Net Worth [Hardcover]

John Hagel III (Author), Marc Singer (Author)

Book Description

Publication Date: January 14, 1999

In This Highly Anticipated New book, John Hagel, coauthor of the bestselling Net Gain, continues to challenge our assumptions of how the Internet will drive, alter, and reinvent the nature of business. With Net Worth, Hagel and coauthor Marc Singer identify the next new source of revenue poised to spring from the Internet -- one with the potential to upend the fundamental relationship that links businesses with their customers.

Editorial Reviews

Amazon.com Review

No one ever said consumerism was easy. At one end, the poor consumer faces a bewildering array of goods and services. On the other, vendors contend with a diverse and fragmented marketplace that makes finding the right set of customers akin to finding the proverbial needle in the haystack. And in between are the billions misspent on muffed purchases and broken marketing campaigns that serve only to stuff mailboxes and alienate the very customers that vendors are trying to attract. The rise of e-commerce has only intensified the problem by offering consumers even greater choice and vendors more competition. John Hagel and Marc Singer think they've got a better idea, and in Net Worth, they present an online scenario that would end this chaos and give both customers and vendors what they really want.

At the heart of Hagel and Singer's solution is the "infomediary" that sits between the customer and vendor. For the consumer, the infomediary acts as a trustworthy agent who knows the needs and habits of the client. For the vendor, the infomediary is the holy grail of consumer behavior, a marketer's dream. The infomediary brokers client information to vendors in exchange for goods and services for the consumer. The result? Happy consumers, satisfied marketers, and a very lucrative business model that awaits those entrepreneurs and companies that are bold enough to embrace the idea. The authors painstakingly outline the challenges and opportunities of developing an infomediary business and go as far as to peg the potential market cap of a dominant player at $20 billion by its fifth year of operation. While the idea of software agents is nothing new, Hagel and Singer may be breathing new life into the idea at just the right time. And even if infomediaries never arise, following the thinking of Hagel and Singer is well worth the price of admission. For marketers, managers, entrepreneurs, and just about anyone who thinks about e-commerce. Highly recommended. --Harry C. Edwards

From Publishers Weekly

Looking at the future of e-commerce, Hagel (coauthor of Net Gain) and Singer, both principals in the consulting firm McKinsey & Company, add a provocative twist to the conventional view that those companies with the best information about their customers will be the most successful. They examine not only how companies can acquire information about consumers but also, crucially, how consumers can control dissemination of their personal information and even charge companies for their use of it. To the ever-expanding e-commerce lexicon they add a new term: "infomediaries." These third parties will serve both consumers and marketers: consumers will use infomediaries to help them find products at the best price, avoid unwanted product pitches and protect their privacy; in turn, via the use of sophisticated filters, infomediaries will be able to provide targeted consumer profiles to companies. The companies will then be able to anticipate consumers' needs and offer them appropriate products. While some companies, such as Intuit or AOL, currently perform some of these functions, the authors predict that the infomediaries are likely to be new companies formed by partnerships between existing firms?most likely between companies with large consumer databases and newer, more Internet-savvy entrepreneurial ventures. Well-written and full of scenarios of how these infomediaries will develop, this book will interest marketers and those consumers who are eager to explore the electronic frontiers of the economy. 50,000 first printing; $150,000 ad/promo.
Copyright 1999 Reed Business Information, Inc.

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Product Details

• Hardcover: 313 pages
• Publisher: Harvard Business Review Press; 1 edition (January 14, 1999)
• Language: English
• ISBN-10: 0875848893
• ISBN-13: 978-0875848891
• Product Dimensions: 6.4 x 1.2 x 9.5 inches
• Shipping Weight: 1.5 pounds (View shipping rates and policies)
• Average Customer Review: 4.1 out of 5 stars  See all reviews (31 customer reviews)
• Amazon Best Sellers Rank: #1,673,576 in Books (See Top 100 in Books)

Most Helpful Customer Reviews

30 of 33 people found the following review helpful

5.0 out of 5 stars If you want to "get it", get this book November 18, 1999

By A Customer

Format:Hardcover

I can understand why so many people have blown off this book with their reviews. It's not pleasant to read if you're basing your business or investment strategies on doing what everyone else is doing on the Internet. But if you want to really have your preconceptions challenged. If you want to feel uncomfortable with all the notions you have as to who the winners and losers will be, then read this.

Especially read this if you're a VC. Read this if you're investing in .coms...Read it and re-read it...because these guys are peering into the future and telling you something that you may not want to hear.

This is a profoundly insightful book that will be looked backed on as a turning point in the history of e-commerce.

19 of 20 people found the following review helpful

4.0 out of 5 stars Book Summary & Comments March 5, 2000

By Michael J. Osofsky

Format:Hardcover

Net Worth predicts how markets will change because of the Internet. Infomediation is what it calls the new way of matching buyers and sellers. An infomediary is a website that helps buyers find what they need. It knows more about the consumer than any existing marketing department does today. This complete picture of consumer desire allows the infomediary to target just the right advertisements at consumers.

Infomediaries will replace junk mail. They will be much more like a dating service in that they will match buyers and sellers based on what they need and have to offer. Buyers will love it because they won't get annoying irrelevant ads. Sellers will love it because they'll find customers that are easy to please because they are the right fit. Sellers can also spend their marketing budgets on other more useful things like R&D. Net Worth argues that the infomediary model will generally reduce market inefficiencies, for example informing consumers of fair market prices. The new model also eliminates the behavioral misalignment between marketers and consumers. That is, marketers want to increase repeat-business, but consumers want to increase choice. An infomediary helps marketers know what choices consumers want, and its wealth of product information maximizes the number of choices the consumer has.

Net Worth is a crystal ball that spells out how markets will shift toward infomediation. It identifies two broad categories of potential players: traditional businesses and Internet start-ups. Both categories are further refined into several types of businesses along with what benefits and disadvantages each has as an infomediary play. The most likely success story will be a traditional business that invests in a start-up and gives that start-up access to its immense customer data.

There will be three stages to the formation of an infomediary. The first stage is to develop consumer trust and data. That is where the reputation and database of the traditional business comes into play. Second, suppliers standardize on a way to describe their products. It will require economic incentive for suppliers to standardize on the proverbial price tag (XML: <price>$0.02</price>), because consumers will be able to price shop more easily. Infomediaries represent a significant number of consumers at the second stage, so suppliers are motivated to standardize their data because they can target ads at those consumers. Finally, the economic phenomena of Network Effect and Lock-In help set in motion a "virtuous cycle" of growth: consumers flock to the infomediary because they can get discounts and better product reviews and the infomediary learns more so the consumers enjoy and flock more.

The last third of the book is the most interesting, because it describes how "disintermediation" is really "re-intermediation". The Internet is not going to cut out the equivalent of travel agencies in every industry. Instead, value chains will reorganize and create NEW middleman roles. The roles correspond to the best opportunities for leveraging economies of scale. The roles are as follows.

1-Infomediaries gather all possible information about consumers. In today's world this is like a sales rep, but in tomorrow's world that sales rep would have knowledge of all customers of all products in the universe.

2-Innovator companies analyze infomediary data to invent new products that satisfy emerging needs. In today's world this is the marketing department, but in tomorrow's world the marketing department would have access to all relevant data in the universe.

3-Infrastructure companies will build what the innovator companies say. This is out-sourcing to the extreme. Infrastructure companies may own just one extremely large and extremely expensive piece of equipment. By keeping that machine at full capacity, the overall market benefits from the economy of scale.

The most interesting thing in the whole book is a paradox about how infomediaries will create a monopoly that the government will have a hard time dismantling. Consumers benefit most from an infomediary if all consumers use that infomediary and no consumer uses another infomediary. The infomediary's database is maximized, and so consumers get the best advice. Monopoly is defined as a business that hurts the free-market system by eliminating consumer choice. However, consumers gain maximum benefit when they have the smallest choice of infomediaries. Furthermore, infomediation's mission is to maximize consumer choice and continually advocate consumer interest. So will infomediaries be seen as monopolies?

Plenty of other reviewers poo-poo'd Net Worth. I think the book is visionary though. At the beginning of 2000, I already started hearing commercials for infomediaries. I'd give this book more stars, but honestly I've read more visionary stuff before.

11 of 12 people found the following review helpful

4.0 out of 5 stars Net Worth - a worthwhile read October 19, 2000

By Julie Simkins

Format:Hardcover

Net Worth John Hagel III and Marc Singer

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