Our previous article gave an overview of the entrepreneurial boom in the dot com era. In the second part of our series, we begin taking a look at the mistakes that led to the failure of many businesses in the dot com age, and how we can learn from them.
“Any business must consist of a fundamental strategy, which must be driven by a long-term vision and long-term goals and objectives. The business must be able to sustain growth and have proper revenue models as well as clear profitability goals just like any business in the old economy.” – The Art and Science of Entrepreneurship, Mr. Inderjit Singh
The basic principle of running a business – that of creating and sustaining growth and profits – was mostly ignored by these so-called entrepreneurs, who saw entrepreneurship as a quick and easy way to make money. Rather than concerning themselves with the most efficient way to run their business and create good profits, these entrepreneurs spent frivolously, throwing away huge sums of money on the most sophisticated technology to solve a business problem without consideration of revenue, profit, and cash flow.
Another mistake they made was that they attempted to model a business along the same lines as what they saw done in other companies, based on published reports or business models that they read on the internet. The problem with this was that very rarely do companies release all their strategies and business models. This information is largely confidential. What gets published merely skims the surface of what goes on in a company. As such, these entrepreneurs who attempted to start a business based on limited, incomplete information on a company’s business model failed.
There are therefore two things that we can take away from this: