[EAS]Online Business Prototypes

pjk pjk at design.eng.yale.edu
Wed May 9 14:28:57 EDT 2001

Subject:   Online Business Prototypes

(from INNOVATION, 9 May 2001)

In the beginning, the business model for Internet-based ventures
was fairly  simple: Have an idea, convince investors to throw
buckets of money at it,  and hope consumers come running. Now, with
vast fortunes vaporized in  crash-and-burn e-business ventures, a
new idea is taking hold. Instead of a  full-fledged launch, some
entrepreneurs are using prototyping to test out  an idea's
marketability. In late 1998, entrepreneur Scott Painter  approached
Idealab's Bill Gross with an idea for a company called 
CarsDirect.com -- a scheme to sell cars over the Internet. The big
question  was that nobody knew if anybody would buy a car online.
Gross challenged  Painter to sell four cars over the Web, keeping
all costs to $100,000. A  bare-bones Web site was hastily
assembled, and when orders began coming in,  Painter bought the
cars retail and resold them -- at a loss. But the  experiment was a
success: CarsDirect.com was a winning idea. Unlike the  earlier "if
we build it they will come" business model in which assumptions 
about consumer tastes and habits were treated as facts, prototyping
is  based on the knowledge that most business ideas are bound for
failure, so  it makes sense to test the waters before diving in
headfirst. "In the  Internet world," says one entrepreneur, "the
beautiful thing is you can do  your market research with real
customers." ("Will Your Web Business Work?  Take it for a Test
Drive," eCompany May 2001)


For the person who buys online, as I do extensively, such business
prototypes are another thing to be cautious about. I generally
confine my online transactions to well established businesses,
either in the sense of a long online history, or a long-time "brick
 & mortar" business with a more recent online presence. Online
businesses unknown to me I check out in ways such as a
- reverse telephone number lookup <http://www.anywho.com/telq.html>
A business that has an unlisted number or is piggybacked on quite
another business does not invite my confidence;
- business literature search.

It is still a matter of judgment after that, but I have found that
a little checking does a lot to improve the odds. I have had to
resort to credit-card "charge-backs" in less than 2% of my online


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