Cyberspace Needs Cyber Ideas

After years of downsizing, Corporate America is moving away from cost-cutting toward a new paradigm of top-line revenue growth. Trouble is, most big companies are not very good at the innovation thing. Nowhere is this as visible as on the frontier of electronic commerce, where seasoned giants find their tried-and-true methods failing them while innovative startups use new ways to make money on the Net.

Instead of merely duplicating existing business models in a new electronic medium, successful entrepreneurs are taking advantage of the Net's unique characteristic--its interactivity. The hottest stores on the Web don't simply sell products, they create a virtual community of like-minded people who regularly visit the site to talk, hang out, and shop. Being there is as much the point as buying there.

Trailblazing Netrepreneurs also hybridize their tactics. Stores that start out just selling stuff use the popularity of their sites to sell advertising as well. Publishers of content move into sales and try to generate subscription revenue (battling the Net culture's belief that information is free).

Smarter companies are using the Net to increase customer support or promote brand recognition. Federal Express Corp., is taking advantage of the Net's interactivity to let customers track their own packages online. Hardly any companies, however, are generating revenue or profits.

Innovation and adaptation are certainly the survival strategies of the electronic frontier. People have been doing business on the Net for only two years. Indeed, the very concept of profit was rejected by most Netizens until very recently. Big corporations that seek to cultivate new land in this rich environment would do well to leave their old ways behind and learn from the individualists who are prospering at the edge of a new world.

Before it's here, it's on the Bloomberg Terminal.