The material in Net Worth is carefully organized within three Parts: The New Infomediaries, Entry Strategies, and The Infomediation of Markets. Hagel and Armstrong also provide an Appendix: The Technology Tool Kit, followed by excellent suggestions for further reading. According to Hagel and Singer, "We came up with a key insight. Digital networks such as the Internet might for the first time provide the tools necessary for customers to capture information about themselves and to deny vendors access to this information....It became clear that there would be an opportunity for a new kind of business -- we call it 'information intermediary' or 'infomediary' -- to help customers capture, manage, and maximize the value of this information."
Hagel and Singer challenge a number of common views about the Internet: "First, we urge senior managers not to view the Internet simply as a way to do the same things cheaper and faster....Second, we reject the notion that the Internet is uniformly leading to disintermediation, creating opportunities for vendors to connect directly with customers while relentlessly eliminating all intermediaries that previously came in the way....Third, we question whether the real value of the Internet is in information access. The Internet instead is a powerful platform for connecting people or businesses with each other, enriched and enhanced by relevant information....Fourth, we are suspicious of claims that the Internet will systematically lower barriers to entry and lead to fragmentation of businesses." These excerpts from the text correctly suggest that (a) Hagel and Singer believe that there are several quite serious misconceptions about the Internet relative to virtual communities and (b) they have quite specific opinions about how best to shape markets at a time when customers determine what the terms of engagement are.
They assert (and I wholeheartedly agree) that companies playing the "infomediary" role are now -- or will soon become -- the custodians, agents, and brokers of customer information, marketing it to businesses (and providing then with access to it) on consumers' behalf, while at the same time (key point) protecting their privacy. In the final chapter, Hagel and Singer observe that "This book has argued that infomediaries can play an extremely valuable market role in reconciling the tension between the growing value of customer information and the growing concern over customer privacy....[Over time] infomediaries will reshape firms and markets. In doing so, they will unleash broad social changes and call into question many conventional approaches to public policy. Our response to these social and public policy issues will in many respects determine the pace and the ultimate effects of this innovative new business model." It is probably impossible to calculate the full value of what Hagel and Singer provide in this single volume. Theirs is a stunning achievement.
Beyond its obvious implications for multi-national enterprise, the concept of "infomediation" may well be the defining principle of global connectivity and interactivity for decades to come. My strong recommendation is that Net.Gain be read first, then Net Worth. My further recommendation is that both books be used to formulate the agenda for a workshop or what is generally referred to as an "executive retreat" (preferably for two days and located offsite) with all participants required to read both books in advance. Those who share my high regard for the two books are urged to check out Peter Senge's The Fifth Discipline as well as O'Dell and Grayson's If Only We Knew What They Know. Both can also help with the planning and then implementing the off-site workshop recommended earlier.
Net Worth is an easy and pleasant read that will stimulate any reader's desire to begin dabbling online whether through an Internet company or the market. It offers the kind of insider's perspective necessary to succeed in the space. Once again, Hagel is providing a road map to what is right around the corner and the importance of these changes to the various communities impacted by them.
Net Worth is relevant to three very different audiences. To business leaders in perhaps fifty large and mature businesses, not yet publicly associated with innovation on the Net , it provides a detailed plan for building a $4bn turnover businesss within ten years, by dominating a new business category, that of 'infomediary'. Achieving category dominance has high initial investment costs but, particularly in relation to other Net business lines, it is genuinely a category where winner takes all and with highly attractive barriers to new competitors. To database marketers, to vendors of consumer data and to CRM specialists, it sets out the very different model which the Net will create in the way consumer data are accessed, used and profitably traded. To the generalist reader of business titles it offers a clear and challenging argument as to why, to survive, most businesses will have to focus much more selectively on a much narrower section of the value chain than they currently attempt to cover.
Despite its title, I suspect that Net Worth has little to say to those whose interest in the Internet is as a tool for delivering information to consumers. Its focus is on the Internet as a tool for generating information about consumers. But do not think you couldn't profit from this book just because you are not an e-commerce specialist..
A sequel to Net Gain The authors are consultants at McKinsey & Co. For one, John Hagel, Net Worth represents the evolution of a thought process begun in Net Gain. The thought process is an original one - it does not seem to borrow on other academic literature - but it is clear that the authors have benefited from much collective pondering on the part of McKinsey as to where equity value is most likely to be gained in an Internet-enabled world.
Polemical clarity The style is neither that of an academic or of a practitioner. To some it may seem too much a polemic. At times it is as though you are reading transcripts of board level management presentations. You are bludgeoned rather than seduced. There is little room for uncertainty - other than who will win the prize - and none for humour. Full marks, however, for the clarity of the text and of the argument. Copyright, intersetingly, is vested in McKinsey.
The Net Worth thesis is built on a clearly articulated model. In this model companies will in the future increasingly specialise in particular stages of the value chain, in innovation within the production of specific consumer services, almost as commodities; in the manner in which these products and services are communicated to, and delivered in customised form to meet the increasingly specific demands and circumstances of, individual customers; and in infrastructure support services which will become increasingly standardised. Innovation, customisation and cost reduction will be the core qualities needed by successful companies in these three stages of the value chain.
Customer profiles The 'customisers', who specialise in the management of the customer relationship, will have at the core of their business proposition the leveraging of information on consumers, or customer 'profiles'. To deliver effective personalisation and satisfy increasingly demanding consumers, these organisations will need to operate across multiple product categories. In addition, they will increasingly rely on their ability to gain the active endorsement of the consumer for access to and use of their web usage as well as demographic and product purchasing characteristics. Expertise in the manipulation of these data to provide tailored services to both consumers and to potential providers will be their key competence.
Infomediaries To the consumer, allowing a trusted infomediary to consolidate their personal profile into a single data source has a number of attractions. It reduces the number of times common personal attributes have to be made available to suppliers. Assuming the infomediary can be trusted, it reduces the concerns over privacy and misuse of personal data. By interposing between the consumer and providers, the infomediary can negotiate better terms with suppliers; can require them to customise their offers in such a way as to better meet the needs of groups of consumers with similar needs; can enforce controls to suppress irrelevant communication, and conversely can initiate relevant proactive communications. In an era when the consumer is increasingly unwilling to offer personal information without exacting a price, and when most companies lack the expertise to pattern existing data into sensible communication strategies, such a shift would offer benefits all round.
A frictionless market? Few readers would find flaws in this logic, other than the touchingly Benthamite faith in the extent to which rational self-interest can be relied on to drive consumer behaviour into a world in which brand values - other than those of the trusted infomediary of course - would increasingly wither away. Hagel and Singer's heaven is a totally frictionless market - which marks them out as inhabitants of the Net world rather than that of Madison Square.
Outsourcing Whatever companies' ambitions to relive past glories, Hagel and Singer are particularly compelling when they argue how, in an increasingly complex business world, companies cannot survive unless they develop management cultures appropriate to the positions in the value chain they want to fill, and that the contrasting cultures for each position are becoming increasingly difficult for any single organisation to nurture and sustain within a single operation. From outsourcing the canteen and the cleaning, and then the manufacturing of assembled components, it may not be absurd for Ford to move to the outsourcing of the entire manufacturing process, but not the design, while it positions itself to the consumer as the relationship manager for all consumer (and business) needs associated with the funding, provision, insurance and maintenance of personal transportation needs.
The benefits of scale The other proposition I found compelling - as one might expect from McKinsey employees - was that, unlike other Internet businesses, many of which suffer from very low entry barriers and attempt to replicate traditional businesses but in more frictionless and hence lower cost forms - the position of an infomediary was more akin to the owner of an operating system in terms of benefits of scale. The more customers you have persuaded to trust you with their data, the greater your commercial influence with suppliers on their behalf. The more producers you deal with, the greater the width of data you build up on your consumer customers, and the more attractive you become to them. The more they deal through you, and the longer your relationship, the richer becomes your database and the more difficult it becomes for competitors to provide your customers with a service of equal value. Such dynamics do not apply to the same degree to individual sites or to portals, or indeed to suppliers of 'old world' products and services.
Given the pace of change in the world of e-commerce, you might suppose that the Net Worth thesis could increasingly be justified or refuted by market events in the 18 months since its original conception. Other than Scoot I cannot at present identify any aspirant European infomediary as would be defined by Hagel and Singer. However, in markets such as financial services, utilities, cars, home buying and travel, in the UK at least, we are daily witnessing the decomposition of the traditional value chain as predicted. What is foretold in this book is, I'm confident, a long-term shift, and I would hazard that evidence so far supports rather than refutes the arguments it sets out.
In summary, a worthwhile read. You don't have to read it all, or read it in any particular sequence. Better read in a train or plane than at home or on holiday.
Richard Webber FIDM Managing Director Micromarketing Division, Experian, UK
This review was published in the Journal - Interactive Marketing. www.henrystewart.com/journals/im