A former colleague of mine phoned me to ask me about eBay: “what do you think? The greatest thing since sliced bread? Or what?”
That got me reflecting on innovation, and the crucial difference between ‘obvious opportunities’ and ‘obvious difficulties’.
In any era of rapid technological advances, people naturally focus on the obvious opportunities. When the internal combustion engine appeared on the scene, for example, lots of people got very excited by the idea of replacing horses by engines – and hundreds of companies were set up to do just this.
What most of them avoided, however, was an obvious difficulty – of making horseless carriages that were affordable to the ordinary working man. (At the time, the cheapest motor car sold for around £300,000 by modern standards).
This obvious difficulty of affordability was – well – damned difficult to solve. So not many people wanted to tackle it. And not many investors wanted to fund their attempts to tackle it.
Yet the people who made the real breakthroughs – people like Henry Ford and Alfred Sloan – were the ones who tackled, and overcame, the obvious difficulties. And those who focused on the obvious opportunities faded into obscurity.
As far as I can see, eBay is a business built on exploiting an obvious opportunity: the opportunity offered by the Internet to lower transaction and interactions costs and thereby open up opportunities for smaller sellers to reach larger audiences. That’s great, so far as it goes. Like replacing the horse with an engine.
But the obvious difficulty of the Internet age is not how to reduce transaction costs. Anybody can do that (and a lot of other sites are now doing it much better than eBay). The obvious difficulty is how to help people find and use the information that’s really relevant and useful to them. That’s a really tough one. The closer you look at it, the harder it seems to get.
The answer to this obvious difficulty lies at the heart of the next big commercial breakthrough: person-centric commerce. And eBay has studiously avoided it.
To this degree, eBay as a business model is already passed its sell-by date. Sure, it’s got plenty of momentum because it’s very famous and top of mind for many users. But having addressed the obvious opportunity of reduced transaction costs, it hasn’t got anywhere to go. That’s why its flailing around, adding all sorts of activities on to its ‘core’ business: PayPal, Skype, internet search/advertising services, price comparison services and the like. eBay CEO Meg Whitman talks up the need for businesses to ‘focus’. But in reality she is doing the exact opposite.
Meanwhile, a few brave souls beaver away at the modern age’s obvious difficulty: how to turn a tidal wave of information that threatens to overwhelm us into the rich, finely-grained, empowering resource it should be?
I’m confident that we’re beginning to crack this one. If we succeed, eBay will become an evolutionary irrelevance.