Category Archives: New ideas

WebVan and Learning from Failure

I have begun discussing learning from failure in a previous post this spring – and now I have successfully taught a class during my Introduction to Entrepreneurship course on WebVan, a case of as an impressive failure as they get from the Internet bubble times of the early 2000s.

Similar to Prodigy I discussed in the past, WebVan also erred on the side of too much too early, although its game was over much quicker. Offering users the possibility to do all their grocery shopping online in 1999 was a precursor new business model in the retail industry then, as it still remains so to this day. But WebVan founders did not stop there – they wanted not only to be an online Wal-Mart, but also to combine the capabilities of a Fed-Ex and an Amazon all in one as well. The company managed to convince several investors about its idea feasibility and assembled over $800M in investment from both venture capital and an early IPO in 1999. However, the good fortunes and investor credibility did not last long – by July 2001 the company was bankrupt and had to fire all of its 2 000 employees.

As discussed when teaching this case, several lessons can be learnt from both WebVan’s ambition and the execution thereof. The below video of their distribution center in California gives a more tangible idea about both:

Today, 15 years later, it is still difficult to encounter perfect grocery shopping solutions online, although several companies are experimenting with new business models in this space. One successful model has been pioneered in Sweden, where customers are not only offered their grocery shopping, they receive a full bag of ingredients with cooking instructions for their working week. This model has been penetrating Europe through different shapes and forms, with HelloFresh in the UK or QueRico experimenting in Spain.  On much lower scale and with much fewer fixed costs, maybe these models will be more successful where WebVan’s Napoleonian vision failed before?

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Where New Ideas Come From? Gutenberg and the Printing Press

While working on my thesis, one idea that I am playing with lately is understanding innovation as the combination of old things, or as Weick put it some time ago, “putting old things in new combinations and new things in old combinations” (1979: 252).  As children, we learn about the world by imitating others.  This imitation streak stays with us in the adult life. For instance, when travelling from one country to another, we adapt to new surroundings by imitating what the locals do.  From individual level of analysis, the same phenomenon of imitation can be transferred to the firm level by the force of analogy.  Many innovations in the business world originate as improved imitations, or borrowings, from other industries, smartly transformed and well-fitted to new environments.

Gutenberg, the inventor of the printing press, and an entrepreneur in his own right, provides a good example of this recombination, or bricolage, process.  Steven Johnson describes him thus in his “Where Good Ideas Come From” (2010: 152):

“Sometime around the year 1440, a young Rhineland entrepreneur began tinkering with the design of the wine press.  He was fresh from a disastrous business venture manufacturing small mirrors with supposedly magical healing powers, which he intended to sell to religious pilgrims (The scheme got derailed, in part by bubonic plague, which dramatically curtailed the number of pilgrims).  The failure of the trinket business proved fortuitous, however, as it sent the entrepreneur down a much more ambitious path.  He had immersed himself in the technology of Rhineland vintners, but Johannes Gutenberg was not interested in wine.  He was interested in words.

As many scholars have noted, Gutenberg’s printing press was a classic combinatorial innovation, more bricolage than break-through.  Each of the key elements that made it such a transformative machine–the movable type, the ink, the paper, and the press itself–had been developed separately well before Gutenberg printed his first Bible.  Movable type, for instance, had been independently conceived by a Chinese blacksmith named Pi Sheng four centuries before.  But the Chinese failed to adapt the technology for the mass production of texts, in large part because they imprinted the letterforms on the page by hand rubbing, which made the process only slightly more efficient than your average medieval scribe.  Thanks to his training as a goldsmith, Gutenberg made some brilliant modifications to the metallurgy behind the movable type system, but without the press itself, his meticulous lead fonts would have been useless for creating mass-produced Bibles.

It is clear that Gutenberg had no formal experience pressing grapes.  His radical breakthrough relied, instead, on the ubiquity of the screw press in Rhineland wine-making culture, and on his ability to reach out beyond his specific field of expertise and concoct new uses for an older technology.  He took a machine designed to get people drunk and turned it into an engine for mass communication.”