By now most people know the story of eBay.  Originally, the founders were looking at the internet as a place to trade PEZ dispensers.  But over the next 2 decades, eBay became the world's biggest garage sale.  If you have something to sell, you can list it on eBay to a world of potential buyers.  While there was a price to listing, it was small and eBay offered a nation of buyers compared to Craig's list which typically only got local buyers amidst a rash of junk listings created by their willingness to allow free listings of on-line items.

Given the current economy, you would expect eBay to be doing gangbusters.  When would be a better time to unload the stuff you don't need than now?  But unfortunately, eBay revenue is down 6% versus last year, and gross merchandise volume is down 12% versus year ago.  Even though eBay has expanded by adding Shopping.com, Stubhub and other sites, total revenue for the Merchandise unit is down 16% versus last year.  (read eBay results here)

eBay demonstrates the risk of being Locked-in to a single business model (and single Success Formula).  For about 2 decades internet growth has pulled along growing revenues at eBay.  Without doing anything differently, eBay grew because more and more people "discovered" the web.  As unhappy customers escalated in alarming rates, and lawsuits against unsrupulous eBay suppliers mounted, eBay blithely kept close to its "core," doing more of the same and only adding businesses that helped the "core" internet business grow – such as the acquisition of Paypal to handle small internet purchase transactions.  Many people thought eBay would grow forever – as the internet grew.

But now we can see that hiccups happen in all technology markets.  Customers are not only using the web, they are getting more savvy.  Fewer are willing to buy from unknown suppliers that may not follow through with promised products – and no back-up from eBay.  Fewer folks are willing to pay for listings as skeptical buyers are less trusting of those listings – and thus they turn to the free Craig's list.  Just being in the right technology market is not enough to keep a business growing.

Lock-in has served eBay well for 20 years.  But "times are changing."  Now customers are more sophisticated, and looking for more confidence and assurances.  They don't trust the eBay model implicitly, like they once did, knowledgable about increasing fraud and lousy customer service from sales people that don't care.  The simple eBay Success Formula isn't producing the results it once did. 

These latest results should worry everyone who depends on eBay as a supplier, employee or investor.  If things don't turn around in the next quarter, eBay will officially enter a growth stall. Even though eBay has been a huge success, like many internet companies eBay could rapidly see an equally remarkable fall.  Customers and suppliers can leave eBay just as fast as they left Pets.com.

Most companies expect their Success Formulas to help them grow indefinitely.  But we know that highly dynamic markets means this is extremely unlikely.  Markets shift – and right now the internet market is shifting fast along with the traditional retail market.  eBay is a company that has not prepared for market shifts at all, remaining exclusively tied to its original Success Formula.  As a result, the company has no plan to do anything differently even though the market is changing fast.  And that is the risk of companies that don't invest in scenario planning, obsessive competitor analysis and White Space during the good times.  They can all too easily wake up one day to a dramatic shift in fortune with no idea what to do about it.

You don't have to be GM or Sears to be Locked-in and at risk of market shifts.  Even leading companies run the risk.  If you devote yourself to Defending & Extending your historical business, ignore internal Disruptions and don't implement White Space to find new opportunities for growth, you risk the business.  Because no one can predict when, or how fast, markets will change putting the old business at risk.