Summary Organising for entrepreneurship - Case studies: questions and answers
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Course
Organising for entrepreneurship (BKULD0O45A)
Institution
Katholieke Universiteit Leuven (KU Leuven)
The lessons consist of lectures that are supported by case studies that you must prepare in advance. These are then discussed in class. In this document you will find the questions and answers for the various case studies. The cases included are B, Candice Cake, Simplex Solutions, Native Deodorants...
Organising for
entrepreneurship
Case study assignments
Questions and answers
KU Leuven
, Case Boo.com
Boo.com was an online shop with very high growth ambition. Therefore, a lot is money is
needed: $185 million. They managed to get this much of money. (This would never be the
case today.) Why? They already built a successful company (= 3rd largest bookstore online
which they sold (exit)), thus the founders were serial entrepreneurs; they’ve been through
the journey + the business model was very promising because they had very high margins:
value capturing at full retail price + customer experience: user experience on the website =
user experience in the shop + internet-based service, so they could sell worldwide.
Their market orientation was worldwide, but after 18 months they were liquidated, and the
company was sold for little money. So, everyone lost! Exit value: $<2.5 million and a burn
rate at $+10 million per month.
Clearly, this is a very negative business case!
Question 1: How is Boo.com’s online strategy different from more conventional retail web
shops?
The business model differed from other Internet start-ups in that its products would be sold
at full retail price rather than at a discount, as stated in the case, but we all know this didn’t
last very long and the target group changed immediately. Another big difference is that
Boo.com uses a large sum for advertising. They do this both before and after the launch of
their website.
Question 2: Why do you think were investors drawn to this approach?
“A retail website is an online platform maintained by a retailer to sell goods and services to a
particular target audience. However, having one set up doesn't automatically mean that
retailers can immediately haul in customers and earn profits. Web design is crucial when
creating an effective retail website.”, this is the definition I find on the internet if I search
what a retail website is. I think investors believed in the features and plans the founders had
for the website, such as seeing each product in three-dimensional photos and an animated
figure giving fashion advice based on a specific activity. We know that J.P. Morgan & Co.
wanted to invest in the company because Boo.com would not undercut traditional retailers
with low prices like many e-retailers do.
Question 3: What problems did Boo.Com encounter?
There are several reasons why Boo.com was declared bankrupt only six months after the
launch of their website, their product.
1) The technology was too complex and ambitious.
Boo.com's biggest problem is the technical problems the company has encountered. People
were unable to access the website, Miss Boo was experienced as very annoying, and the
web content did not always load to name a few.
2) The product was not ready, and they postponed the launch several times,
because they were a lot of bugs
, 3) They tried to launch in 18 countries all at once: offices, languages, taxes and
currencies.
One is the lack of planning and control. As CEO Jim Rose explains, it is almost impossible to
become operational in 18 countries at the same time.
4) Internet access high-speed was needed, but only 2% have this (= complementary
access) and there was no access on a Mac.
5) No financial discipline; completely lacking e.g., flying 1st class: they were
operating like a 50-year-old multinational.
Boo.com's offices were located in the wealthier districts of London and New York and their
employees were also allowed to book the most expensive flights and hotels right away. On
top of that, they did not just use e-mail like any other company, but also spent money on
mail.
Another reason why Boo.com had so many problems is the lack of oversight by the board.
There were only four seats in management for investors, a number that is therefore far too
few as we learnt in class. What is worse is that the investors who were on the board had
little attendance at meetings and had little experience with a company like Boo.com.
What could Boo.com have done differently?
a. Testing the product with users: feedback would have helped to increase a chance of
success e.g., building prototypes (overlap with specifications) and adapting based on
feedback.
b. Manage geographical expansion.
c. Expertise is needed.
This is of course not a guarantee of a successful firm.
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