Sun, 13 Aug 2000

Why creativity is important in e-Business

By now you must already know what MP3 is. It's a format of audio file that was actually the audio part of the MPEG video file. Hundreds of street hawkers have been selling these VCDs on their makeshift stands in the Glodok area of Jakarta, creating an acute traffic problem on the streets and headlines in the newspapers, so you should be very familiar with the VCDs by now. The beauty of the MP3 format is that the file size is very small, yet it can reproduce high-quality audio. When listening, you can hardly distinguish the sound of an MP3 file or a compact disc. The downside is that it has been very widely used to trade copyrighted music on the Internet.

Now, talking about swapping copyrighted music materials on the Net, you will immediately think of

Regardless of the result of the lawsuit, the recording industry's fight against illegal copying of music seems to remain an uphill battle, and the hill is getting taller higher every day. It was an uphill battle before when CDs first came out and people started copying music from CDs to cassettes on their home stereo systems. It is an even more difficult battle now that the MP3 has gained such a tremendous popularity. As Napster gets ready for the worst-case scenario, other copycat tools for sharing files online emerge on the Internet. Here is a partial list that you can find on ZDNet: Navigator, SpinFrenzy Exchange, Scour Exchange and Gnutella.

In fact, microprocessor giant Intel Corp. has just announced its intention to make available tools that can be used to swap files easily through the Internet. Add to that the influx of new gadgets that let people store hundreds of MP3 music and play them back according to their preset program. Some time next week Compaq is slated to launch its own version of the portable MP3 player. For the recording artists and the recording industry in general, it may no longer be an uphill battle, it may already be a lost one. Tomorrow artists may no longer be able to rely on the sales of their CDs or cassettes for their income. They may have to work hard to improve their showmanship, as people may still be willing to pay for a good live performance but not for a good recording.

What does this tell us? If anything, it should remind us once again that only change is constant. What worked in the past may no longer work today. And, as the pace of life becomes faster and faster thanks to the driving force of digital technology, these changes become even more difficult than ever to follow.

On the Internet, changes are taking place much faster than in many other areas in our life. A business plan that made sense when it was presented to venture capitalists last week may no longer work today, because an alternative product or service has just been announced. In addition, a good business always attracts competition, especially in a business environment such as ours which is characterized by a "me-too" mentality. When competition becomes too hard to handle, the current business model may become meaningless. This leads us to a fundamental question of whether it is really necessary to have business plan at all for an Internet business.

The answer is clear, however. It is always better to have a business plan than no to have one. It was the lack of business plans that prompted many investors to suddenly put the brake on the injection of their money into dot-coms recently, and a lot of them now have evidently learned their lesson very well.

But, as the environment changes, the business model should also be revised accordingly and in a timely manner. Where does the revenue flow come from? Should we change the target customers that we focus on? How can they be served? What new values can be added? Are the assumptions still valid? These are some of the questions that should constantly be asked. Yet these are what a lot of business owners and managers seem to have ignored. The music industry has a very different environment today, but the main stakeholders have always lived on the old assumption that copying music materials is not easy and consumers will simply buy the original CDs or cassettes.

Change is the rule

When Stephen King, the prolific suspense writer, put the first chapter of his book, The Plant, on the Web and announced that he expected that only 75 percent of those who downloaded the material would pay him the meager US$ 1.00 per download, he actually accepted the fact that not all people would pay for copyrighted material. More importantly, his experiment might result in a change in how we look at copyright and how we obtain copyrighted works in the future. The question is, are other writers and publishers ready for the change?

The telecommunications industry is another good example for showing how the old rules have to be modified because a new piece of technology comes around. The Internet brought the e-mail revolution, and suddenly we no longer spend as much time talking on the phone or sending faxes as we did in the past. If the telecom companies still rely solely on revenues from telephone charges, they will be out of business in no time. The main issue becomes how fast they realize the change and take the initiative to revise their business model.

The telecom companies are not the only ones affected by the proliferation of e-mail. The postal services have also seen some of their business being eroded by e-mail. However, the U.S. Postal Service has given us another good example of how a business should respond to changes in their environment. USPS was quick to understand that e-mail was an irreversible trend. USPS became the first in the world to sell stamps through the Internet -- in cooperation with other Internet entrepreneurs. Recently, USPS announced that it planned to give away e-mail accounts -- one for each of the 120 million street addresses in the U.S. The e-mail addresses will be stored in their gigantic database. Come September, those without a PC or Internet access at home will still be able to receive e-mailed messages. USPS will print them out and deliver them by snail mail.

Why did USPS respond to the invasion of the Internet at all? Analysts have calculated that the postal service may lose up to US$ 17 billion per year in revenues, as letters and bills are now sent electronically rather than in printed forms.

The USPS still has to work hard to find other innovative ways to keep itself in business. It may succeed, it may falter. It is still unclear how much revenue it can get from the new service. Yet, what it has done demonstrates a timely understanding of what technology-driven changes mean. It quickly modified its business model accordingly. That shows, too, how in the Internet business creativity, or even maverick thinking, is becoming far more crucial than ever. (Zatni Arbi)