Are you thrilled with your great Website? And delighted with your brand-new Internet strategy? If so, forget your thrills and dismiss the delight. Companies don't need a great Website: they need a 'business Web'. Nor do firms need an Internet strategy: they need a strategy for changing the entire business to exploit the opportunities, and counter the threats, of a fundamental and universal transformation of industry and commerce.
That is the emphatic advice of cyberspace guru Don Tapscott, whose new book, Digital Capital, spells out the importance of the business web or b-web: 'a distinct system of suppliers, distributors, commerce services providers, infrastructure providers, and customers that use the Internet for their primary business communications and transactions'. The book, co-authored with David Ticoll and Alex Lowy, describes many real-life examples, starting with the MP3 music boom. But the message far outweighs MP3. Tapscott is the seer of the total revolution developing as the b-webs gather irresistible momentum.
B-webs, relying on the Internet as primary infrastructure, have a unique, new 'value proposition' that makes the old ways obsolete. They involve many partners and five types of 'contributors': customers themselves, context providers (who facilitate the interface, like MP3.com), content providers (e.g, MP3 musicians): commerce services providers: infrastructure providers. B-web participants both cooperate and compete with eachother as they focus on customer value and manage customer relationships through the context provider. The key players know and keep the b-web's rules, and all players exchange a variety of data, information and knowledge.
Tapscott's credentials as prophet of this revolution are impeccable. In 1996, he published The Digital Economy, which he claims as 'first to discuss how the Internet changes business models'. Its major prediction has 'turned out really well'. At a time when Netscape's browser explosion was only just being born, Tapscott expected to see a billion Web users by 2003. That forecast is currently 'right on track', but is beginning to look conservative as wireless connections to the Internet take off.
Forecasts of massive e-commerce growth have been overtaken by vivid publicity surrounding the collapse of some conspicuous e-businesses and most e-stocks. Whether you take a bullish or bearish view, though, depends on what you mean by e-commerce. The dot.com frenzy, and its more frenetic instigators, 'are a bust', says Tapscott. But when it comes to creating new business infrastructures, 'all the estimates were far too low'. True, Nasdaq's down, and technology stocks are down. But concentrating on these upsets is 'a fundamentally wrong way of looking at the New Economy'.
Tapscott notes that the technology sector is now worth a cool trillion dollars. But the sector's importance in its own right 'pales besides the impact' of its technology on the infrastructure of all business. 'Exploiting the Net to do competitive business in new ways will affect every industry'. In this processs, the question, 'What's an Old Economy Company?', becomes rhetorical. Tapscott cites Nortel Networks, once an old-line Canadian telecoms business, which 'has totally renovated itself and is doing fantastically'.
Yet even Nortel is outshone by start-up competitor Cisco Systems. 'Nobody would have thought that what Cisco has achieved was possible', says Tapscott. The company, most famous for Internet routers, is one of the book's models of b-web brilliance. It has used 'the coordination tools of the digital infrastructure to expand massively in highly focussed areas of competency'; while simultaneously exploiting the fact that 'the discrete value-creating activities of firms, even entire industries, become cheaper and easier to disaggregate out to the open market'.
Start-ups embrace these New Economy laws more easily than established companies - even those which try hard to rework their business models. Many have not bowed before the new propositions. That includes Americans: but 'conservatism is greater in Europe than in the US', says Tapscott. 'Companies will boast they have a great Website that's really sticky, and attracts lots of eyeballs, and say it's a portal, but to me that's totally wrong'. Rather, Tapscott advises, 'start with the customer and the customer value proposition and go for the process in the book'.
This process wasn't plucked from the air. Tapscott and his consultancy associates in Digital 4Sight worked out this 'very different way of applying business strategy' by studying its sources. They went to most of the 200 companies with whom they work (including eBay, the auction champions, and e*Trade, the fast-rising retail stockbroker) and asked them, 'What did you do? How did you come up? They couldnt articulate it. So we reverse-engineered what they did'. Having constructed a chain from what the companies achieved back to where they started achieving, the team 'codified it as an approach'. They present this 'b-web strategy design' in six steps:
1. Describe the current value proposition from the customer's viewpoint, that is, why does this system exist?
2. 'Disaggregate': Consider contributors to the system and their contributions, strengths and weaknesses. Compare what your business does to other systems which might better perform the tasks.
3. Use brainstorming and other creative techniques to envision how the Web could enable value. Decide on your new, better value proposition.
4. 'Reaggregate': Define what you need to deliver the new value proposition, internally and externally, including processes, contributors, contributions, applications, technologies and other success factors.
5. Design a visual map that depicts exchanges of value between partners in the b-web.
6. Do the b-web 'mix': Define a b-web 'typing strategy' that will improve your competitive advantages.
'Typing strategy' requires some explanation. According to Tapscott, there are five b-web 'types'. There's the Agora, or marketplace (eBay): the Aggregations (like the Webvan delivery business) which organize distribution; Value Chains (like Cisco) which 'design, produce, and deliver products or services to meet a specific set of customer needs; Alliances (like the Linux PC operating system network); and finally distributive networks (like Enron, which 'sells power from anyone to anyone'). The spectrum of possibilities is huge, which means an intimidating range of strategic choices.
That six-step process also sounds quite daunting, especially for resistant managers who have not come to terms with either e-commerce or New Economy strategy. Tapscott meets less resistance today, though; 'When The Digital Economy came out, people looked at me like I needed help, or was on expensive drugs. Now I don't get that any more. It's over a year since anybody said to me that the Internet was a fad'. But there's a problem in the UK ('Belgium and France are worse'); managers themselves are not using the technology. 'Personal use is a precondition. I tell them, sit down with your daughter!'
Familiarity is an imperative, because inexorable economic forces are changing business economics for ever. Tapscott venerates a Nobel laureate, economist Ronald Coase, who in 1937 studied the role of 'transaction costs' - the cost of doing business. The cost of transactions outside, says Tapscott, is dropping below the cost inside the firm. That means, according to Coase's Law, that firms will stop doing those transactions themselves. Tapscott's own 'biggest insight 10 years ago was that it's not possible to do everything that we once did inside the firm. The production and creation of value for customers is passing to business webs and better systems'.
The transition goes far beyond Web execution of what was done before in conventional ways. It enables new and radically different functions. 'The Internet is rich in transactionality, stuff that wasn't there', says Tapscott. Tools are developing apace for search transactions, knowledge management and the delivery of application software. Some applications may seem banal, like transmission of singing birthday cards and exchange of family snaps. But they are tiny parts of a gigantic revolution, whose exchanges and auctions are already transforming big business. The revolution transcends buying and selling on-line, or 'B2C' (business to consumer') and even the vastly bigger 'B2B' (business to business).
As revolution proceeds, the very being of old-line businesses is challenged. 'It's not even about supply chains', says Tapscott. 'It's about demand chains'. For example, your demand is to send money - say, to pay for an eBay acquisition. A Web service called Paypal transfers funds free between any two parties who have e-mail. It does a quarter of all eBay transactions (a gigantic sum of money transfer), muscling in on traditional banking territory, Other software companies are also providing banking services. 'By the time the banks wake up', says Tapscott flatly, 'it will be too late'.
The revolution is still accelerating in awesome manner. Speaking at London's recent Mobile Commerce World Conference, Tapscott said that 'Mobile computing devices, broadband access, new wireless networks and computing power embedded into everything from bicycles to factory tools are converging to create a pervasive global network which will fuel exponential change in business model innovation'. That's the 'Hypernet' - and it's no hype. Companies which dismiss Tapscottism as hype will live (or die) to rue the day.
read all 70 gurus with one feed read all Read all media
