Summary: Meg Witman from eBay relates a story about her company’s evolution. Who was in control? (Hint: not Meg)
I was recently watching The Business of Innovation on CNBC. One of the guests was Meg Witman from eBay. She related a story that in 1999 people were selling die cast cars on eBay. Then, a manager at the company came to Meg and said that people were selling real cars on eBay. At first she didn’t believe it but it was true, someone was selling a Ferrari on eBay. At the time eBay wasn’t set up for transactions like this. They reacted to the customer use and, in less than 5 years, there were more dollars transacted on eBay Motors than in any other category.
Even though this sounds reactive, I don’t think it is. I find it proactive. They didn’t have to respond. They could have smiled, had a quick giggle about it and turned their attention back to their core business. Perhaps it was just an anomaly. Surely, this won’t turn into anything big. Had they taken that tact, another company surely would have tried to own that segment by serving up an optimized solution. But that isn’t what happened. EBay modified their business plan and captured the burgeoning market for online used vehicles.
How do businesses evolve? Most of the time they evolve in a reactive manner. Perhaps the business climate has changed. Maybe a new competitor has come in or technology has moved beyond a company’s offerings. In other situations, companies sometimes maneuver themselves into a tough situation like a no-margin business or customer alienation. But reactive evolution is no way to live – it’s just keeping your head above water.
The better place to be is in proactive evolution. The eBay story is one example. However, it is not the most enlightened. They gave their customers what they needed but none too soon. A stronger place to be is to give customers what they want before they even know that they want it. This is, of course, fraught with risk. What if the need never develops? What if the customers don’t “get it”? What if you’re just plain wrong? This is where market validation comes in. Betting the farm on an unproven direction is just plain foolhardy. The real artistry is in knowing when you have enough market validation with the least amount of cost.