Philip Evans

Thomas S. Wurster

<article-ideainbrief class="article-ideainbrief">
 <h4 class="ideainbrief-title">The Idea in Brief</h4>
 <div class="ideainbrief-contents">
 As e-commerce matures, the focus shifts from claiming territory to defending or capturing it, and from experimentation to strategy. In particular, navigation constitutes the battleground on which strategic advantage is either won or lost.
 Navigational tools comprise everything that helps ease consumers’ search for products they want to buy: brands, advertising, relationship building, even merchandising. The Internet alters the economics that determine how these tools get used. Today, e-businesses such as Yahoo! and Quicken focus on providing information, leaving the manufacturing, warehousing, and distribution to others. They make detailed, customized information available to a mass audience at very low cost. The information is not just in one category—say, travel. It cuts across traditionally defined industry boundaries. And it gives preference to consumers’ desire for objective information over retailers’ and suppliers’ desire to promote sales.
 Pure navigators such as Yahoo! and Quicken threaten retailers and suppliers alike with the loss of their customers. A fundamental rethinking of value propositions is in order.
 The Idea in Practice
 Navigation has three dimensions:
 1. Reach is about access and connection—how many customers (or suppliers) a business can get in touch with, or how many products or services it can offer.
 2. Affiliation has to do with whose interests a business is representing: the consumers’ or the suppliers’.
 3. Richness involves the depth and detail of the information a firm provides or collects.
 Companies can compete along any of these dimensions. (Microsoft CarPoint competes on affiliation: it enables car buyers to compare models on 80 different specifications.) The recommended strategy depends on what type of player you are:
 <ul>
 <li>Pure navigators. Close affiliation with consumers is your main competitive advantage—never do anything to compromise their interests for your own short-term gain.</li>
 </ul>
 <ul>
 <li>Electronic retailers. Be wary of exclusive deals with product suppliers: the sacrifice of reach and consumer affiliation would probably cost more than the gain in margin would be worth. Define your business in terms of a coherent consumer search domain, not an irrelevant physical category.</li>
 </ul>
 Example:&nbsp; 
 CDNow carved out a dominant, reach-based position in the CD sales category only to lose it in just a few months to Amazon. CDNow’s domain mimicked a physical category. Customers preferred Amazon’s more comprehensive search capabilities, which span books, movies, and toys—as well as CDs. 
 <ul>
 <li>Incumbent product manufacturers. Your competitive advantage over retailers lies in providing product-specific richness. To address the problems presented by navigators whose reach and consumer affiliation surpass yours, consider forming an alliance with a group of suppliers. Use branding to communicate an experience—feelings, associations, and memories—instead of facts about product attributes.</li>
 </ul>
 <ul>
 <li>Incumbent category-killer retailers. If you’re like Barnes &amp; Noble or Wal-Mart, you start with many competitive advantages, including reach, a high measure of customer affiliation, and rich consumer data. But unless you’re willing to compete against yourself, you risk losing your business to someone else. Create a separate information business and allow its managers to exploit the assets of the traditional business.</li>
 </ul>
 </div>
</article-ideainbrief>In its first generation, electronic commerce has been a landgrab. Retail space on the Internet was claimed by whoever got there first with enough resources to create a credible business. It took speed, a willingness to experiment, and a lot of cyber-savvy. Companies that had performed brilliantly in traditional settings seemed totally lost. Indeed, there isn’t a major e-retail category in which a bricks-and-mortar retailer has leading market share. Even Wal-Mart, that master of information technology, has so far proven hopelessly flat-footed on the Web.

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Getting Real About Virtual Commerce

A second generation of electronic commerce is emerging, one that will be shaped more by strategy than by experimentation. The battle for competitive advantage will be waged along three dimensions: reach, affiliation, and richness.

Getting Real About Virtual Commerce

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