Platt Perspective on Business and Technology

Opening up the online business model for new and emerging opportunity 1: outlining some of the basic issues and challenges

Posted in startups, strategy and planning by Timothy Platt on April 29, 2013

Last November, 2012 I finished a series on best practices for using YouTube and related rich-media marketing approaches (see YouTube marketing 9 – developing viral marketing reach from a business model and strategic planning foundation) in which I noted that:

• A business that goes viral in its marketing reach is in a very similar position to a business that offers a highly innovative and novel product or service – a true blue ocean innovation to the marketplace.
• In both cases, the actual target demographics that would want to purchase may be quite different than initially anticipated.
• In both cases, market analysis and two-way sharing of information and insight are essential to making meaningful connections that will systematically lead to sales, to business stability and strength and to competitive advantage.

And I have also written about Web 2.0 oriented businesses (see for example Moving past early stage and the challenge of scalability 8: web 2.0 business models.)

Up to here, however, I have barely scratched the surface as to what a Web 2.0 oriented business model actually entails, as organizations that pursue that strategic and operational approach go online and seek to develop and expand an online reach. My goal here is to at least begin to more fully address the issues and factors that go into that. And I begin by repeating a fundamental reality of online marketing and business that I have already noted several times in this blog:

• The closest parallel to physical distance in cyberspace is a mathematical inverse of bandwidth, where slower speeds of connection online equate to being further away for bricks and mortar businesses.
• But with increasing proliferation of high speed and wide broadband connectivity and with the ever-increasing expansion of what wide broadband connectivity means as a minimal requirement, any business that goes online can realistically hope to reach geographically widely distributed audiences and with effective immediacy.

That has some immediately significant consequences. Among them, and to further build a foundation for this discussion, it should be noted that:

• When physical distance per se ceases to be a pertinent market-defining factor, the closest approximation to a local market becomes a needs and interests oriented target demographic. (I will hold off on elaborating on this point for now and simply note here that I am going to post an installment on online demographics oriented marketing in this series.)

One of the points that comes directly out of the above six points as developed up to here is that any business that goes online faces at least the potential of building a truly global audience and marketplace – and certainly if it really understands the dynamics and qualities of its prospective marketing and sales audience and what qualities its members hold in common, that by trait correlations define the group. And that is where this narrative begins to get more complicated and nuanced in the real world – and in real cyberspace.

• You have a product or service that you would want to sell, and when you do so online you potentially face and reach a truly global marketing and sales audience.
• So at least in principle, even a very narrow niche market-oriented offering that could not reach a sufficiently large interested target audience in any physically localized marketplace, might succeed online. After all, online you can at least in principle, tap into the buying potential of many, most or even all of the physically dispersed online members of a marketing demographic who would constitute an interested customer base.
• In cyberspace and for purposes of product design and development, online marketing and sales, the closest approximation of a local market is that target demographic. That understanding drives the Web 2.0 oriented business.

But let’s consider some of the potential complications to this story that can and do arise.

• Buyers always have finite and limited resources that they would have to tap into in making a purchasing decision, with limits to their time and energy that they can devote to a product or service search, and limits to what they can and will spend monetarily when they find what looks to be a good offering.
• When a potential buyer is making purchasing decisions that involve more standard and even mainstreamed products and services, businesses compete for their consumer dollars against businesses and providers who are largely coming from within their own industries and even their own niches within their industry. And consumers might start their search by going to a favored and familiar business to buy from, but they often make their purchasing decisions on the basis of search engine queries where they look for both products and sources simultaneously and by using basically standard search terms.
• But when a product or service offering is truly novel and disruptively new, chances are higher that businesses offering them are competing against businesses that offer different and even very different types of products and services when competing for those consumer dollars. And it is likely that there is no standardized set of search terms that would automatically lead to a selling business for a truly disruptively new offering.
• Disruptively new and novel offerings tend to be much more attractive, at least at first and when still new and disruptive, to pioneer and early stage adaptors who value novelty per se. And they only become attractive purchase options to middle stage and late adaptors later and as those consumers see others buying in. But even there and within the pioneer and early adaptor market cohorts, and even where members of those groups are looking to acquire new and cutting edge per se, they would be looking in many cases more widely than just to your specific types of products or services. So your offerings would be competing for these consumers’ limited resources against new and novel in general, plus standard and generic as these consumers meet their basic and ongoing needs.
• So knowing your true competition becomes more complex as you offer distinctively new and novel, than would be the case for more mainstreamed offerings that would cater more specifically to mainstream, established markets.
• But at the same time, and returning to the points raised and noted at the top of this posting, new and disruptively novel is also quite specifically where blue ocean strategies and larger emerging market opportunities would be found.
• So in the mind of a startup owner, and at the heart of any Web 2.0 and explicitly online-oriented business model that they might deploy, and certainly as that uses more cutting edge and early adaptor-oriented communications and connectivity channels and approaches – you will often find a desire if not an explicitly stated and planned intent to achieve blue ocean success. When is that realistic and how might a new business’ chances be improved for succeeding there? What should be its perhaps more conservative Plan B, and when should breakout success and blue ocean strategy development that would lead to it be the Plan B?

This is the first installment to a new series, and as noted above, I plan on discussing online demographics marketing as part of it. I also plan on discussing the open questions raised in my last bullet point immediately above, and more. Meanwhile, you can find this and other related postings at Startups and Early Stage Businesses. You can also find related material at Business Strategy and Operations and at its continuation page: Business Strategy and Operations – 2.

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