Why the pursuit of "rapid and big"?

The high survival rate of the Internet as a whole and the low survival rate of companies adopting a "rapid and big" strategy means that for most companies, "rapid growth" is not appropriate. Once a good idea has been touted as a big idea, the company's pursuit of rapid growth may attract failure.

⊙david Kirsch Brent Goldfarb

In the eyes of the public, the ambitious Yahoo! , EBay and Amazon have almost defined the success of the Internet era, and have become a representative of the entrepreneurial spirit of the Internet world. Their "rapid expansion" (GBF) strategy ——— to abandon all the commercial principles of the past in order to operate in a way that does not cost, regardless of income, and seeks to occupy a larger market faster than its rivals, and was once the typical development strategy of the dotcom bubble of the middle of the 90 to 2000.

The flip side of the coin, however, is that most companies adopting this strategy have failed to achieve Yahoo! , EBay, Amazon's success. The huge economic losses caused by their failure have made it seem that the consensus ——— the Internet has been annihilated.

Our research suggests that this view may be too one-sided. By studying the survival rate of internet companies in the past 1998-2002 years, the results show that internet companies have a 5-year survival rate of 48%, a bit inferior to other industries. This high survival rate means that many of the business ideas that appear in the internet age are actually good ideas. What the public is aware of is a "big, fast" company that is largely covered by the media, but it is only a small part of the internet iceberg that is exposed to the water. In 1994-2001 years, roughly 50,000 companies in the United States have been given venture capital to exploit the Internet's business, according to speculation. Of these companies, about 15% per cent have adopted a GBF growth model, with fewer than 500 companies (<1%) eventually listing.

when "Good idea" became "Big Idea "

In that case, why is there so many companies pursuing rapid growth? In fact, in many business books and even academic writings, GBF has been regarded as a better strategic choice in the commercialization of the Internet. It is based on the assumption that in the internet market, the first advantage is crucial. The media on the first-mover advantages of the report, it further strengthens the enterprise decision-makers "forerunner has strategic advantage" belief. As a result, companies that adopt GBF strategies are always expanding rapidly and investing heavily in order to get consumers to intercept competitors.

Of course, rapid growth also takes time. As a result, it was not initially possible to determine whether a company adopting a GBF strategy could succeed. It is this uncertainty that makes network stocks have a higher market value, and capital markets are thus lavish. This, in turn, makes it possible for GBF companies to grow more by claiming to be bigger to make more money, before making a profit.

For example, the development of Internet in America in the 90 's. By 1998, many emerging e-commerce companies had raised risky funds to support their rapid growth. That Christmas, the internet industry reached even more than 2.3 billion dollars in expected income. People judge the success of a company not by profit, but by the amount and total income of consumers. Companies also decide whether or not to offer online purchases on demand, regardless of whether they can make a profit.

Subsequently, many GBF companies have run into difficulties: excessive access to the site paralysis, orders can not arrive on time, and so on. At the same time, after years of massive investment, investors need to see the final results. "We are interested in the competition among industry leaders," said M.halley, a venture capitalist, in a November 1999 Business Week. The first is great, the second is good, but the third is in trouble. ”

According to industry reports, the U.S. E-commerce revenue in the 1999 Christmas season is two or three times times higher than in 1998. At this point, however, people are no longer as tolerant as they used to be, with 1 billion of dollars being staked out in pursuit of a GBF strategy, a lack of scale that could no longer be used to explain the huge deficits in the Internet's leading companies ' statements.

In this frenzy of the Internet, only a handful of companies have successfully implemented the GBF strategy, which is one of the Amazon sites. The reason for Amazon's success is that it takes various forms, uses public media to build up the reputation of emerging e-commerce, and is patient enough to make a quick and big strategy. By the beginning of 2006, Amazon had set up branches in 10 countries, including India and China, employing more than 12,000 employees and more than 30 online stores selling everything from child creams to lubricants. Its annual income is close to $10 billion trillion, and continues to maintain an astonishing high growth.

"Behind the scenes" under the Internet Iceberg

As research shows, outside the ambitious GBF companies, a large number of companies are hidden beneath the surface of the internet iceberg. In terms of survival, they are more successful, but are overshadowed by a handful of dazzling gbf companies. "Wrestlinggear.com" is one of them.

In September 1998, Jeff Pape founded the "Wrestlinggear.com" in the Chicago suburbs. His strategy is straightforward: through the internet, thousands of wrestlers are provided with the equipment they want. He buys and resell from other distributors, gradually expands the scale of operations, buys more goods, shortens the turnaround cycle, and does not recklessly increase sales, but ensures that every business brings positive cash flow. Thus Wrestlinggear's sales are growing at a rate of twice times a year.

Like Amazon, "wrestlinggear.com" is a typical Internet story that is happening: Wrestlinggear represents the traditional "behind-the-scenes hero" of discovering and exploiting opportunities, and it is this "ordinary" that makes it more remarkable. Amazon is one of the few companies that has been successful in the pursuit of "rapid growth", while more losers are still making the mistake of pursuing a bigger and stronger process and exaggerating good ideas into big ideas. Although they have captured the imagination of the public like the fast-moving antelope, they have at last paid the price of billions of of dollars to investors. If they are not so compelling, they may, like Wrestlinggear, embark on a more traditional path of growth, surviving and even thriving.

(Presented by Smith School of Business, University of Maryland, assistant professor at the Smith School of Business, University of Maryland)