The Emergence of Online Ventures

One of the most significant forms of new companies to emerge in recent years is the online venture. Fueled by the growth of the Internet, online ventures are those companies that conduct their business primarily through online media, such as the World Wide Web.1 Initially, the bulk of sites available on the Web were used for marketing or product information purposes ("mar/comm" sites). However, this medium is now being used for broader, more strategic business applications such as e-commerce, customer service/support, and inventory management.

As various industries converge in this space, each brings a distinct perspective on the challenges, opportunities, applications, and procedures for developing successful businesses using this medium. The online medium requires companies to function differently and improve reaction time, service quality, and communication depth in order to serve customers who are more self-reliant, demanding, and focused. Also, the technologies themselves create limitations on the customer experience and often dictate certain approaches and solutions that may fall outside of a traditional company's expertise or understanding.

The operating efficiencies made possible by the Web, combined with its ease of use and global reach have made it possible for start-up companies to have an immediate impact in the marketplace and pose a credible competitive threat to well-established, traditional offline companies. A classic example of this phenomenon is Amazon.com, whose initial emergence as an online retailer of books revolutionized this category and forced established offline companies such as Barnes & Noble and Borders to take notice and re-evaluate their business strategies.

However, online ventures are not limited to start-up companies. As existing, traditional (offline) businesses seek ways of lowering costs, improving service, and expanding into new markets, they too are migrating some functions online or developing new divisions to serve the online channel. Some of these companies make the decision to completely abandon their "bricks and mortar" stores in favor of conducting business strictly online (e.g., Egghead Software), while others develop their online business as a complement to their offline operations (e.g., The Gap).

As more business functions and companies migrate to the Internet, the changes within an existing business will be substantial. Consider what it takes to open an online store, for example. Not only are the requirements for success dependent on traditional business functions (creating catalogs, updating information, enabling transactions, processing credit cards, coordinating inventory and shipping, fulfilling orders, etc.), but also the experience itself needs to be newly minted. The act of walking into a store and purchasing a product is nothing like surfing a website and making a purchase. Merchandising itself must be reinvented. Added to this, customer service must now respond to potential buyers through a new medium (as well as the traditional ones) and these customers will have different expectations of a company based on their use of the Internet and familiarity with it. Lastly, various parts of a company will need to function more closely as a result and may need to be organized in alternate ways in order to serve customers better.

1. The World Wide Web is merely one type of online medium and only a portion of the Internet itself. Online services, interactive television, and future forms of online media may not use the Internet as we know it.

Next: Defining the Online Venture