Kozmo

One of the most famous dot com failures was a company called Kozmo. Kozmo entered the market in major cities with dense populations. If you wanted a small purchase, say a pack of Jolly Ranchers, you could get on the internet and enter your order at Kozmo.com. Kozmo would deliver your purchase by bike messenger within an hour, at a slightly marked up rate from what the item(s) would normally cost.

The company raised $250 million, entered 18 locations, and had over 1000 employees. The company thought that it could keep costs low by delivering only in areas with a high concentration of internet users. Though it seemed like a smart idea in theory, the company lost money on most of the sales it made, due to expensive city warehouses, inability to stock a large variety of items at wholesale rates, and the high cost of delivering small items in a short time window. The company went bankrupt in 2001.

The company suffered from a problem that most dot com companies suffered from – the internet was simply not a game changer for this type of business. There was a reason no one had entered the business earlier, using phones as the point of order instead of the internet. It was an expensive delivery business, and the business model was broken.

I did a call with the HR manager of a huge industrial supplies company in Chicago about using social media to recruit candidates. We talked for 30 minutes, and my conclusion at the end of the call was that social media was not a game changer for his company.

The company does not brand itself for strategic reasons, and its main method of recruiting is finding passive job candidates through data mining and calling them to see if they are interested in interviewing. The problem is that the company currently looks for smart people based on a resume, and by the time they find a good candidate it might be three months after the person applied.

I told him, “Social media is perfect for data mining, and with blogs and LinkedIn, the data is much more dynamic than a resume. The most you might want to do is add another step in your process – email or Twitter candidates as a first point of contact rather than call to qualify them and save time.”

It begs the question – is the internet and social media really a game changer for the company you want to start? The revolution you want to lead at work? It’s worth thinking it through:

Action Item #1: Identify the most important aspects of the business you want to get into.

When I wanted to get into the publishing business, I thought about what publishers truly do for first-time authors. I came up with three major things: give authors credibility, help with product design/marketing, and handle distribution. What matters for the industry you are trying to enter?

Action Item #2: Figure out how people typically do it.

Credibility in the book industry is not something a small press gains overnight, so instead I read everything I could about the marketing and distribution processes for books. This is an essential step for any business you start – how are people already doing it? The tried and true is that way for a reason – you can’t revolutionize the industry without understanding it first.

Action Item #3: Identify the real game changers.

The internet in itself is not a game changer. Social media is not a game changer for every industry. The question I had to ask myself was whether the internet and social media were game changers in the book industry.

For the book industry, the game changers are in the marketing and distribution of the book. Marketing can be done online and through direct mailings rather than through expensive traditional advertising, and online distribution is much easier to break into than bookstores. Furthermore, some credibility can be gained through consumers who purchase products online and care more about customer reviews than a brand name.

When you are looking at game changers, remember that it’s very difficult to change behavior. If you have to sell someone on the switch in behavior first – before they’ll even try your product – you have an uphill battle, not a game changer.

What are your thoughts on game changers? Share your action items on your blog or in the comments section. If you have additional thoughts about entrepreneurship, send me the link and I’ll share it on my blog.