Introduction:

Shannon Ryan, Randy Woods and Mike Bradley founded Buystream in February 1999. Buystream is an Ottawa based software firm that specializes in web site decision support applications that generates detailed profiles of the web site visitors. Buystream’s first product was “Architect”, a successful product that sold over 300 copies. However, their second product, “Merchant” was not successful at all, as a matter of fact they hardly sold any copies. It was clearly time to make a decision about the direction of the company; they needed to decide on the viability of the product.

The overall difficulty levels of this case study were simple and straightforward. The problem was easy to understand and as we will find out, the solution is a logical one. The name of the company, personnel, product, industry, date and location are all real and not disguised.

The Story:

The year was 1995, two roommates, Shannon Ryan and Randy Woods saw great opportunity in the immerging Internet and at the time there were very few web development firms. They realized the growth of web development and started Nonlinear Creations in 1995. While building world class web sites, Shannon Ryan and Randy Woods encountered a problem, they wanted to improve the quality of their web sites by custom building the site to each users computer specs such as screen size, Internet connection and CPU speed. The first step was to classify the browsers into classes according to their computer specifications, this way they could customize the web site according to the class of the browser. For example, browsers with slow connections would view a website with less resolution, resulting in a faster download time, and Spanish speaking browsers would see the website in Spanish. There wasn’t software available on the market capable of performing these complex yet essential tasks. This resulted in the design of “Architect”, software that solved many of these problems by finding out the resolution and screen size of the viewer’s computers, the presence of certain plugins, the modem speed and language of preference. Nonlinear Creations designed “Architect” for internal use only. Since web development was on the increase, it was clear that other web developers could benefit significantly from this product. After the performance analysis of Architect, Shannon Ryan and Randy Woods decided to sell the product as a separate software package. Together with Mike Bradley they started Buystream and with the help of KPI ventures, an Ottawa based venture capitalist, by June of 1999 they raised $500,000 US to start the company and put together the executive members and sales team. After perfecting “Architect”, they started selling the product, door-to-door, to other web developing companies. With in a short time span they were able to sell 300 copies.

With the success of Architect they started their second round of capital raising, which resulted in $1.5 Million US to develop their second product “Merchant 1”. Merchant differed from Architect in that it analyzed the behavior of the customers buying patterns, by comparing and building a profile of which customers were buying products and others were not. These profiles where later used by the web developers to analyses and improve the effectiveness of a web site in order to increase the number of sales.

With the presence of “Merchant 1” in the prototype stage, they were able to raise an additional $14.5 Million US from Safeguard Scientific by April 2000 and released “Merchant 1” by May 2000. At the time there were many companies developing click stream software (click count, web traffic and web campaign comparison), which was vastly used by e-Retal vendor. Buystream saw their product as a complement to these existing technologies and not as a competitor. They distributed about 100 trial copies of their product but sold very few. Most of their clients did not see the need to purchase two software for their web site. The clients did not account for two separate costs for what they saw as essentially the same product. They choose the product which contained the essential features rather than the fancy product which did not contain the “dull and boring features that they expected to have…” as Randy put it. In summery, the needs of the retailers were unknown and they were not addressed at the early stages of the software development.

The Problem:

The lack of sales caused the shareholders to start loosing hope; patience and most importantly delayed much-needed funds. Buystream was loosing money and there was little time to fix the problem before the money ran out. The alternatives were clear; change the product so it has the same features as the competition and sell at a lower price; or add some key features that the clients wanted and keep the extra features to have an edge over the competition