UPCOMING TOPICS Half Your Workforce is Now Obsolete Big Gap in E-Commerce Maturity Create Irresistible Digital Value! E-Market to E-Market: Beyond Today's E-Commerce Death of the Brand: Software Agents Suspected American Invasion of Internet Markets: Any Country Beware! OTHER RECENT ARTICLES of interest "Peer into the Internet's future" Cyber prophet Walid Mougayar and three others ponder the future of business on the Net. (Appeared in Information Week's special report "Internet in the 21st century", May 4th 1998)

ABOUT Walid Mougayar Walid Mougayar is president of CYBERManagement Inc, a management consulting and education firm. He is an authority on Internet commerce business evolution, management and strategies as depicted by his current bestseller Opening Digital Markets (McGraw-Hill, 1998). Walid is co-author of The Business Internet and Intranet (Harvard Business School Press, 1998). Walid is exclusively represented by The Leigh Bureau for speaking engagements. Since 1995, Walid Mougayar has been writing about and presenting original themes on Net commerce such as: digital value creation, new Internet business models, virtually integrated companies, benchmarking in cyberspace, digital strategies, agent-based commerce, electronic business communities, and other important management themes usually covered in this semi-monthly issue. Prior to 1995, Walid spent 14 years with Hewlett-Packard (Canada) Ltd.

ABOUT CYBER Review This newsletter is received by an exclusive list of business managers, executives and electronic commerce strategists interested in business and management thought leadership in the evolution of Internet commerce. It may be electronically duplicated, reproduced or retransmitted in its entirety with a live link to http://www.cyberm.com/vol2no3.htm. For reprints, please contact CYBERManagement Inc. Excerpts used for the purposes of quotation must be attributed explicitly to Walid Mougayar, CYBER Review. Archived issues of this newsletter and other CYBERManagement research are available here.

Increased E-Commerce business activity is leading to the creation of several types of electronic marketplaces (E-Markets). Unfortunately, today's E-Markets are closed, whereas the next generation will be open, global and based on electronic business rules of engagement.

Yes, it's a new "E-word ". E-Markets-- also known as digital markets-- are made up of several virtual businesses that come together within the confines of open trusted environments to interact spontaneously and efficiently. They represent an evolution from today's E-Commerce landscape, as they force an unprecedented level of co-operation and interoperation between electronic businesses. If you have conquered electronic commerce and mastered the essence of electronic business, E-Markets are the next frontier and battleground for market shares and market dominance*.

What we have seen so far are only first generations of E-Markets, mainly organized by familiar categories such as:

1. Virtual superstores (e.g. Amazon, NetGrocer)
2. Electronic storefronts to existing services (e.g. Internet banking)
3. Bid/ask marketplaces (any online auctions or classifieds marketplace)
4. Virtual order centers (e.g. CarPoint, Travelocity)
5. Intranet-based electronic business communities (e.g. Cisco, Dell)
6. Virtual trading marketplaces (e.g. FastParts, PartsNets)

Beyond today's closed E-Markets, we are awaiting a newer generation of open forms of electronic marketplaces that will give the Internet its true meaning of a global marketplace. Even better, we are ultimately anticipating E-Markets to conduct business with each other.

A few years ago, "open systems" were in vogue. The goal was simple, yet logical: to allow proprietary computer systems to communicate with each other- - a purpose they were not originally conceived to do. A similar analogy takes place today in Internet commerce. Yes, we succeeded in connecting millions of computers together, but now we have thousands of proprietary electronic marketplaces on our hands. Just as early computers didn't communicate with one another, electronic markets aren't co-operating with each other, yet.

Here are some examples of non-co-operation:
First, in the consumer space, pick any successful business, such as Microsoft's Expedia for travel, Amazon for books, Onsale for auctions, Auto-by-Tel for cars or Classifieds2000 for classifieds. Although they each claim to be global Meccas for their own offerings, they portray in reality a micro-representation of the true global potential, because their inventory is only a subset of globally available inventories. The only way to find and compare additional offerings is to purposely visit competing Web sites, or to force a software agent to do it. Furthermore, any process that is chained to another-- such as going from picking a car model or dealer, to choosing a car loan, to deciding on an insurance plan-- has to be performed within the confines of the closed marketplace you first entered, and not truly across openly available market choices. Second, in the business-to-business space, all current electronic business communities are designed to serve a given organization's partners-- by invitation only.

The evolution to more open and interoperable electronic marketplaces will become a reality when the following two business conditions exist simultaneously: 1) a critical mass of electronic markets willing to co-operate, and 2) the availability of electronic business rules.

Critical mass of electronic markets
We are starting to reach a critical mass of electronic users in certain segments, but we are still awaiting a critical mass of electronic businesses in several industries. While E-Commerce is giving birth to electronic businesses, we need several of them to form an E-Market. This is the same as being in a new town with a growing population and waiting for several businesses to flourish in each community. Only after enough of these businesses exist in each segment would there be a reason to form associations that foster co-operation for common benefits. The increasing weight of electronic markets dependence and competitive industry forces will be an economic incentive for co-operation. We need more electronic businesses, even if they start in a self-serving "closed" stage. Aren't we tired of naming the same companies that symbolize Internet success: Cisco Systems, Dell Computers, Marshall Industries, Yahoo!, Excite, Amazon.com, E*Trade and a just a few others?

E-Business Rules
Yet another "E-Word", E-Rules (or E-Business rules) spell out the predictable terms of engagement and behavior between two electronic businesses or between an E-Market and another one. E-Rules are admission tickets to E- Markets. Once E-Rules are known, companies can tap new electronic markets by differentiating themselves within the established criteria. For example, E- Rules could include product definitions and classifications, common business process policies (e.g. credits, orders, shipping, returns, etc.), bid acceptance terms, delivery options, and other necessary knowledge required to consumate an end-to-end business relationship between trading partners. One advanced planned implementation of these open rules is the RosettaNet initiative, which groups all companies involved in the Information Technology industry (manufacturers, wholesalers, distributors, shippers, large users, etc.). E-Business rules will contain a richer decision criteria for buyers and sellers such as terms of payments, shipping process and cost, return policy, support features, etc. They will be packaged and presented in standard ways that allow a business comparison to take place beyond commodity factors such as price and product features.

Beyond E-Markets: More E-Markets
Imagine now a critical mass of E-Markets willing (and able) to co-operate by adhering to open business rules of engagement. Three different scenarios are possible:

1. Within a vertical industry. For example, why couldn't we personally manage all of our financial holdings-- mortgage, retirement fund, mutual fund, insurance plans, checking/savings accounts, stocks portfolio, CDs, bonds-- across the various financial institutions that are maintaining them? Sure we can organize this information today on a PC, but a more significant evolution would be to do it interactively, and in real time. This could force all financial institutions to co- operate on a set of E-Rules for electronic customers.
2. Across co-operating industries, but focused on a uniquely identified process. For example, realtors, termite inspectors, lenders, lawyers, appraisers, listing sources are all needed to enable the consumer process of "buying a home". But what is needed is not just the handful of appraisers or banks recruited by the company running a given real-estate Web business. Rather, what is needed is for ALL appraisers to be available electronically, for ANY bank to be able to fulfill mortgage requests, for ALL real estate companies to pool their listings, etc. By coming together co-operatively and intermixing their inventory of capabilities, industry players can build a truly comprehensive electronic marketplace, and that is much more attractive to all buyers, sellers and process participants.
3. From an E-Market to another. Going one final step further, why not allow complete E-Markets to accept electronic business opportunities from other E- Markets? All of them would have to "open" their services to other available E- Markets. What if, for example, all the insurance industry's inventory were automatically made available when an automobile was purchased through an online process? Or, why not allow the entire shipping industry to collectively bid on large or small orders, directly from manufacturers or distributors? Or, why not allow an E-Market coalition from one country to interact with another E-Market segment in a different country? To do so, open listings of "interchangeable services" would have to become available so that businesses can feed each other electronic services. This is beyond linking a Web site to another. This is about seamlessly chaining products and services needed from one E-Market to another, without human intervention.

While we wait for open marketplaces to take shape, I suggest that you evaluate your electronic co-operation practices with other members of your value chains, competitors and other industries that matter to you on the Internet. If the seeds of electronic co-operation at the business level are not planted now, we will end up with more disorganized marketplaces. We don't need more disorganized marketplaces,-- the Web is already disorganized as it is!

At the end, tomorrow's E-Markets will be open and orderly, but the path to this evolution may not be.

Note: CommerceNet and their spin-off Veo Systems have so far described (and are working on) the most compelling vision for open E-Market interoperability.

* Source: "Opening Digital Markets", McGraw-Hill, (c) 1998.

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Our analysis of 500 worldwide E-Commerce press releases over the month of May revealed that only 6% of stories were truly significant to the advancement of electronic commerce on the Internet.

The largest number of stories (35%) was found in the "navel gazing" category, a label rightfully attributed, as most companies are quick on the trigger to boast about intentions and achievements. The most commonly recurring words in this category were "demonstrated", "selected", "chosen". This indicates that the marketplace is starving for early recognition and self-confirmation of successes. Another notable category (19%) was in business or technical alliances. This confirms that electronic commerce is about leveraging partnerships and relationships. The third category (17%) was in new product introductions. Leading the pack were press releases from technology vendors making such claims as "revolutionary", "most comprehensive", "most advanced". So the hype lives on.

Following is the percentage breakdown in 7 distinct categories. They provide a clear picture of what is really happening in the marketplace.

35% of analyzed releases are navel gazing stories
19% are business or technology alliances
17% are new product introductions
8% cover statistical or research findings
7.5% are of a legal or legislative nature
7.5% are about new online businesses
6% are significant to the advancement of Internet commerce

What makes an event significant? The following characteristics must be included: it is not totally expected but is welcomed, shows some boldness, depicts steps not taken before, is an example for others to follow, and most importantly has long term strategic implications. Finally, the story should make you think: "They started something..."

Just like any industry, E-Commerce has its share of insignificant news, but because of its novelty that share is disproportionately high. The old saying "it's not good enough to believe 50% of what others say but rather you must know which half to believe" becomes "you have to know which 6% to believe".

Note: This analysis pertains only to original press releases from company sources, not stories written by professional reporters.

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Copyright © 1998, CYBERManagement Inc.