DIGITAL CAPITAL

Harnessing the Power

of Business Webs
DON TAPSCOTT
DAVID TICOLL
ALEX LOWY
 Digital Capital - Page 1

MAIN IDEA
Business webs (“b-webs”) are the new platform for competition and the new creators of value in the twenty-first century.

Service Producers
Providers Suppliers
Simply put, a b-web is a partner network of up to
b-webs
five key constituents, linked via digital channels:

Customers Infrastructure
Companies
B-webs are important in the digital economy because they are the only means by which digital capital can be accessed, increased
and ultimately converted into market value. Digital capital is the sum of three knowledge assets:

Human Capital – what the people within your b-web know

+ Customer Capital – who you know and how those people value your contribution
+ Structural Capital – how what you know is built into your b-web and systems
Digital Capital

The central challenge of business in the digital economy is to form and build reserves of digital capital by harnessing the power of
business webs. Specifically, b-webs allow you to gain human capital without having to own it, to access customer capital through the
formation of mutual relationships and to benefit form the structural capital other parties provide. To that end, there are now five well
established b-web models which are proving to be successful in the creation of digital capital:
• Agoras – Open marketplaces where people come together to discover prices
• Aggregations – Online intermediaries who organize and coordinate a marketplace
• Value Chains – Integrators who manage the supply chain efficiently
• Alliances – Pools of knowledge shared by many working towards a common goal
• Distributive Networks – The backbone and infrastructure systems of the digital economy
In the years ahead, participation in b-webs will become an imperative rather than an option. In the era of digital customers, only those
firms which are leading or actively participating in a b-web will have a sustainable competitive advantage.

The Creation and Harvest of Digital Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 2 - 3

Business webs are replacing industrial-age corporations as the commercial entities for creating wealth in
the digital economy. B-webs are inventing new value propositions, changing the rules of competition for
entire industries and combining people and resources together in new and productive ways. In doing so,
b-webs are creating a new form of capital called digital capital – the currency of the new economy and the
driving force behind the market valuations awarded Internet companies by stock markets around the
world.
In short, creating and then harvesting digital capital is rapidly becoming the key challenge of business, and
the most effective vehicle for creating more digital capital is the b-web business model.
Business Web Model #1 – Agoras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
An Agora is an open marketplace where buyers and sellers come together to collectively discover the
market price for any good or service. The Internet makes it feasible for an efficient market with dynamic
pricing to emerge for anything and everything.
Business Web Model #2 – Aggregations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
Aggregations are online intermediaries. They organize and coordinate the selection, pricing and delivery
of goods, services and information. They generate revenue by capturing or retaining a part of the added
value they bring to the marketplace.
Business Web Model #3 – Value Chains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
Value chains used to be supply driven – consumers could buy only what the producers wanted to make.
Value Chain Integrators turn that around to deliver whatever products customers want – in customized
and service enhanced forms.
Business Web Model #4 – Alliances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7
Alliances have no hierarchy in control. Instead, a few rules and standards evolve which governs how the
Alliance works. Everyone in an Alliance b-web is both a producer and a consumer of products and
services. They’re also a contributor to the knowledge found within the Alliance.
Business Web Model #5 – Distributive Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8
Distributive Networks are the b-webs that provide the backbone for the digital economy – infrastructure,
communications bandwidth, delivery services, banking services, etc. All such networks are in a constant
state of flux and change.
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The Creation and Harvest Business webs are of commercial significance because they
of Digital Capital create digital capital. In the new economy, digital capital is
Main Idea transforming entire industries and creating wealth in entirely new
ways.
Business webs are replacing industrial-age corporations as the
commercial entities for creating wealth in the digital economy. Digital capital adds a new dimension to the three types of capital
B-webs are inventing new value propositions, changing the rules which have traditionally been classified as intellectual capital:
of competition for entire industries and combining people and n Human capital – the combined capability of every person
resources together in new and productive ways. In doing so, within an organization to create value for customers. It
b-webs are creating a new form of capital called digital capital – includes the skills, knowledge, intellect, creativity and
the currency of the new economy and the driving force behind know-how of each individual in an organization. In the
the market valuations awarded Internet companies by stock industrial economy, each business enterprise attempted to
markets around the world. build as much human capital as it could afford. In a b-web, the
In short, creating and then harvesting digital capital is rapidly human capital of all participants can be accessed by
becoming the key challenge of business, and the most effective everyone – dwarfing what was possible in the old economy.
vehicle for creating more digital capital is the b-web business n Customer capital – an organization’s established
model. relationships with customers and suppliers. When
Supporting Ideas internetworked through a b-web, the customer capital of each
participant combines to form the relationship capital available
The key question in business today is not: to the entire b-web. In other words, multidirectional links form
“What’s driving the changes in the economy?” which provide marketing benefits for everyone.
Instead, business leaders should be focusing squarely on an n Structural capital – the business processes and marketplace
entirely different question: know-how by which an enterprise meets customer
“What should I and my organization be doing requirements. Once again, a b-web enhances and extends
now to respond to all those changes taking place?” the structural capital of each participant – by allowing the
knowledge, processes and tools provided by any participant
The industrial economy was built around the production and
to flow to the point of need. B-webs also change the rules of
movement of physical goods and services – a scarcity mindset.
market leadership, which has direct implications on the
By contrast, the new economy has an abundance mindset,
impact of structural capital.
brought about by the fact many offerings are knowledge based
and embedded in the design and production processes. In summary, b-webs are the most productive engines available
in the new economy for creating digital capital. They redefine the
Therefore, to win in the new economy, the formula is simple –
boundaries of the traditional firm and revolutionize the idea of
deliver better value than everyone else at a lower price. But no
partnering.
single company can be the world-class lowest cost provider of
everything it needs. Therefore, standalone companies are The Internet is rapidly becoming the most efficient infrastructure
giving way to an entirely new commercial entity where for all business activity. As it becomes the backbone of the new
companies work together to create added value – b-webs. economy, all sectors of the business world are being
transformed. Those companies which can accumulate the
A business web is a distinct (yet flexible) combination of
largest reserves of digital capital will have market valuations that
suppliers, distributors, service providers, infrastructure
reflect a premium for that digital capital.
providers and customers that use the Internet as their primary
means of communication and transactions. That’s part of the reason why, at present, the combined market
valuation of new economy public companies far eclipses the
Companies may participate in several b-webs, each of which
market valuation of the traditional titans – auto, steel, energy,
competes fiercely for the same customers. An industryspace (for
manufacturing and finance.
example, the software industry) may have several b-webs
competing within it. Significantly, however, this is still the early days of the b-web as a
new corporate form. It’s not yet clear how b-webs will demand
The key features of all b-webs are:
new types of thinking, behaving and being. Nor is it yet clear to
n They use the Internet as their primary infrastructure. what degree the new economy will transform the everyday lives
n They deliver innovative new value propositions. of people around the world.
n They have many participating business enterprises, all What is clear, however, is that b-webs are part of the process of
cooperating and competing with everyone else. learning how to maximize the creation of digital capital. While the
n They focus on customer value – not making and selling. Internet has grown at an impressive rate in its lifetime, it has not
yet even reached the mainstream – it’s still made up mostly of
n They are lead by a context provider – who manages customer the early adopters. In that environment, it’s to be expected that
relationships and coordinates the value creating activities. many early b-web experiments will fail. On the other hand, some
n They have rules and standards everyone knows. b-webs (like Cisco and MP3) have already been spectacular
n All participants exchange data in depth. successes. One thing, however, is already clear, even at this
early stage of development. B-webs offer such compelling and
n There are five classes of value contributors:
abundant opportunities for the creation of digital capital that
• Customers – who receive value and contribute value.
businesses will ignore them at their own peril – they will either
• Context providers – who manage the b-web.
adopt effective b-web strategies or fade away into commercial
• Content providers – who develop the goods and services.
irrelevance.
• Service providers – who provide enabling services.
• Infrastructure providers – who provide resources.
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So how do you go about building a new b-web? It’s usually a six The three key challenges and opportunities of building a new
step process: b-web are:
Step 1 -- Describe
For the marketspace you’re targeting, analyze and Key challenges and opportunities
articulate the customer value proposition currently
in use – and why this proposition now exists.
In asking this question, you’re aligning your thinking with the
Managing the Using relationship Selecting the right
customer’s perspective and challenging the conventional
people involved capital effectively business model
products and services that have met this need until now.
Step 2 – Disaggregate
Look at all those businesses which currently create value
Challenge #1 – Managing the people involved
meeting that value proposition. What are their strengths and
weaknesses? How do they compare with your b-web? The network makes it feasible and realistic for people beyond
the normal boundaries of the firm to participate in the process of
In this step, you’re attempting to uncover any human,
creating digital capital. In other words, each member of a b-web
relationship or structural capital that could be brought into the
can access and apply the human capital available from all other
new b-web. Specifically, you’re looking for opportunities to
parts of that b-web. In turn, the internetworking and virtual
create digital capital within the current value system.
pooling of all the human capital of the entire b-web creates a
Step 3 -- Visualize fertile environment for high performance. In the central value
What new value proposition will your creating activities of the digital economy, those b-webs with the
b-web propose and deliver on? greatest access to broad and deep amounts of human capital
Essentially this step asks you to identify how you can apply will have a significant competitive advantage.
digital technologies to enhance the value proposition – in the Challenge #2 – Using relationship capital effectively
process creating entirely new competencies, new product and
In a b-web, customer capital (established relationships)
new service offerings.
becomes relationship capital. That’s because b-webs change
Step 4 -- Reaggregate the nature of marketing completely. Since everyone in a b-web
What are the processes, contributors, applications and communicates actively with everyone else, marketing is no
technologies you’ll need to deliver on the new value longer a matter of projecting a brand name through mass media
proposition? And who, therefore, must be part of the b-web? placements. Instead, customers become more empowered.
You are now designing the b-web model required to deliver on Customers become actively involved in two-way marketing, and
that new value proposition. Part of this will be deciding who even participate in the price fixing processes. And since
contributes what amongst all b-web participants, and how the transaction costs are lowered in a b-web, marketing becomes
rewards will be split amongst those delivering the various more of an interactive communications exercise. That is, the job
components. of the marketer changes from selling products to accumulating
and growing the relationship capital reserves within the b-web.
Step 5 – Value Map
That means:
Design a visual map showing all requisite
• Shopping will take place anytime, anyplace, anyway.
value exchanges within the b-web
• Two-way communication will replace promotions.
Value maps graphically represent the flow, within the b-web, of: • Prices will become flexible and personalized.
• Goods, services and money. • Customers will pay for experiences, not products.
• Knowledge, including strategic information. • The creation of relationship capital will drive revenues.
• Intangibles, such as brand names, customer loyalty, etc. • Prospects become candidates for relationships, not markets.
The value map helps clarify the key relationships and value
Challenge #3 – Selecting the right business model
exchanges that will take place within the b-web.
In the digital marketplace, companies adopt the optimum
Step 6 – Fine-tune your b-web mix
business models as competitive weapons. Therefore, selecting
Select which b-web model you’ll run with, and
the right business model – and remaining agile enough to move
customize a basic model to fit your requirements.
to a different model if necessary – can be a determining factor
Armed with your value map, you can now decide on which b-web between success and failure.
model to start with. Take that general model as a core organizing
There are five general types of b-web business models, each of
approach, and fine tune your specific b-web. Retain some
which is developed around a different organizing principle:
flexibility and ability to alter your b-web as planning moves
• Agora – dynamic pricing
forward, since not every proposed relationship will fall into place
• Aggregation – selection and pricing
as planned. Put together a complete b-web that will:
• Value Chain – process integration
• Deliver on your new value proposition.
• Alliance – creativity
• Create enhanced value for the end customer.
• Distributive Network – allocation / distribution
• Provide differentiation from everyone else.
• Deliver a sustainable competitive advantage. The key challenge in building a successful b-web is to design a
• Reduce costs for all b-web participants. b-web mix that enhances customer value, provides competitive
• Have clearly identifiable sources of profit. differentiation as well as a sustainable competitive advantage
• Achieve what you set out to do. and reduces costs for all participants. Achieve that and a vast
amount of digital capital can be generated.
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Business Web Model #1 Producers Consumers

Agoras
Main Idea Price
An Agora is an open marketplace where buyers and sellers Discovery
come together to collectively discover the market price for any Mechanism
good or service. The Internet makes it feasible for an efficient
market with dynamic pricing to emerge for anything and
everything.
Supporting Ideas
The name of this type of business Web comes from ancient
Greece, where the Agora was an open marketplace convened
by the king or one of his nobles. The Internet equivalent is an
open marketplace where multiple buyers and sellers can
together discover what the going market price is for anything.
Theme Dynamic pricing
Each Agora typically uses one (or more) of several mechanisms
for discovering a price: Value Liquidity – conversion of goods into a desirable
1. One-on-one negotiations between buyers and sellers – Proposition price efficiently and quickly
which tends to work well for unique goods and business
negotiations. (Monster.com) Consumer Market player
2. Sell-side auctions where the seller specifies the minimum Role
bid, the timing and a reserve price. (eBay) Focus Timing, market intelligence
3. Buy-side auctions where each potential buyer submits a
sealed offer. (FreeMarkets Inc.) Key Discovery of price
4. Exchanges, as in stock and commodities, where multiple Process
auctions are ongoing using ask-and-bid mechanisms. Examples EBay, Priceline, NASDAQ, FreeMarkets,
(Optimark, Industry to Industry, NASDAQ) Yahoo! Classifieds, AdAuction, MetalSite,
Arguably, robust and well disciplined exchanges are the most California Power Exchange, Monster.com
sophisticated and powerful pricing mechanisms, although
eBay’s business model has attracted a lot of attention and more
than $200 million in revenues in 1999 alone. Opportunities for a digital Agora exist wherever:
In eBay’s business web, the buyers and sellers do most of the n There is an existing market which operates inefficiently.
work, incur all the costs and take any risks. eBay: n A lot of pent-up frustration exists over current pricing
n Has zero inventory – since sellers acquire and stock their own mechanisms with an absence of competitive bidding.
goods and services. n A new, high profile market emerges for Internet based goods
n Incurs no marketing or merchandising costs – as each seller or services.
provides their own sales materials and illustrations. n Regulatory intervention opens up a market.
n Has zero distribution costs – as each buyer and seller makes The key success factors in building an Agora b-Web are:
their own arrangements. 1. Develop a way to improve the price discovery mechanism
n Incurs no product liability – as the auction format means it is utilizing the unique capabilities of the Internet.
buyer beware. 2. Build critical mass quickly since liquidity generates value
n Creates no content of its own, but simply uses whatever the through network effects.
seller has prepared. 3. Continue to refine and improve your Agora b-Web to match
n Has zero marginal growth costs – since each new customer the preferences of your users.
will simply use up a little more space on eBay’s Web server. 4. Develop enforceable rules that create a truly level playing
n Collects its transaction fee in advance – lowering any costs of field for everyone. Find ways to offset insider advantage.
collection or likelihood of bad debts. 5. Add sophistication. Use smart software to customize your
In short, eBay uses its business model to create digital capital rules and differentiate between classes of participants.
from structural and relationship capital that cannot be replicated 6. Create an audit trail for all participants. You must be able to
outside the Internet environment. By acting as the effective monitor the history and profiles of participants and provide
referee of an array of online auctions, the business builds trust transparent enforcement of the rules if you’re to have
(by helping to weed out deadbeat buyers and sellers) and credibility and confidence.
authentication – that you’re getting what you expect at a price
which other people are also willing to pay. 7. Allow for digital agents and intermediaries to participate.
They will create many opportunities in the future.
Founded in 1995, eBay is unique for an Internet company in that
it is highly profitable and debt-free. Ebay handled around $350 8. Pay close attention to the factors which impact directly on
million in auctions during its first three years of existence. In credibility – trust, privacy, taxation, regulatory issues
1999, transaction volumes soared to $3 billion.
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Business Web Model #2 Producers Consumers

Aggregations
Main Idea
Aggregations are online intermediaries. They organize and Aggregation
coordinate the selection, pricing and delivery of goods, services
and information. They generate revenue by capturing or
retaining a part of the added value they bring to the marketplace.
Supporting Ideas
In the Internet age, why would anyone use an Aggregation?
Simply because they present their customers with an optimized
(and personalized) combination of six key elements:
1. Selection
The vast vendor knowledge of an Aggregation has always
been a powerful attraction, although the Internet does Selection and convenience
Theme
empower consumers to do better searching on their own. To
offset that, Aggregations now tend to electronically cross Value Optimization of selection, organization, price,
traditional product, industry and geographic boundaries to Proposition convenience and order fulfillment
organize by consumer needs more than by historical
distinctions. Consumer Buyer
2. Organization Role
Physical Aggregations (like supermarkets) arrange goods
logically and for convenience. Digital Aggregations perform Focus Market segmentation, supplier offerings,
the same function through providing embedded hyperlinks to fulfillment
other products, tracking of preferences to make additional
suggestions and the presentation of dynamic, interactive Key Needs matching
sales materials. Process
3. Price Examples Amazon.com, E*Trade, Wall Street Journal,
In addition to offering better prices because of reduced Travelocity, HomeAdvisor, WebVan
transaction costs, online Aggregations can also do
something new and innovative like:
• Offer better pricing to long-term, loyal customers. The key success factors in building an Aggregation b-web are:
• Combine and price bundles of products and services. 1. Personalization. Let customers design a way of doing
• Develop pay-only-for-results advertising systems. business that suits their preferences and behaviors rather
4. Convenience than meeting a vendor’s needs.
A digital Aggregation, in addition to being ready to do 2. Physical Aggregations use information about their products
business whenever you are, can remind you when you’re low to create efficiencies and improve customer service. Online
on regular purchase items and even replenish your supplies Aggregations do the same by treating every consumer as an
automatically. Ultimately, a good Aggregation will be able to information provider. They make it easy to capture, store and
tell consumers what they’re just about to develop a need for share customer experiences.
before they even realize that need themselves. 3. Since digital content can be customized, online
5. Matching Aggregations add value by increasing control options. In
Historically, Aggregations have only benefitted financially other words, content should be matched to shopping
when consumers purchase something they have in stock. An behavior exactly and precisely.
online Aggregation can structure all sorts of other financial 4. Build a community of users. Allowing consumers to help
arrangements easily – making it possible for them to each other solve problems instills a huge amount of
generate fees from everyone who benefits from a customer loyalty in Aggregations.
transaction.
5. Focus on the fulfillment process intensively. Make certain the
6. Fulfillment delivery mechanism echoes the quality of the online
Aggregations oversee the fulfillment process every step of experience for consumers.
the way. That allows them to benefit from bulk buy
6. Find effective ways to actively engage consumers. Offer
arrangements, predict future demand with more accuracy
them value-added services that simplify their lives – such as
and prioritize the overall fulfillment process.
product recommendations based on the purchases of other
In short, there are compelling reasons for the existence of like-minded consumers.
Aggregations in both digital and physical world formats. They
7. Empower consumers. Give them digital tools which are
have existed and survived through history because they bring
sophisticated and useful – which typically were previously
added value to the exchange of goods and services. The last
available only to specialists in that field.
major change Aggregations underwent was during the Industrial
Revolution, when new technologies became available. They will 8. Watch out for cost inefficiencies that exist in the physical
also undergo dramatic reinvention and redevelopment in the world which can be replaced by more effective, digital
digital business era. equivalents.
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Business Web Model #3 Producers Consumers

Value Chains
Main Idea
Value chains used to be supply driven – consumers could buy Value
only what the producers wanted to make. Value Chain Chain
Integrators turn that around to deliver whatever products Integrator
customers want – in customized and service enhanced forms.
Supporting Ideas
Value chains create value by:
• Identifying and defining specific customer needs.
• Designing products and services that provide solutions.
• Delivering those products and services.
In every value chain, some activities add more value than others.
Most frequently, the greatest value resides in the design process
and relationship management areas. Digital Value Chain Theme Process integration
Integrators are proving to be highly adept at securing those
functions for themselves and letting partners do everything else. Value Design and deliver an integrated product
Specifically, there are four key questions which Value Chain Proposition meeting customer needs and requirements
b-web developers focus on to create leverage:
Consumer Value driver
1. What’s the essence of the end user value proposition?
Role
Usually, the key point of differentiation from everyone else is
the best part of the value chain to own. Focus Innovation, supply-chain management
2. Which contributions assume leadership – by adding the most
to the overall value proposition? Key Product design, supply-chain management
By securing the leadership role for your own business, you Process
will maximize the amount of digital capital you own – using Cisco, Dell, General Motors, Celestica,
Examples
the structural capital provided by partners and collaborators. Bidcom
3. How can we design a b-web as a customer fulfillment
network – with everything focused on end customers?
Smart Value Chain b-webs integrate seamlessly with the The key success factors in building a Value Chain Integrator
customer, effectively allowing the customer to create their b-web are:
own value by ordering customized products and services 1. Focus on delivering a customized solution which is
through the b-web. Because customers – rather than enhanced by services – the things that really make a product
vendors – are driving the system, they can input precise useful. That way, you add genuine value.
demand information and configure according to their own
2. Get to know and respond to the needs of your customer
needs and preferences. That way, a Value Chain b-web
better than everyone else. You can only do that if you’re
becomes responsive and intelligent.
electronically connected with every customer.
4. How can we work with suppliers to develop win-win
3. Focus. Keep your attention riveted solely on those activities
partnerships while also enhancing quality and efficiency?
that deliver the most value. Put in place a network of partners
Knowledge sharing between partners in a b-web adds
to do everything else required to provide a complete
structural capital to the customer capital provided by
multi-dimensional product or service offering.
customers themselves. By increasing the quality and
timeliness of information, partners can better manage their 4. Develop expertise in the area of managing and building
own inventories and supply chains to enhance their business relationships. The more fully you bring partners
responsiveness. Since partners have an undistorted view of and customers into your inner circle, the better. Be prepared
demand, they can increase their own efficiency. By linking all to invest loads of energy into building strong relationships.
suppliers to a common information system, everything 5. Share rather than hoard knowledge. Make it possible for
becomes better aligned. That alignment, in turn, allows even each of your partners to operate efficiently and profitably.
better deals to be offered to customers in the future. That maximizes the amount of trust they have in you – which,
In essence then, Value Chain b-webs are wealth generators. in turn, increases your effectiveness over the longer term.
They not only identify and define needs but they also design 6. Be ready to embrace the next generation of Web
solutions to those needs, and manage the sequence of steps by architectures and Web applications as they become
which raw materials are transformed into finished goods and available. Stay at the leading edge of delivering customized,
services. Value is added each step of the way as the b-web Web-powered business applications.
participants respond to unique customer demands. The b-web 7. Think customer fulfillment networks. Everything a Value
follows all the steps required to create a satisfied customer – Chain Integrator does should be moving towards enhancing
from the extraction of raw materials through design and and building on the customer experience. Everything and
manufacture to the delivery of goods to end customers. Value is every system should be oriented, calibrated and designed to
added with each and every step when a Value Chain b-web is set be customer focused. In short, the capacity to deliver
up and functions correctly. customized solutions to unique demands must be inbuilt.
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Business Web Model #4 Prosumers = Producers and Consumers

Alliances
Main Idea
Alliances have no hierarchy in control. Instead, a few rules and
standards evolve which governs how the Alliance works.
Everyone in an Alliance b-web is both a producer and a
consumer of products and services. They’re also a contributor to
the knowledge found within the Alliance.
Supporting Ideas
The Internet has powered some stunning Alliances – such as
Open-Source Linux, MP3, the Human Genome Project and
developers of Palm Pilot software. Despite that, not many
people fully understand how Alliances create value.
Value can be captured from an Alliance b-web by:
n Linking multi-way relationship capital, cross b-web human Theme Creativity and flexibility
capital and structural capital together synergistically to
actually create and distribute valuable products. (Example: Value Creative collaboration in pursuit of a shared
The Wintel Alliance between Microsoft and Intel). Proposition goal or objective
n Exploiting the increasing returns in market value derived from
network effects. (Example: America Online). Consumer Contributor
Role
n Understanding intentional emergence – where a community
of users work together towards an agreed upon outcome that Focus Community, standards, roles, creativity
maximizes rewards rather than simultaneously heading off in
a number of different directions. (Example: Linux). Key Innovation
n Exploiting a new design paradigm where: Process
1. Users are treated as codevelopers and debuggers. Examples America Online, NetNoir, Linux, MP3, Wintel
2. Frequent releases and updates are made. Java, Netscape, the Human Genome Project
3. Anticipate that someone, somewhere will see solutions.
(Examples: Sun Microsystem’s Java or Netscape’s browser).
n Encouraging a reciprocal gift economy to form – where The key success factors in building an Alliance b-web are:
participants receive something in anticipation of the fact they 1. Ensure that everyone who participates in the Alliance
have an unstated moral obligation to repay the gift with derives benefits they value.
interest at some stage in the future. (Example: MP3) 2. Define whether the Alliance is going to be commercial or
How value can actually be extracted from an Alliance b-web non-profit and use proprietary or open standards.
varies, but some of the common means are: 3. Share power among participants so everyone participates in
• Charge fees to participate in an event related to the Alliance. the leadership role.
• Charge user fees for online forums or games.
4. Award stature within the Alliance on the basis of contribution,
• Charge fees for technical support services.
not entitlement.
• Produce and sell a tangible product – research report, etc.
• Sell the software developed by the Alliance. 5. Keep innovation moving forward at a lively, engaging pace.
Exactly what the best strategy for converting the digital capital 6. Disseminate information widely and completely.
created by an Alliance into revenue is will depend, in part, on the
7. Use public recognition, financial rewards and greater
specific variety of Alliance. As a general rule, Alliances come in
responsibility to reward exceptional contributions.
six types:
• Social alliances – chat groups and forums. 8. Keep any rules and the process by which rules are made and
• Discussion alliances – tightly focused on a specified subject. enforced open, democratic and flexible.
• Help alliances – where people exchange advice & experiences. 9. Make sure all contributors understand how recognition of
• Design collaborative alliances – developing a product. added value will be acknowledged and rewarded.
• Production alliances – exploiting a technical standard. 10. Configure the output of the Alliance in a modular format – so
• Online and video games alliances participants can configure it or embed it into other things they
The Internet is an incredibly fertile environment for new Alliances do.
to take root and grow. Alliance b-webs can form quickly around a 11. Find ways to harness network effects whenever and
value proposition of creative collaboration. The key is to direct wherever possible. That harnesses the power of the Internet
those collaborative efforts towards a common goal in the productively and intelligently.
absence of a traditional management structure. Make it possible
12. Since creative collaboration is the goal, use every effort to
for participants to commercially exploit the outcomes of the work
communicate and strengthen the goal which is shared
of the entire Alliance and you’ll soon find a community of
passionate, motivated and highly involved users will form. This across the entire Alliance. In essence, get everyone on the
same page of the same book.
can be a powerful force in the creation of new digital capital.
 Digital Capital - Page 8

Business Web Model #5 Producers & Producers &

Distributive Networks Consumers Consumers
Main Idea
Distributive Networks are the b-webs that provide the backbone Distributive
for the digital economy – infrastructure, communications Network
bandwidth, delivery services, banking services, etc. All such
networks are in a constant state of flux and change.
Supporting Ideas
Simply put, Distributive Networks are mediators or enablers
facilitating digital or commercial transactions. Both producers
and consumers of goods use networks to conduct their
transactions. Historically, the power grid was the best example
of a Distributive Network but in the digital economy, the Internet
itself is the ultimate network.
The two driving forces behind the growth of Distributive Theme Allocation / distribution
Networks are:
1. Deregulation – many governments have dismantled Value Facilitate both the exchange and delivery of
monopolies and let free market forces empower the set up of Proposition goods, services and information
new networks to provide infrastructure needs.
Consumer Both sender and receiver
2. The network effect – the bigger the network, the more value
Role
there is in additional users joining the network.
The key Distributive Networks of the digital economy are: Focus Network optimization, visibility, transparency
• Telecommunications
• Financial services Key Distribution
• Distribution and logistics Process
• Air travel Enron, UPS, AT&T, Wells Fargo, the Internet
Examples
• Power
Savvy network builders are currently in the process of setting up
broad Distributive Network b-webs that: The key success factors in building a Distributive Network b-web
are:
n Make it easy for other b-webs to join in and derive benefits.
n Become enablers of e-commerce applications. 1. Make it easy for other b-webs to use you as their commerce
or infrastructure provider.
n Provide visibility, speed and agility to companies who are
2. Make a decision whether to focus on a commodity
developing new e-commerce capacities.
infrastructure approach or target a value-added niche.
n Cross traditional business categories – for example, linking a
3. Whenever an arbitrage opportunity arises, share the profits
bank, a telecom provider, a delivery service and an oil
with customers. That will generate a substantial ramp-up in
company together in a network which uses neighborhood gas
stations as a shopping, delivery and pickup kiosk. volume.
4. Make certain you provide event-driven optimization
n Bring together the partners needed to provide turnkey
capabilities and responsiveness. It’s the basic price of
solutions for supply chain management – probably in
association with software, telecom, distribution, consulting admission in the digital economy.
and financial services providers. 5. Ride the network effect. Maximize the number of points of
presence you have. Find ways to serve more customers in
n Capture information from customers to find ways to manage it
more locations. The more value you deliver, the more your
to derive added benefits in the future – in effect, making the
network function as an infomediary. network is worth and the greater the incentives for others to
join.
n Come up with entirely original digital applications – such as
6. Don’t have an asset mindset – where you try and own the
combining a telecom company, an airline, a limousine
service, a travel agency and a delivery service to create a entire network yourself. Instead, think b-web partnerships.
concierge service for frequent travelers. Utilize, but don’t own, as many assets as possible.
7. Keep searching for new ways to facilitate the exchange and
n Operate as “Investomediaries” – broad financial services
providers who will work to maximize the return on delivery of products, services and information. As the
investments and utilization of available funds and savings for Internet expands, more opportunities will open up on an
ongoing basis. Keep up with the play and evaluate every new
consumers.
development from the perspective of building the network.