Why businesses fail online

Many traditional businesses fail to generate revenue and profits - in fact, they often invest substantial amounts for very little return.

This makes company leaders reluctant to risk further investment. But why does this happen so often? Who's to blame? And, how can we change things?

All of us know of successful bricks-and-mortar companies that have thrown money at Web development, blogs, social marketing campaigns, eCommerce stores and failed to deliver any ROI (Return On Investment).

It is commonplace to find CEOs, directors, and executives in small, medium and large organizations who have been stung by "the Internet". Some have spent hundreds of thousands of dollars with little more than a few dollars in return.

This article will discuss some of the main reasons (to my mind) why competent and successful businesses fail so often, and so miserably online.

The recipe for online failure

I regularly come into contact with owners or C level execs who have completely sworn off the Internet as a medium for business. One company I came across had spent, over two years and several hundred thousands of dollars for a website that wasn't, in any sense, useful.

This type of story is commonplace, and is indicative of two important points:

  1. Companies are (initially) prepared to spend money online
  2. Companies are ill equipped to plan and execute online

These two points are a perfect recipe for failure because they lead to large initial investments that are directionless, ineffective, and ultimately, wasted.

This leads to dissatisfaction and disillusionment about the Internet, leading to a loss of competitiveness in the online arena going forward.

Top reasons businesses fail online

The Internet is such a powerful medium to drive business, yet very few companies get it right. Here's why...

1. No requirements analysis

Almost every online business "disaster" I have encountered has originated as a result of a failure to properly analyze the company's targets and goals. This is because people tend to operate like this:

  1. The CEO (or CTO, or whoever) gets it in their head that a website or Internet marketing campaign is important
  2. Instructions are passed on to employees to "make a website" or "start a social marketing campaign"
  3. Employees act on those instructions - either implementing in-house, or outsourcing

The problem is that, right from the start, no-one has actually analyzed what the company needs from their website or online marketing campaign.

Instead, everyone works towards providing the CEO with what (s)he wants - because that's how the organization operates traditionally.

While the CEO is often very competent at running their business, they are often ill-equipped to know or understand what is required to successfully translate that into the online medium.

2. Lack of expertise

Web development. eCommerce. Blogging. SEO. Internet marketing. None of these things are generally the core focus of a traditional company. This leaves them vulnerable to poor decision making.

Businesses don't take time to acknowledge the fact they do not have the knowledge, experience and skills to work effectively online.

Simply finding the right person to speak to about online business is a skill in itself.

Far too little emphasis is placed on finding the right people before going ahead with implementation.

3. Unrealistic expectations

People seem to have an Internet sized blind spot when it comes to anticipating the ROI (Return on Investment) of websites, online campaigns and content.

For some reason, the Internet seems to cause otherwise astute leaders to throw the following maxims out the window:

  • There's no such thing as a free lunch
  • Assets don't tend to pay for themselves overnight
  • You get out what you put in
  • There's no point in doing things half way

It's probably a result of my earlier point (2. lack of expertise) that people tend to forget that, as with any aspect of business, attaining grow online takes hard work, skill, dedication, and investment.

The online world may have a different set of challenges, but it still abides by the core principles of business.

The dangers of neglecting the Internet

With so many companies acting on the principal of "once bitten; twice shy" there is a danger that they become less competitive with time.

Considering that:

  • the Internet is undergoing explosive growth
  • mobile access and mobile eCommerce are growing rapidly
  • almost everyone in developed nations use search to find the information they need

its not prudent to ignore the Internet.

Simply put:

If a company decides to neglect the Internet, it will ultimately be out-competed by others that do succeed online.

How can you succeed online?

The answer is to basically do the opposite of the 3 reasons for failure listed earlier:

  1. Invest time and effort into analyzing requirements and goals before moving on to implementation
  2. Understand where your company lacks skills and find the right people to provide expertise and advice before moving on to implementation
  3. Understand the online market. Have realistic targets and goals. Understand the likely ROI before moving on to implementation

I'm giving a talk on Internet marketing for businesses to SAICA (South African Institute of Chartered Accountants) tomorrow and I'll be telling them much the same thing as I've told you.

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