STRATEGIES FOR THE DIGITAL ENTREPREUNERSHIP

How to survive in the actual dotcom reallity

Felipe Zurita Quadros Phd. Cadidate, Hugo Cesar Hoeschel Phd., Andre Bortolon Phd.

Law and Intelligence Systems Research Institute, Lauro Linhares St., 728/105, Florianópolis, Santa Catarina, Brazil.

Francisco Pereira da Silva Phd.

Post-Graduate Program in Production Engineering, Federal University of Santa Catarina, Florianópolis, Brazil.

Keywords: Internet, Business Plan, Entrepreneurship, Information Technology.

Abstract: This article approaches the importance of business plans development for Information technology

companies, wrapped up into an extremely fast and dynamic reality of the globalized world transformations.

A recent approach was given about the mistakes made mainly by the companies based on the Internet, well

known as dotcoms, before the crash of NASDAQ in 2000. It was searched to trace a parallel among the

mistakes made by these companies thanks to inefficiency of its business plans, also identifying their flaws,

suggesting a reflection for entrepreneurs and futures managers, who see in the Business Plan development a

way to enlarge its business and attract investors, as weel through electronic means as for conventional

means.

1 INTRODUCTION

Nowadays exists an avid market for new solutions

involving the most different processes through

electronic roads integration. A great search of new

solutions for a range of customers more and more

thirsty for technology. It´s exactly what DeMasi

(2002) describes as a society more and more

dependent of technological attributes, that allow to

have more time to do what really matters

individually for each one. And the Internet has been

showing like the great star of this technological

wave that appeared on these last years. How to

ignore, according to E-Consulting Group, a mass

media that grows faster and faster which will have

till the end of the 2003 year more than 500 million

users, and more than 1,8 trillion dollars traded? It

reveals the whole potential of this market, that is still

far away from reaching its maturity, showing that

there is a wide space to grow.

The Internet is truly a world full of opportunities,

and m

any countries, as well as Brazil, are countries

with a high level of enterpreneurship. But it is worth

to stand out the Brazilian example in this case,

here about 90% of the new companies don't last

more than 5 years in agreement with Salim et al

(2001). According to the author, in United States, in

agreement with a Gartner Group study, only in the

Internet field, new companies have the probability of

75% to crash.

By this time, another reflection about the reason

hat took most of the dotcom enterprises crashes all

over the world is necessary. The reality is that the

Internet is not, by itself, a magic world, where

everything is possible. It is nothing else than a mass

media, as well as the telephone and the television.

Perhaps its power had been lightly overestimated

because of the frenzy that its fast ascension woke up

in the market, after all, according to Vieira (2003),

while the telephone needed 80 years to range more

than 50 million users and the TV took 40, for the

Internet five years was enough to reach this number.

527

Quadros F., Hoeschel H., Bortolon A. and da Silva F. (2004).

STRATEGIES FOR THE DIGITAL ENTREPREUNERSHIP - How to survive in the actual dotcom reallity.

In Proceedings of the Sixth International Conference on Enterprise Information Systems, pages 527-530

DOI: 10.5220/0002656905270530

 SciTePress

2 UNDERSTANDING THE

START-UPS REALITY

Start-ups can be understood as rising companies

based in new projects, generally formed by

entrepreneurs that identify a great opportunity in a

very specific market, and starting from this

opportunity, they decide to create a new company.

Salim et al (2001) confirms this statement when

define that a start-up company can be understood as

a vision of a group of entrepreneurs, which joined to

develop a new project. In this cases, doesn’t t exists

infrastructure, customers' wallet, list of products and

services for example. Everything should start

literally from the beginning, and the main tool to

turn possible the accomplishment of this project is,

without a doubt, its Business Plan, where they

should put the main guidelines and goals of the new

company, turning possible place the project in

practice.

The entrepreneurs should clearly define the

business objective, and whenever is possible, they

should also try to link their personal objectives to the

business goals. According to Bhide (2002), to create

a successfully enterprising strategy is extremely

necessary making entrepreneurs involved make this

reflection. After all, do not exist a correct or

incorrect approach of business, there is not a ready

recipe for it. It is essential for the entrepreneur get

identified with the company business model. Its

personal longing can be placed from the will of

setting up a Start-up to sell it later with a good

profit, until creating a solid model of business

capable to be noticed in the market for many years.

After all, they should clearly know where they want

to go, and what they want to do.

If the new business is based in a new product,

market or process, it will need to be better explained

than if it was already based on products, markets or

processes already established. Inside of the IT

companies reality, as the Internet for example, its

importance is still larger. Kotler (1998) confirms this

situation suggesting that business plans are tending

more and more to be guided for consumer and

competitor markets. This implies in a more realistic

analysis, suggesting a discussion in comparison to

works that were already accomplished in the past.

In many occasions, too much time is spent in the

planning stage, instead of placing the own strategy

drifted in practice, losing a precious time. In these

cases, the planning tends, sometimes, to being seen

as something more important than the own projects.

If that happens, alert Kotler (1999), the entrepreneur

should not have in mind the mistaken idea that the

planning process is something static. He should not

overestimate the longevity of its planning, and

should be ready to change their plans at every

moment. The company success will also depend of

his perception, creativity, the qualifications of the

team, and their capability of assuming and manage

risks. Bhide (2002) confirms this situation when

comment that most of the time, the planning is not a

task that should be adapted for most of Stat-ups.

These companies, in its majority, don't have enough

money to invest in researches and development of

new products, in way to analyze an opportunity of

business completely. And in a lot of times, when the

research have been completely investigated, the

opportunity must not exist anymore. The

entrepreneur should have in mind that a planning

without a posterior action won't work in any

effective result.

3 INVESTMENT SEARCH

If the question is how to attract investors for the

enterprise, is important to give an emphasis to the

study of the investment. It should esteem the amount

of capital revenue that will be necessary for its

execution.

Before the Nasdaq crashes in 2000, a lot of

money was given to people who didn't have any

technical capacity or profile for its business type.

The dotmcom enterpreneurs at this time didn´t gave

attention to the consequences that a great and

unnecessary capitalization could bring for their

projects. Bhide (2002) calls this event as the occult

costs of capitalization.

Venture capitalists tend to do not pay attention

for investments that don´t demand a lot of capital.

Most of times is easier to get 5 million than 1

million dollars for an enterprise. In this case 4

million dollars that would not need to be there

exists, and can be spent. However this incites the

entrepreneur to unnecessarily run risks. In this case,

the entrepreneur needs to define its capitalization

strategy clearly. For Bhide (2002), he should opt for

using the bootstrapping (own financing or of friends

and relatives) or for looking for external investment.

4 BULDING A BUSINESS PLAN

For Degen (1989), by the moment of the Business

Plan development, the entrepreuneur should suggest

some managerial guidelines on what to do, or not, to

obtain the success desired. Independent of the plan

type to be developed the entrepreneur should be

brief and objective, not use technical jargons, base

their sales in the market and not in the production

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capability, avoid empty statements, test the possible

risks, and sell his image as an entrepreuneur.

It´s also necessary know that whole investor

gives a lot of attention for the financial analysis,

wich is based on the sceneries construction. But it

won't be enough for the capitalists. However,

Sahlman (2002) suggests that before the financial

analysis, four key-questions should be answered

about the business:

·Who are involved in the project?

·Which is the opportunity?

·Which is the business market reality?

·Which is the risks?

After answered these questions, the entrepreneur

tends to be more prepared to develop their Business

Plan in a more objective way, being able to be

questioned by the investors about his enterprising

capacity. For Degen (1989), Business Plans can

possess a different structure, depending not only of

the enterprise type in subject, but essentially of its

objective. And this may be reached faster if the

entrepreneur could easily answer these questions.

5 OPPORTUNITIES OF THE

DIGITAL WORLD

The Internet generated a series of deep modifications

in the society ways of interaction. However it is

noticed that the processes didn´t change, only the

used means are just different, and accomplished

through routines based on the Information

technology, generating an enormous economy of

time and money. Drucker (2003) checks this

placement when affirming that the becoming of the

electronic trade and the Internet it is for the

Information revolution, as well as the rail way and

the vapour machines were for the industrial

revolution. In the same way is believed that the

economic phenomenon is not necessarily in the

activity as itself, but in the modifications that it

causes in the whole society.

Several companies already surrendered in front

of the great amount of solutions based on electronic

trade. New examples of administration of

managerial processes through electronic seams to

appear every day, and the cases of success are

constantly growing. A good example can be seen

recently through the joint venture created by GM,

Ford, Daimler-Chrysler, Renault and Nissan. These

assemblers decided to join in an web portal to

integrate all its process of purchase of several inputs,

and saving by this a lot of money. General Motors,

Ford and Daimler Chrysler, for example, were

responsable of 81% of the trades on the site.

Together, with Renault and Nissan, they intend to

buy in 2005 more than US$ 240 billion in tires,

screws and uniforms in the whole world, everything

through the Internet. It´s, at least, a nice number, if

you compare with 2002 year, when the amount

didn´t pass through US$ 45 billion.

6 CONCLUSIONS

Entrepreneurs should know that to manage success

in the Internet or out of that, doesn´t exists magic

formulas. The secret lies in a responsible

management, mainly when refers to the creative

capacity along the time, building a self maintainable

model of business. It is necessary to pay attention

and carefully seen that not everything in the virtual

world tends to be different when compared to the

traditional ways. This problem solution should be

based on the engagement of the involved business

entrepreneurs. Even in the clear definition of the

company focus, its business model, who will wrap

up, and the opportunities and menaces analysis for

example. As well as through any other media, doing

business through Internet is already something

viable and extremely lucrative, nevertheless

enterprises without a minimum of planning will be

not capable to survive in any place.

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