by Dana Blankenhorn
Volume IV, No. XXXI
For the Week of July 31, 2000

This Week's Clue: The Logistical Problem

This Week's Clue: The Logistical Problem

SSP (Shameless Self Promotion)

Political Silly Season

Only Consensus Works

Solving Disintermediation

Clued-in, Clueless

Last week we discussed a problem in the service sector, finding and nurturing early talent. That's a relatively easy problem to solve. The problem of e-logistics is more difficult.

While a service business can scale in simple, planned increments (a person, a server, a T-3 line), that's not the way retailing works. You can sell a few products per day by yourself, at a profit. Once you grow beyond your store's capabilities you need a warehouse, and vast new capabilities with it. Once you outgrow the warehouse the complexity grows exponentially. 

There are two types of companies focused on solving these problems. Commerce Service Providers like Ordertrust . The second are the delivery companies like Federal Express. Of course, these capabilities can be complementary - Ordertrust doesn't deliver, and FexEx isn't a CSP.

FedEx chair Frederick Smith is on record believing there's no substitute for his service, and you'd better hope he's wrong. Amazon.Com and Webvan are among the leaders in trying to prove him wrong. Success is guaranteed for neither of them. Another place worth a visit in this regard is Fingerhut  - it's how the Federated Department Stores hope to replicate what Amazon is doing.

The problem is there's a void in this market. Once you scale past the capabilities of the average CSP you're playing in the big leagues without a bat. You can either raise capital to improve your e-logistics capabilities of you can find yourself a merger partner. In the end, those solutions sound identical, don't they?

While the show's over, you can still get enormous benefits from visiting the Web site of the e-Logistics show , which was held in Brussels, Belgium. (Lovely place, by the way. You should go.) 

The company that deserves the closest questioning in this area, by the way, is undoubtedly Dell. They have solved the problem for themselves, and claim they can do it for you. The problem is that, except for selling their own boxes, it's big hat and no cattle. (Kind of like Mikey's favorite politician .)

You know you're a real business when you have to hire a logistics expert. You're ready for an IPO when that person calls in the consultants. 

SSP (Shameless Self-Promotion)

I'm spending a few weeks guest moderating John Audette's great I-Sales list . If you're not on it already, get on it. It's incredibly useful.

I'm still making myself available for consulting to a limited number of clients, with an eye toward assuring their long-term success. If you're interested give me a shout at 404-373-7634.

Also, please pass this along to friends and urge them to join our list. And don't forget our new e-mail address .

I write daily for ClickZ, and weekly at Andover.News. I write monthly for  NetMarketing, Boardwatch, and  Intellectual Capital. I've been in Advertising Age and the Chicago Tribune . Once every other month I'm in CLEC Magazine. Twice each month I'm at OneChannel.Net  and I've recently joined the staff at ISPWorld. You can always buy my book . Subscription instructions are at the bottom of each issue.

Remember that it's journalism that keeps the Clues coming...

Takes on the News

Political Silly Season

It's not just silly season in the Presidential race. (Here's what I think of that .) It's also the silly season in Congress, where solons take advantage of the fact we have two Houses of Congress.

The game is simple. Pass popular stuff in one house that special interests don't like, then bury it in the other. Or, pass something popular the President won't wear in both houses and let him veto it. In neither case is the idea to make new law. In both cases it's to masquerade as bold when you're in fact quite timid.

An example is the Wilson anti-spam bill, . It passed the House with just one dissenting vote. It is going nowhere in the Senate . This is the best anti-spam effort to date, but when folks would rather have the issue it's an easy thing to fudge.

Personally I'd much rather see this dance than the actual passage of laws that can't be enforced. Laws regarding the Internet are notoriously difficult to enforce. Passing laws against things a substantial portion of Internet users do routinely is a wasted exercise. (The No Electronic Theft Act , which became law in 1998, is a great example of an unenforceable law.) The attempt to enforce the unenforceable leads to random prosecution and lessened respect for all law. This is the kind of irresponsibility that's easy to commit, impossible to correct, and terribly damaging to the Rule of Law the whole Internet depends upon.

Only Consensus Works

The bleatings of Time Warner president Richard Parsons miss the point. It doesn't matter whether a democratic system and democratic courts agree with him that Napster and its ilk are illegal, even Communist. What matters are where the consensus of Internet users stands, and right now that's against him.

Consensus, not democracy, is what rules the Net. Without consensus - a general, willing agreement among all players to the rules - you can't enforce the rules, because enforcement will be random and (thus) counterproductive.

This may be the most important Internet insight government or business can hear, as well as the most frightening. Money knows how to manipulate democratic power, but only real success can create a consensus.

You can take advantage of this in your own business dealings. Seek negotiation instead of litigation. Create win-win agreements, and renegotiate when they become win-lose agreements. Consensus within your business, consensus among your business partners, and consensus among your partners cut the costs of exception-handling to the bare minimum, and that's the sure way to long-term online success.

Here's an example. Does anyone doubt that Paypai, the fake Paypal site, will be brought to ground? Of course it will be, even though it's based in Russia. Now, will criminal penalties really shut down Gnutella , and all its users? Of course it won't. There's a consensus that stealing a Web site is wrong, but no consensus that using Gnutella is wrong. It's the consensus that assures Paypai goes down and Gnutella remains, and there's nothing government can do against consensus except by giving China the tools it needs to shut off dissent.

Solving Disintermediation

Entertainment companies are now facing what PC makers faced two years ago, disintermediation. This occurs when suppliers sell directly to customers and mediators (stores) are taken out of the picture.

What companies like Sony fail to understand is that, for the most part, they're mediators, not suppliers. They've confused their contracts with actual musical talent. If Sony can push retailers into linking customers to Sony Web sites, than musicians can push Sony into linking into their sites, not Sony's.

The key in all cases is to push the actual value you bring to the table. Retailers don't "own" their customers - they must provide a better, more convenient way to choose among what's out there and get it. Their experience gives them an advantage here, which must be matched against the producer's scale.

This is where true personalization comes into play . It's knowledge that is freely offered, and your ability to build solid relationships based on that knowledge, that will make the difference in which channel someone buys from.

Do your customers really like you? You're about to find out.

Clued-in, Clueless

Clued in is The Register of the UK , suddenly the best place in the world to get tech news because the writing is breezy, the tone is skeptical, and the newsgathering is ahead of everyone else.

Clueless is Above.Net . Once the leading Web host, they've fallen second to Exodus, and now they're busy killing their remaining goodwill in a stupid fight to kill anti-spam activism that it doesn't own .

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