Tuesday, January 25, 2011

Breaking the Habit

There are two styles of consumer Internet ventures emerging in Israel: product perfectionists and money chasers. Despite our tendency to celebrate and learn from both of them, one of these has a darker side we should be cautious of.

Product perfectionists are founded upon a belief that a unique and differentiated product will create an avid and loyal customer base, which in turn will help build their brand and business. These companies understand that a great customer experience is paramount, and the result of a corporate strategy and culture that focuses on the customer, not merely the result of good product definition or an unbeatable price. I place a high premium on product perfectionist companies that can deliver a compelling customer experience, though it is far from sufficient to ensure success.

In contrast, money chasers are founded upon a belief that an effective monetization and distribution model can essentially define the product offering. These companies excel at driving traffic, accumulating users and raking in cash, but often at the expense of the end consumer (including the customers’ customer). While many entrepreneurs and investors are attracted to the money chasing model, there is a disturbing side to many of these businesses.