By ET

“Location, location, location,” is a common and almost hackneyed phrase in all kinds of business contexts. In the famous Hoteling model (1925), it has been incarnated with a math formulation. If “location, location, location” is the jewel of crown in the offline world, I’m thinking, what is the best advise I can give to the online enterprises?

“Innovation” comes to my mind right away. There are a few reasons why innovation is particularly intriguing in the online context.

• Switching cost: from any webpage, another webpage is just a few clicks away, even if you can provide your visitors with high-quality information/products, there is no guaranttee that they will bring you sales in the future
• Low entry barrier: the technology is at a stage that anyone who wants to start a web business can easily do so, it is amazing to see how quickly the fixed cost involved in setting up a new website is approaching zero for the last a few years. When you are sleeping, your competitor is getting ready to take over your market! Look at google, it started when yahoo was the dominant search engine in the market, and many others were trying to cut a slice of the pie (excite, altavista, hotbot, etc.). Apart from the threat from new entrants, any online store is also facing the competition from traditional offline stores, many of whom already have accumulated precious experience in mail orders.
• Technology advancement: technology is fast changing everyday, something impossible yesterday becomes possible today. If one is discouraged by the fact that all those brilliant ideas have been found and exploited by other companies, one should stop and think what new opportunities have emerged. A good example is Skype, I don’t want to discuss about its smart virual marketing strategies, Skype did a very simple thing: combine P2P with VoIP. This makes VoIP service scalable and any additional “free” user adds some resource (and value!) to the paid users. They are masters of playing “network externality” games.

By ET This entry was posted on Thursday, June 9th, 2005 at 7:37 am and is filed under General, Random Thoughts, Research, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.