Online Innovation Takes Over Startup Culture

The dotcom boom never really went away. From about the mid-nineties through 2001, the landscape was littered with crazy speculation, business plans scratched out on cocktail napkins, and venture capital being pushed to where it never should have been.

The bursting of the dotcom bubble didn’t put an end to dotcoms. It put an end to the speculation, but it didn’t put an end to born-in-the-cloud companies, and today they are stronger than ever, and their innovation continues unabated. We are even seeing something of a Renaissance – known to some as the new “dotcloud boom,” or the emergence of a new class of born-in-the-cloud companies which tend to use lean and agile methods of development and operations, have low initial capital requirements, and are built to accommodate consumers’ growing acceptance and demand for online, automated, and self-service solutions. We speak of the dotcom boom as something in the past – but it made permanent changes to the business and startup culture, and lasting innovations in how we define business operations and relationships.

In the retail market for example, retail analysts now realize that the online channel needs to be equal to brick-and-mortar, and not an afterthought – a mistake that has led to what some today refer to as the “retail apocalypse.” In the startup world, “born-in-the-cloud” companies dominate the scene, buoyed by the realization that cloud-based services are inherently more secure and preferred by most business and consumer customers – and that a physical location is no longer necessary. Even everyday services, from reading the newspaper to filing your taxes, have gradually taken on an online-first focus.

In the back-end mechanics and operational processes, global supply chains are a reality of even smaller companies, who take advantage of cloud-based supply chain tools in a model that transforms the traditional insular focus of business, with each company acting only in its own best interests, to something new. That is a direct outgrowth of the dotcom revolution of the nineties. Rather than seeing individual companies today, we see ecosystems of interrelated companies on a global scale.

Indeed, a large, multi-million dollar global company may well be run out of a tiny office with three or four full-time staff, a larger group of gig economy providers, and a supply chain that includes providers throughout Europe and Asia.

Driving these innovations – and perhaps the next wave of dotcloud innovation – is simply consumers and businesses accepting the reality that it’s no longer necessary to fly across country to meet with clients and suppliers, sit at a desk in an office, or even to have an office at all. And, it allows those companies to source the best provider for each situation, regardless of physical location.

Two noteworthy examples are the travel industry and tax filing. Both have undergone significant changes in business model and go-to-market strategies, and illustrate some of the most dramatic shifts towards online innovation. The travel industry was once dominated by individual travel agents sitting in offices in strip malls across the country. Consumers wanting to take a trip went to an office with travel posters on the wall, picked up color brochures, and relied on a skilled individual with exclusive access to a mysterious database which allowed those agents to access the best rates. Today that is all but obsolete, and online, self-service booking portals make that exclusive information available to everyone. Some booking portals like HotelsCombined take it a step further, acting as a “portal of portals” which compares the rates of multiple travel websites.

Similarly, tax filing was, at one time, the stuff of nightmares, late nights with adding machines, or at best, bringing a shoebox full of receipts to a tax preparer. Those preparers still exist, but like travel agents, are rapidly becoming obsolete, as online portals like e-file.com offer an easier interface and the same sort of question-and-answer interview that used to be conducted by an overworked staffer over a desk.

The perceived bursting of the dotcom bubble, besides being driven by unrealistic speculation, was also the result of two realities of the time, which have since been corrected: The technology and infrastructure was, during the nineties, not yet mature enough to match the ambitions of dotcom entrepreneurs; and the public’s perception of online companies as being inflexible caused them to seek out and prefer in-person options.

On the latter point, that perception has been completely turned around, with a younger demographic who is more accustomed to buying, selling, and virtually living in their smartphones, and now often prefers automated, self-service, and online-based services. For years, retail was stagnant. Online shopping first made a foray into the consumer realm in the nineties, but didn’t quite catch on due to inflexible interfaces, slow connection speeds and resistance to change. It took a generation for it to happen, but now the retail stagnation is becoming all too real as some of the biggest retailers in the world, who refused to change with the times, are failing. K-Mart and Sears will become extinct, and Amazon, along with thousands of other smaller online retailers, will take their place.

The greatest benefit to this phenomenon is that we are likely to see at least a minor “boom” in startups the coming few years, regardless of (or in spite of) macroeconomic realities. A startup that in the nineties would have required ten million dollars to launch, can today get off the ground with a few thousand dollars, some gig workers, and a handful of cloud-based services.

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Dan Blacharski is a thought leader, advisor, industry observer and author of the book Dotcloud Boom. He has been widely published on subjects relating to customer-facing technology, fintech, cloud computing and crowdsourcing, and he is editor of NewsOrg.Org. Follow @Dan_Blacharski