Learning from Boo's demise

Boo's collapse marks the end of the emperor's-new-clothes period for dotcoms

Boo's collapse marks the end of the emperor's-new-clothes period for dotcoms

The Independent View

Martin Butler

The collapse of one of the larger, or at least, well known, dotcom companies has been extensively reported in the media. The loss of 300 jobs, while not insignificant - and not to be dismissed lightly in human terms - would hardly rate the amount of coverage given if it was in the manufacturing sector, for example.

However, dotcom companies are seen as the flagships of the whole e-business fleet, and what happens to them is considered relevant to the whole of e-business. This is a complete and utter nonsense, and only serves to highlight the confusion that surrounds e-business, e-commerce, e-tailing, and any other "e" word that you care to think about.

E-business can be considered as a generic term for the whole of Internet/electronic trade; a concept rather than an achievable implementation. The achievable implementation aspect comes at the more fine-grained level - specific applications or business processes that can be moved towards the market.

This market dynamism is what e-business is all about, but that does not mean that it negates all that has gone before. With the collapse of Boo.com, and the concern surrounding the future funding of even higher-profile dotcom companies, what is becoming clear is that companies need business plans that are formulated in the same manner that business plans always have been. With many of the dotcom companies there has always been a certain element missing. That this element concerned the actual revenue stream appears to have by-passed the numerous investors.

The bubble has burst, and there is no doubt that from now on organisations that want to become dotcom companies will need to show how their revenues are to be generated.

Herein lies the problem of e-business. IT has been very successful in reducing the cost base of companies, but a reduction of cost is something that is far easier to forecast and to demonstrate in a model. Increase in revenue, or revenue streams from new markets are far more difficult to predict and model. While not taking the generalist line that investors in dotcom companies have not even considered the revenue model, I do believe that they have been too ready to accept a less than detailed forecasting methodology. To a large extent this has been due to the fact that no historical or similar models existed.

Separate elements of an e-business strategy, if implemented correctly, can increase revenues - or at the very least will allow revenues to remain stable in the changing market. Which brings us back to the implementation of solutions, rather than implementing e-business as a whole.

E-business solutions cover a multitude of areas, and it is necessary to codify these areas in order to put into place an effective business plan. It is worth pointing out at this juncture that the business plan should not be considered as being an inflexible or restrictive document - that would not work given the new market dynamics. However, it needs to be as detailed a plan as would have been drawn up for the traditional bricks-and-mortar organisations.

As a starting point, an e-business solution should address the issues of required IT infrastructure, the implementation of B2B systems, the implementation of B2C systems, the competitive use of information, the effect that the new model will have on existing physical infrastructure and logistics, and the way that business processes can be migrated to the new way of doing business.

Even from this very high-level, limited list, it should be obvious that this is not something that can be implemented in a "big bang" or "one-off" fashion. The fact that much of the above list deals with existing implementations and business processes gives the clue to the rise of the dotcom companies, and also why ultimately, the vast majority will fail.

The strength of the dotcom organisation has been that it was fresh and new and did not need to give consideration to existing models. Unfortunately, this freshness all too often meant that not enough consideration was given to good business practices - one of which was having a strategy that showed where the money was going to come from once the investors got cold feet.

It is now time for all believers in the benefits of e-business to stand firm against the onslaught of doubters and Job's comforters that will abound in the wake of Boo.com and the other failures that will follow. The message must be that e-business is not about selling a few goods or services over the Internet, just as in the early days it wasn't about having a simple Web presence.

E-business is about the way that we shape the future of our organisations, using every tool available, while still maintaining sight of the fact that business is business, and that certain business practices are relevant and form the core of all trade, regardless of any prefix of the moment.

Martin Butler is chairman and founder of analysts The Butler Group

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