Financial Post: eWorld
Digital Economy
Rewriting the rules of engagement: Business Webs are destroying the old competitive models
Don Tapscott
Financial Post

05/26/2000
National Post
National
C09
(c) National Post 2000. All Rights Reserved.

For most of the past century, the starting point for strategic thinking has been the individual corporation. No longer. A new form of value creation is becoming the basis for competitive strategy. We're entering the era of the business Web, or b-Web. It is any system -- of suppliers, distributors, service providers, infrastructure providers and customers -- that uses the Internet as the basis for business communications and transactions.

The key to competing in the digital economy is business model innovation that exploits the power of business Webs. Industry by industry, business Webs are destroying the old model of the firm.

Many other names have been given to groupings of collaborating companies, such as clusters, swarms, virtual corporations, keiretsu, outsourcing partnerships, business ecosystems and econets. But each of these names refers to a unique form of a phenomenon that is far broader, as universal as the concept of the corporation itself.

The activity in each Web is usually choreographed by one company, and that lead company often enjoys the lion's share of the Web's profits. But the other participants are vitally important; each one contributes according to its core competencies, the things that it does best.

With b-Webs, the rules of competitive engagement are rewritten. Although b-Web members must co-operate for the Web to succeed, they also often compete vigorously with one another. On top of this, the Webs themselves compete with other Webs.

Any company hoping to thrive in this environment must decide which Webs to join and what roles to play in them. That's a tough challenge in itself.

What makes it even tougher is the proliferation of b-Web models. Confronted with a new way to do business, most companies are struggling to figure out just what their choices are. They must understand which of the five basic types of b-Webs they operate within: Agora, Aggregation, Value Chains, Alliance or Distributive Network.

AGORA

An Agora facilitates exchange between buyers and sellers. Prices are "discovered" through real-time, on-the-spot negotiations, whether through one-to-one haggling or through multi-party auctions and exchanges. A wide variety of goods and services are available and access to the marketplace is relatively easy for those whose products or services fit the category. The highest profile examples are eBay and Priceline.

AGGREGATION

In an Aggregation b-Web, one company usually leads in hierarchical fashion, positioning itself as a value-adding intermediary between producers and customers. The lead aggregator takes responsibility for value selection and fulfillment, pricing and market segmentation. E*Trade has aggregated many companies to create a virtual stockbroker, charging one-tenth the fees of a regular broker. Its Web partners include a host of companies such as stock quote services, news services and research companies.

VALUE CHAIN

In a Value Chain, a primary company leads in a hierarchical fashion, maximizing value integration through operational effectiveness.

In the Cisco Systems Value Chain, the company sits at the top of the b-Web, marketing and managing customer relationships, while community members perform all other functions. The community, not just Cisco, designs Cisco products. Community partners working in a variety of different locations manufacture their products. Technology alone is not making this happen; it also takes a culture skilled at establishing trust and sharing knowledge.

ALLIANCE

In an Alliance b-Web, a large number of companies or individuals embrace a common mission, with no single entity exerting complete control over the group. Their modus operandi may seem casual, but their output is often formidable. Witness Linux, one of the best operating systems available today.

DISTRIBUTIVE NETWORK

These networks provide the infrastructure services for the new economy. In addition to the roads, postal services, telephone companies and electrical power grid of the industrial economy, distributive networks can now include digital network operators, the new logistics companies and banks (which now run on networks).

With the rise of the business Web, organizational models have become weapons for competitive strategy in every industry. These new networked business communities are transforming the rules of competition, inventing new value propositions and mobilizing people and resources to unprecedented levels of performance. To be winners in this dynamic environment, business leaders need to master a new b-Web strategy.