Profits and the
Internet: Seven Misconception by Subramanian Rangan and Ron Adner aims to
discuss the different misconceptions of companies with the use of internet as a
part of their strategy for profitable growth. The sudden popularity of the
internet gives rise to a more easy and fastest way to promote products or
services to its target customers. According to Rangan and Adner (2001),
“Internet is powerful. It is opening the way to new markets, customers,
products and modes of conducting business.” But Internet Strategy can also cause
damage or profit loss to the companies. According to Porter (2003), in his
article entitled Strategy and the
Internet, “the Internet weakens industries’ profitability, as rivals
compete on price alone. And it no longer provides proprietary advantages, as
virtually all companies now use the Web.”
Back to the seven misconceptions, many companies have failed
to gain profitable growth. There are lots of failed dot-coms. To avoid further
failure or loss in the use of internet, companies
should be aware of the seven misconceptions as emphasized by Rangan and
Adner.
The first misconception is known as the “First-Mover Advantage” Misconception. It is true that everyone have long
perceived that being the first among your competitors could gain more profit
and popularity to target market. As the saying goes, “the early bird gets the
worm.” Though the idea was agreeable that being the first gives more benefits,
still there is no assurance that popularity for the product or service offering
of a company would last that long. It isn’t always about being the first but
rather being able to satisfy the needs and wants of your valued customer
through giving the best move.
The second misconception is known as the “Reach” Misconception. This
misconception revolves around the belief of companies that the more they can deploy existing activities and resources to
pursue new customer segments and extend reach, the more they can grow revenues
and earnings. Reach misconception is more about the segments or target
market that a company aims to attract or to serve. Companies adopted the Internet
to reach more target customers but since customers have different preferences,
companies have overlooked the risk that they are taking that might affect their
activities.
The third misconception is known as the “Customer Solutions” Misconception. Companies
have believed that in order to gain more earnings, they must provide solutions
to their customer’s problem. And also provide an additional product to their
main product. The problem that arise from this wrong belief underlies between providing a solution and maintaining focus. Lack
of focus and expertise or specialization would greatly affect the product or
service offerings of the business. The company should assess which particular
problem of the customer they would like to address and provide a solution.
The fourth misconception is known as the “Internet Sector” Misconception. Many
companies believed that the Internet is
undifferentiated landscape. A company must be able to identify in which
sector they would like to give their focus.
The fifth misconception is known as the Misconception of “Best-of-Breed-Partner
Leverage.” It tackles more about engaging in a partnership in order to gain
competitive advantage. In this misconception, companies have overlooked the
importance of balance and control.
The sixth misconception is known as the “Born Global” Misconception. As stated
by the authors, “all successful global companies will go to the Internet, but
not all Internet companies will be able to go to the Internet.” There will be
limits with the use of the Internet. Not all company can use it as a part of
their strategy especially if it still on its first year of operation. According
to the article, Internet businesses should overcome first the three
hurdles before going global. First, potential customers must know that the
company exist. Second, users must trust the company enough to conduct business
on its site. And lastly, people must want to buy the company’s offering.
The last misconception is known as the “Technology-Is-Strategy” Misconception. The misconception that equates technology
with strategy doesn’t bring competitive advantage on the business. But since we
are now living in a digital age, technology has played an important role in any
businesses. It delivers on two strategy fundamentals: Product advantage and
production advantage. Those two corresponds on the demand and supply side. It
aims to deliver product or service that can be affordable for the customers
without loosing its quality and won’t affect the profitable growth of the
company.
The Internet can be helpful in any businesses if used effectively.
It can give competitive advantage to any businesses only if they are aware of
the misconceptions about profitable growth and the Internet. In this Digital
Age, Internet is a result of technological advances. The article doesn’t only
discuss the effects of Internet misconceptions in established businesses but
also the Internet-related businesses. Different Internet-related businesses
have aroused such as Yahoo! Inc., Ebay, Facebook, etc. Being the first mover
doesn’t always matter in gaining profitable growth, what matter most is being
the best mover by assessing what sector you would like to focus in, what
customer’s problem you would like to give a solution, and how you would deliver
quality products or services without affecting the profitable growth of the
company. In other words, the key factors in gaining profitable growth is
assessing the possible strategy to employ together with the Internet and asking
the right questions.
