Understanding the critical factors of a business keeps it going

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In the late 1990s, a large number of Internet entrepreneurs emerged in India, spurred on, no doubt, by the successful acquisition of Indiaworld by Sify. All of these young entrepreneurs were convinced that they had the makings of the next Yahoo! or Amazon (Google wasn’t that big then). With very impressive looking websites the only thing missing for success, in their minds, was the money. Almost everyone who started an online business in that period believed that the critical factor for business success was in building a really good website, which would generate traffic (eyeballs) which in turn would lead to advertising revenues and then the magical acquisition.

But hardly anyone survived that era. And the very few that did, are doing rather well. All those who’re still around and flourishing realised early on that having a good-looking website was not the most critical factor for the business since the reality in India was different.

PC and Internet penetration was very low and broadband was unheard of; fulfillment of online transactions had to be managed through a complex network of vendor and supplier relationships, online advertising revenues were mythical and Internet payments weren’t going to happen because credit card penetration was abysmal and the infrastructure to process payments online was not up to the mark. Therefore, they figured out two things—an alternative mechanism for generating revenues and the need to have an offline or physical world presence. Building a website was the easy part, ensuring reliable service and fulfilling customer needs was a very different kettle of fish indeed.

Fast forward to 2008. There still are a lot of consumer Internet sites that have not internalised the lessons of ten years ago. A lot of startups are also chasing the same dreams in the mobile value-added services (MVAS) area.

Let’s take another example of a company from the past 12 months. Realising that travel was going to be a hot sector, this company invested heavily in acquiring state-of-the-art vehicles. They then launched a website and unleashed a marketing blitz that included very attractive prices and options. Sales started booming and the vehicles were on the road. The vehicles started developing small problems which then turned big.