Why This Book Is Important for Your Business

This book is important for three major reasons:

1) There's an increasing amount of fear, uncertainty, and doubt in today's business environment;
2) any individual business is powerless to control events around it; and
3) we're already in hyperdrive, the stakes are high, and the pace of change is accelerating so rapidly that both uncertainty and powerlessness are going to increase.

In today's business environment, leaders don't have the luxury of incremental change or gradual evolution. Your business needs to turn on a dime, your managers have to develop new skill sets almost overnight, and your customers are becoming increasingly fickle because their tastes change quickly. It's in this atmosphere, where you need to accelerate your business growth, minimize investment risk, and develop a new kind of customer loyalty, that we believe forming communities, inside your company as well as with your customers, is the only prudent way to proceed. It's important if you want to survive. Both new and established businesses that are seeking to make the transition to the world of the Internet are afraid. It's new, uncharted territory and most people believe there's little history to teach us how leaders can navigate these troubled waters. They are fearful, but they don't know where to turn.

Product-based companies are no longer in control. The days when Ford Motor Co. could dictate what color cars their customers would buy is long gone. In the high-tech world, the days when one company could control the development of operating standards for an entire industry are gone. Even Bill Gates found that there were forces more powerful than Microsoft. This book is built upon an assumption that your business model, your products, and the way in which you interact with your customers needs to be driven by customer preference, not your own internal efficiencies.

The pace of change is increasing also. This book is important because you can't send half a dozen of your executives off to an MBA program and hope that they will come back with your Internet business strategy in two years. The actions you take and the changes you make to your business in the next six months will, in all likelihood, determine whether you're a casualty, marginally successful, or a healthy survivor of the transition to the new world of e-commerce. The stakes are high. Business-to-business e-commerce will explode in the next several years, with online commerce reaching a transaction value of $2.8 trillion by 2003. The Internet will account for a fourth of all business-to-business purchases, according to a recent study by the Boston Consulting Group (BCG).

Media Metaphors

We live in an age of convergence. We used to have established conventions of communication for print, for informal writing (correspondence), for the telephone, for radio, television, and movies. Then things began to merge. We had made-for-TV movies and books on tape. Along came the Internet and suddenly e-mail replaced much of our correspondence and telephoning. Communications media became blurred and established conventions were made obsolete. We have seen this same blurring of media in the business world. Only a few months ago the acquisition of Time Warner by America Online was announced.

One of the major challenges we faced in writing this book was how to provide you, the reader, with enough context to translate the concepts of community into your business world. After much discussion, we found ourselves using media metaphors. You'll find throughout this book that we use a lot of similes and examples taken from the movie production industry. This is hardly by accident, since the use of these terms and ways of describing business processes came to us through intense study of that industry and its own struggle to form communities. But this is a book about the Internet. At this point in time, midway through the year 2000, we're watching books, movies, and the Internet establish new communications conventions, and finding that they are all becoming one.

Think about this introduction, which is intended to give you some context, as being what we used to know as a preface in the book industry, a preview in the movie industry, and a home page in the world of the Internet. It's intended to give you context and to anchor you psychologically with some examples and terms that you are already familiar with, before we introduce you to new symbols, metaphors, rituals, and cultures.

What We Are Going to Talk About: Lights! Camera! Action!

Scene 1

Think of this book as a movie. It's a narrative, a chronicle of the idea of building a business around a very old form of human organization -- the community. As with any good story, there's some background. We start our story with thoughts on "the rise of communities." This part of the story is about history; and it's important because we believe in the old adage, "Those who fail to understand the mistakes of history are doomed to repeat them." While the sweeping changes that are taking place around us in business, government, and education are numbing and sometimes frightening, there actually is some useful history that we can look at to place today in an understandable context. We've chosen to start our story by retracing some of this history and looking at what happened to society when we had our last information revolution -- the invention of the printing press.

You need to start thinking strategically about the Internet, e-commerce, and the new world economy. This book is about making strategic changes in your business to make it function like a community. Each player on your team today has to simultaneously be a versatile player, coach others, and hold a seat on the management board that worries about the long-term viability of the enterprise. So we start with examples of strategic thinking that proved successful the last time changes of the same magnitude occurred.

Scene 2

What's driving us into this new economy? There are a number of things present in today's world that didn't exist in the 1500s. The results of these driving forces may be of the same magnitude as those in our historical example, but they are different. There are forces that are "pulling" us into different business models and markets and there are conditions that are "pushing" us in that same direction. Internet technology has made it possible for anyone who is online to be in contact with any other person connected to the web of networks on this planet; this is absolutely unprecedented in human history. This interconnection acts as a force to pull us into new ways of doing business, learning, and governing ourselves on a global scale. At the same time, the general rise in economic prosperity, at least in the developed parts of the world, has given rise to pent-up demand for increasingly sophisticated services, in both the business-to-business and the business-to-consumer markets. It is as if our customers are standing behind us and literally pushing us into doing business differently.

These drivers are forces we can't control, but we must understand how to react to them. We are in a fragile canoe in a fast-traveling stream and we can't get to the shore. But we can steer around the rocks and ride the rapids if we have some idea of the power of the water and how it reacts to our oar. This book is about how to put the oar in the water and how to paddle.

Scene 3

Rapid growth and change are the major components of today's business climate. Companies and organizations are responding by developing new models of doing business and new ways of making and delivering products and services. Cultural, technological, and business applications are changing around us. New cultures are literally being formed daily. These cultures have new sets of symbols and rituals of interaction, and they construct their own meaning among themselves. Take, for example, the vast communication differences that exist between the two major generations in today's business environment: the baby boomers and the Gen Xers. They respond to different messages and have different expectations about how to do business and how to work. These are changes that not only have to be dealt with, but anticipated and leveraged.

Technology is becoming atomized. In three short years, we've gone from a dream of having networked computers to experiencing the rise of open source software, embedded computing at the component level, and wireless connections between all of these different elements. How do you deliver your brand message to someone's wristwatch browser? That is the kind of question that today's technology demands an answer to.

Portals, customized Web sites, and the emergence of agents have helped us make a major shift from a traditional seller-centric model, through an aggregator model, to a truly customer-centric business application paradigm. This shift creates the need to organize your business internally in a different fashion, speed up your product development process, and incorporate revenue models that may be outside of your business's expertise. Once again, we find that a community model can be very effective in the new business climate.

Scene 4

How does one transform a business into a community? It's not easy to do, because most of our old ways of doing business and the established rules of the road don't work anymore. It's more complex than mastering a new set of moves in an old game; it's more like learning an entirely new game. We believe that the central ingredient in this transformational process is education: for the leaders of the business, for workers, and for your customers. The core value-adding process in the new economy and within our communities is the creation, nurturing, and preservation of intellectual capital.

The increasing complexity, the need for creativity, and the demand for more community in today's marketplace call for different styles of management and different ways of dealing with all of your stakeholders. There are steps that you can take to ease the transformation, and we spell out those steps. Perhaps the most important step, as with any journey, is the first one. In our opinion, this first step has to be making a very critical and unbiased assessment of where your company is today. That evaluation, placed against a vision of where you want to take the company, can help you formulate a list of things to begin working on. We provide an assessment model, along with some illustrations of how it works, to help you develop a vision of the transformation process.

Scene 5

At this point in our movie, you, the audience, understand why the actors are behaving the way they are and some of the forces driving them; you've seen the scenery change and the tension is building. As the scene opens, actors are repositioning themselves and forming new relationships with one another. Improvisation seems to rule the scene. Is there something fundamentally different about the setting they are performing in? Reinventing communities online is similar in some ways to establishing physical communities, but there are important differences. Some very basic psychological needs are met by both physical and online communities. There are a number of examples of people who consciously constructed online communities that can be used as benchmarks. Our actors do have role models.

Communities solve many social problems. These problems are mimicked in business every day. Conflicts arise, status and roles must be defined, and we need to both attract new members to the community and move others out. The tensions in our drama are resolved by bringing into alignment cultural factors, the focus of management, communication patterns, and the actual design (in time in space) of our community. When the actors' behavior, the script, and the setting are all in sync, we can achieve effective functioning of the business.

How we interact with one another and how we express our creativity are the two major dimensions against which all these factors can be laid. The Internet has forced us to move from low levels of interaction and low creativity to high levels of interaction and high creativity. Much of this first came to light in the late 1980s, when early adopters were trying to use the Internet to form telecommunities. Most of these experiments were unsuccessful, because they weren't approached from the broad perspective of a community of commerce that needed to be self-sustaining. They were not managed properly and they didn't have a business plan. There's much to be learned from these lessons as you start to construct your own community of commerce.

Scene 6

As our movie begins to draw to a conclusion, conflicts are being resolved, new relationships are being formed, and all the subplots are being played out to their natural conclusions. In this scene, we lay out the actual nuts and bolts of the steps for building an Internet-based community of commerce. There are many elements of communities of commerce that you need to look at; some you must do, some you should do, and some it would be nice to do. You need to differentiate these elements clearly and set your business priorities accordingly. Investing in the less critical areas and ignoring the essentials is a recipe for disaster.

Choosing your partners and building commitment within your community are two critical action elements. Partners must be chosen for strategic advantage, not tactical efficiency. Commitment will sustain your community of commerce over the long haul. There are many different ways of looking at commitment, but achieving commitment to the community really means building your brand.

Branding in e-commerce is a topic that is only now being explored. We see the issue as being at center stage in all the plays that will follow in this theater of business for the next decade. Branding is an emotional issue; it responds to subtlety and image and is steeped in symbolism. Branding, as a responsibility, must be taken from the marketing department and placed squarely on the shoulders of the chief executive. The chief executive then becomes the master of community development.

Scene 7

The pieces are coming into place, but now they need to be reassembled. The traditional roles of actors, directors, audience, and producer all need to be reexamined. We see that it is the audience that is really driving the action, but it is the producer who is in control. In this scene, the context of our drama will be examined. We'll begin to see how new roles emerge.

To build and sustain a community of commerce, you must develop the right framework. Using the example of a midsize advertising firm, we'll examine how all the factors involved in building a community work together. We'll look at the interrelationships of products, culture, and environments and how these relate to emerging business communities.

Scene 8

What is the future of online business communities? First of all, we believe communities will be a basic business model for many years and will increase in importance as the Internet becomes even more pervasive in the new global economy. The desktop was the organizing metaphor for business in the 1980s and 1990s. People sought to control the desktop, connect the desktop, and use it as a window (pardon the pun) to the larger world. The organizing metaphor that will dominate in the next decade is the community. The technology itself has empowered people to become more connected and more related to one another. These connections and relationships are being formed by our customers themselves, and are no longer controlled by the providers of products and services. This social transformation needs to be exploited if a business is going to be successful in the next decade.

The other dominant development we see in the future of online business communities is the evolution of an old business model -- the media model -- but with a new twist. This business model suggests that if you can reach out to build a community of potential customers and get their commitment and their brand loyalty, you have built something that has inherent value. You've constructed a new distribution channel to a community of like-minded people with the same preferences and purchasing patterns.

The best example of this model of the future is the emergence of Martha Stewart.com. Stewart started out on a very small scale and targeted a very narrow niche that was on the cusp of an underlying generational change in the United States. Stewart was smart enough to understand that the baby boomers were maturing and becoming interested in constructing around them a pleasant, comfortable place to live, raise their children, and entertain members of their community. Her first foray into this market was through limited television appearances, which expanded exponentially overnight. Her brand was established. More recently, she entered the publishing arena and established a community of commerce on the Internet. The next step in the evolution of her business model was to become what could be called "you.com" and to actually take herself public. When she did that in 1999, she was heavily subscribed by some of the scions of the venture capital community. This was a clear sign that the media model is going to be the successful business model for the next decade. Big money is betting on it. Martha Stewart has managed to develop a community of commerce; integrate it with television, print media, and the Internet; and attract investment from some of the most forward-thinking people in the business world. Watch this space!

The future of online business communities lies in providing people with shared interests a way to come together, express those interests, and conduct easy, relatively painless transactions with providers of goods and services. The future is bright for those who understand this and adopt a community-based way of doing business. The future is bleak for those who don't.

Fade to black! Roll the credits.

Observations about Case Studies

Our book is peppered with case studies. Case studies make things real. They are chronicles of people actually out there in the real world trying to do something with the ideas we're talking about. Some studies are blended into the text, and others are set off as stand-alone reports of successes and failures. There is one worrisome aspect of writing a book that includes case studies: The pace of change in the world of e-commerce is so rapid that situations are often out of date before they are reported. We've made every attempt to keep our case studies current and focus them on business models that illustrate the potential of e-commerce or clearly document a pathway not to pursue. The examples are fluid and will be continuously updated. We will bring you those updates through our Web site, www.CommunitiesofCommerce.com.

A Note on the Bibliography and Resources

Readers need tools and a road map to pursue their own investigation of our ideas. Thus, we have provided dozens of resources, including academic and business press sources as well as Internet sites. They are very broad in scope, but will get you started. They've all been verified at the last possible moment, but are subject to all of the vagaries of the business world, which could render them out-of-date or irrelevant. We will update the resource lists and publish them on our Web site. As a convenience to readers, bibliographical entries are listed along with resources.