style='font-size:12.0pt;mso-bidi-font-size:10.0pt'>By:2'> Newt Barrett

mso-bidi-font-size:10.0pt'>Almost fifty years ago when Sam Phillips made the

first recordings of Elvis, his business card read, “We record anything,

anywhere, anytime.” Of course, a footnote would probably have added, “in

Tennessee or thereabouts.” Even so, this flexibility was extraordinary for its time.

More typical were businesses that rigidly defined their products and their

processes—and the places that they sold them.

mso-bidi-font-size:10.0pt'>The twenty-first century iteration of Phillips’

slogan is the MP3 universe. Thanks to the ubiquity of the Internet, music

aficionados everywhere can record and redistribute CD-quality music pretty much

anywhere in the world using MP3 technology and tools. This phenomenon is

enabled not only by the Internet, but also by an emerging business model that

leverages the Internet to create a fluid set of interlocking relationships.

According to Don Tapscott et al. in their new book, normal'>Digital Capital, that model is the ‘business web’ or b-web, for

short. “Unlike other big ideas, b-webs are inevitable… The b-web is emerging as

the generic, universal platform for creating value and wealth.”

mso-bidi-font-size:10.0pt'>Tapscott is a chronicler of technological change and

its impact on the way we do business. His 1992 book, ‘Paradigm Shift,’ examined

the effect of distributed computing models on business tactics and strategies.

Today, he views the Internet as the ultimate enabler for a brand-new—and as he

puts it, inevitable—business model. He notes that the old hierarchical model of

Ford, General Electric, and the original AT&T, are swiftly giving way to

several varieties of b-webs. And, unlike the famous Japanese keiretsu, the

b-web assumes neither permanent, unchanging relationships nor shared ownership.

mso-bidi-font-size:10.0pt'>In describing MP3’s success, he notes that it’s “the

product of an Internet-based alliance—a business web—of customers, businesses,

… and content providers. It exemplifies how business webs have risen to

challenge the industrial age corporation as the basis for competitive

strategy.”

mso-bidi-font-size:10.0pt'>Traditionally, the only way to acquire the requisite

forms of capital required to build a profitable business -- from hard cash to

human beings -- was to create a company that owned most of what it needed. In a

b-web, that’s all changed, according to Tapscott, “You can gain human capital

without owning it; customer capital from complex mutual relationships; and

structural capital that builds wealth through new business models.”

normal'>The B-web:

Fluid, Dynamic, Customer-centric

mso-bidi-font-size:10.0pt'>Frightening speed and constant change mark the

economy in which we operate. Within this fluid environment the customer is empowered

as never before. She operates with almost perfect knowledge in many cases. She

lives in a world in which product scarcity has become product abundance.

mso-bidi-font-size:10.0pt'>The small town bookshop in Cedar Key, Florida, with

limited shelf space, limited inventory, and monopoly pricing, for example, is

no longer the sole source of supply for avid readers. Barnes & Noble may

never arrive in Cedar Key but readers can travel to online bookstores in

seconds—whether to barnesandnoble.com for price and variety, to Alibris.com for

rare and out print books or to a specialized e-bookshop for vertical depth.

mso-bidi-font-size:10.0pt'>In the end, “you must deliver much better value at a

much lower price,” according to Tapscott. This reality is a near-term threat to

almost every land-based business in any town, large or small.

normal'>It’s the

Customer, Stupid! Disaggregation and Reaggregation

mso-bidi-font-size:10.0pt'>The implication of the b-web model is clear. Each

business must first be prepared to disaggregate all of its functional elements.

Then, by starting with the customer as the focal point and with the Internet as

a core enabler, it must reaggregate functionality—keeping for itself only those

processes that cannot be allocated to other providers more efficiently.

Tapscott maintains, “Companies will begin with a customer value proposition and

a blank slate for the production and delivery infrastructure. Through analysis,

they will parcel out the elements of value creation and delivery to an optimal

collection of b-web partners.”

mso-bidi-font-size:10.0pt'>In the end, each partner will concentrate on what it

does best. The net result is that superb return on capital can be expected when

b-webs operate effectively. Revenue growth can be exponential while costs show

modest linear growth.

mso-bidi-font-size:10.0pt'>The phenomenally successful networking company,

Cisco, exemplifies the 21^st century b-web. It has benefited, of

course, from the exponential growth of traffic on the Internet and the

sophisticated switches and routers needed to facilitate that traffic. But this

$12 billion company has been careful to reserve only a relatively few functions

for itself—core technology design, process coordination, marketing, and

relationship management. All the rest, including most manufacturing,

fulfillment, and onsite service, goes to its b-web partners. The result is that

Cisco can respond with dramatic speed to changes in product specs and customer

demand.

normal'>Types of

B-webs

mso-bidi-font-size:10.0pt'>Tapscott has identified five types of b-webs that

define the range of evolving business models. In each case the Internet is the

primary, if not sole enabler of these business forms.

tab-stops:list .25in'>mso-bidi-font-size:10.0pt;font-family:Symbol'>·

Agora:

An agora, derived from the ancient Greek term for market center, facilitates

the buying and selling of products and services. Internet-related technology

has enabled some astonishing implementations. The huge auction site, Ebay, is

the best known example. Every day millions of buyers and sellers come together

at the site, engaging in electronically-enabled transactions. Exponential

increases in users, transactions, and, yes, revenue are possible with only

modest cost increases.

tab-stops:list .25in'>mso-bidi-font-size:10.0pt;font-family:Symbol'>·

Aggregration:

In this case, products, services or information are aggregated in such a way as

to add significant value to users. Cursed by a paucity of time and a plethora

of choices, users crave central points of aggregation to simplify their lives.

Examples would be Wal-Mart, E-Trade, or our own site, BusinessNewsNow.com.

tab-stops:list .25in'>mso-bidi-font-size:10.0pt;font-family:Symbol'>·

Value

Chain: This b-web variety derives from a highly integrated value chain that

delivers customized solutions matching customer needs. Cisco’s operation noted

above is a highly effective value chain

tab-stops:list .25in'>mso-bidi-font-size:10.0pt;font-family:Symbol'>·

Alliance:

An alliance is a relatively unstructured network of companies and users sharing

a common interest. This is frequently seen in technology businesses where

product success depends on broad acceptance of standards defined by a

particular product. For example, the Palm Pilot is a fine product but its

success owes very much to the software applications developed for the Palm

operating system and to the millions of Palm fanatics who share their

enthusiasm with even more millions of prospects; this, in turn, motivates even

more software developers to write applications for the Palm. The result: an

ever-widening circle of success.

tab-stops:list .25in'>mso-bidi-font-size:10.0pt;font-family:Symbol'>·

Distributive

Network: These b-webs deliver services and goods from producers to users.

Distributive Networks are like the human blood system, in Tapscott’s analogy:

“They neither create nor consume their essential cargo. But, when these

services fail, their host systems can die. Examples are the telephone network,

FedEx and UPS, and the Internet itself.

normal'>Marketing in a

B-web World

mso-bidi-font-size:10.0pt'>The traditional B-school marketing mantra of

product, price, place, and promotion is turned topsy-turvy in the world of

b-webs. The fundamental shift in marketing thought is away from pure branding

to the value of the customer relationship, which in turn derives from the

customer experience. Strong brands can disappear overnight.

mso-bidi-font-size:10.0pt'>Microsoft exploited this marketing reality in the

browser wars by leveraging its powerful relationships with its industry

partners and with its users. Netscape owned the browser market in early 1996

with tens of millions of users. Netscape’s smugness at the time was matched

only by Microsoft’s determination. Three years later, the Netscape browser was

toast.

mso-bidi-font-size:10.0pt'>In short, according to Tapscott, “the brand matters,

but as a measure of relationship capital, not as an image.”

normal'>The Bottom

Line

mso-bidi-font-size:10.0pt'>‘Digital Capital’ is a must-read for the 21^st

century business owner. Like it or not, we must rethink and reshape all of our

business assumptions. This book is an excellent tool for undertaking that

painful, but essential process.

style='font-size:12.0pt;mso-bidi-font-size:10.0pt'>‘Digital Capital’, by Don

Tapscott et al., Harvard Business School Press, Boston, MA