(Editor’s note: Ari Jacoby is CEO and co-founder of Solve Media. He submitted this story to VentureBeat.)
Go to any news source these days and you will certainly see stories about the looming technology bubble. Are we approaching a bubble? Are we in one? And more importantly, how do we prevent it from being like the dot-com bust in the late ’90s?
For entrepreneurs looking to outlive the hype of a commoditized market, technology or offering, there are three key areas to focus on:
Innovation – Is your company legitimately improving on a current solution? Expanding an established market? Or is your company simply copying the hottest industry trend? As you’re creating and refining your business strategy, it’s important to ask yourself these questions to ensure that you are actually bringing innovation to market. The companies that survive long-term always create new categories.
Take Amazon.com, for example. Numerous vertical e-commerce sites emerged during the dot-com bubble – many of which did not survive. While it launched as an online bookseller, Amazon rapidly expanded beyond that single niche. Amazon wasn’t interested in limiting itself to one narrow vertical and saw opportunity to innovate by offering a long-tail, almost limitless, supply of products. They’ve since revolutionized shipping, warehousing and web services. Many competitors folded – and today Amazon battles against Wal-Mart – not Borders.
Can companies that aren’t actively trying to forge and market new categories survive in the shadow of competitors that are? Certainly. But, when the bubble pops, those companies will likely hang on for survival while the true innovators are well positioned for growth, success and longevity.
Solve real problems – There are always companies that struggle to explain the need for their product or service. While it might make perfect sense to the company’s founders and backers, if you are not offering a concrete solution to a real problem that is being faced by companies and consumers – you won’t last. It’s a hard truth.
Think simple – Too many companies hype the complexity of their solution as a way of masking its ineffectiveness. Most products that offer a solution to a real problem derive that solution from simplicity.
It is easy for pundits to look at current valuations of tech companies and write another piece opining about a new digital bubble. It is tougher to be intellectually honest and examine the underlying reasons why one company failed and another succeeded.
Entrepreneurial optimism bias is dangerous and unforgiving, so here’s an easy litmus test: Would your customers truly miss your offering if it ceased to exist tomorrow?
If the answer is “no,” you’re simply building a commodity and contributing to the inevitability of the next bubble.