In an environment that traditionally measured companies based on their profits and every product had a fixed price based on the cost of production, the article “Free! Why $0.00 is the future of business” makes a strong argument on why this mentality is changing and how companies are forced to deal with it. With the advent of Web 2.0, it has become easier for users and potential customers to gain feedback from other users. A single person can damage the reputation of a company and can have an impact on its bottom line. The valuation of companies like Facebook whose main asset is its consumer base is evidence of this fact. Gaining the customer interaction is become critical and companies will be forced to find a tradeoff between earning profit and building its reputation over the internet. The six business models show how some companies have started along this path. However this is still a nascent concept and has tremendous potential for new entrants.
The one obstacle that prevents companies from developing and maintaining their online reputation is the initial startup costs. The hardware and software costs to setup an presence that will attract customers is high while the return on investment remains low for a few years. However this gap too has been addressed with Cloud computing. Companies can now leverage the advantage gained by major players and enter the online space at a fraction of the costs. While this might seem like an opportunity for companies to outsource the processes that do not add direct value to the customer, it also means that there is a low barrier for new entrants and hence a potential for an emerging company to target an underserved market and cause a disruption.
If you were facilitating today’s discussion, what question would you ask your fellow classmates?
The one question that I would ask my fellow classmates is ‘The current environment is conducive to growth and potential disruptive innovation and there are a lot of new startups that seek to take advantage by targeting a particular market. Why then do most of these startups fail and close within a couple of years. What is it that the successful companies do differently from others?’