hosting online and application marketplaces like the iOS App Store allows companies to connect directly with their customers.

It is now extremely cheap to build a global company from day one. Your potential market is bigger than any previous business has had access to and it is growing every single day. You don’t need permission from anyone and there are no gatekeepers standing in the way of engaging with your customers.

2. Convenience

Convenience is the second big characteristic that will ensure that the Internet becomes a staple in the lives of hundreds of millions and not just the early adopters.

If you think back to the dot com bubble, many of the failed business models were really just too early in the cycle. Companies like Pets.com or Webvan failed for a number of reasons, but one of the most important reasons was a lack of total addressable market.

Now that Internet penetration has increased from hundreds of thousands to hundreds of millions, suddenly these business models start to work. Amazon has been one of the leaders in this space with their Amazon Prime service.

The second big convenience characteristic has been pushed into the spot light by the ubiquitous nature of the smartphone. Now that we have a constant internet connection and a location aware device on us at all times, this opens up a number of new opportunities to service convenience.

I’ve wrote previously on the huge opportunity of resource allocation in connected marketplaces so I won’t go over old ground. But the fact of the matter is, the penetration of smartphone is going to continue to create opportunities like Uber or TaskRabbit.

And thirdly, payment options online are smoothing the friction of taking payments from customers. PayPal started this trend by tying payment details to an email address. But the bigger move in commerce has been the likes of Amazon and Apple who now have millions of customer’s credit cards on file ready for one-click payment.

In a world of one-click payment, location aware offers and services and same day delivery on anything you want, the Internet is going to continue to savage the offline retailing industry.

3. Distribution

Distribution is the third key characteristic of the Internet because there are now more efficient and more scalable ways to connect with your target customers than ever before.

For the first time, you can connect directly with your audience and they can give you their permission to send them information about things that they are interested in. When all of marketing was mass broadcasting, nearly all marketing messages were wasted. Now they we can connect directly to a customer who has shown their interest, we can offer better ways to inform and delight.

Search was one of the first big distribution mechanisms that grew the Internet. The unprecedented rise of Google enabled anyone to access the Internet for the first time and land on the page that most suited their query. Search remains to this day one of the biggest and most powerful distribution mechanisms online.

Although not the first, Facebook and Twitter have really been the most iconic platforms that have thrust social as a new distribution mechanism online. The huge explosion in online social activity has brought the Internet to whole new demographics who previously had no interest in being online.

As online distribution continues to evolve and become more powerful, the Internet will become the most important platform for connecting and engaging with your audience. Whilst television and the printed press still hold the majority of the mass market’s attention today, the move online is creeping closer every day.

4. Networks

And finally, the fourth major characteristic of the Internet is the power of networks and connected marketplaces.

Due to the economies of scale of the internet, the growing global audience and the tiny cost of moving bits on the wire, networks and connected marketplaces are going to continue to grow in importance in our lives.

We’ve already seen some of the biggest transformative online companies emerge as the likes of eBay, Craigslist and AirBnB. These companies understand the messy concept of peer-to-peer marketplaces and the huge opportunity that comes from these types of economies of scale.

The rising importance of networks and connected marketplaces can clearly be seen in the Long Tail effects on the world of publishing, music, movies and media. It is only a matter of time before the next industries start to fall into the laws of the Long Tail.

Conclusion

As you can see, the Internet has a number of powerful innate characteristics that create unprecedented future opportunity for companies. It’s not hard to see how the millions of offline companies who are neglecting the Internet as not a threat will soon be left behind.

Unless these companies embrace these characteristics and swim with the tide and not against it, they will be washed up and left as wreckage.

The beautiful thing is, you have none of the baggage of the offline world, and so you have every incentive to exploit these characteristics to turn existing industries on their head. By starting from a fresh start, you can re-imagine how an industry should work, how it should interact with it’s customers and what products it should deliver.

Without the legacy of the past, you can invent the future.