"MetaMarkets": Capitalism in the Internet Age
In MetaCapitalism, PricewaterhouseCoopers partners Grady Means and David Schneider describe a new Internet-driven world in which the traditional corporate structure of the past is replaced by redesigned "brand-owning" companies. These companies outsource their manufacturing, distribution and even support functions (for example, accounting or human resources) and focus their capital instead on selling the brand, managing customer relationships and managing their supply networks. In other words, they are "decapitalized" - they no longer carry the high production capital and working capital functions of the past and even reduce their human capital costs.
Of course, as the authors write, "When brand owning companies redefine themselves, who - to put it bluntly - will make the stuff? Who will deliver stuff to customers and handle all the value chain processes that have been outsourced?" The answer is what the authors label "value-adding communities" or VACs.
VACs are external networks that take on many of the processes and functions once handled by the manufacturers. These networks can be compared to athletic teams made up of different players - the specific companies contributing to the network. As with athletic teams, the players in the VACs are constantly changing - new companies with better products can replace incumbent companies, VACs can trade value chain players with players from other VACs, and so forth.
According to the authors, the establishment of value-adding communities is just the first in the transformation to "metacapitalism." The authors predict within two years the growth of "metamarkets" - a brand new entity that gathers together portfolios of value-adding communities to offer, in the authors' words, "the best integrated suite of businesses from the perspective of customers and consumers."
The Case of Cisco Systems
To illustrate the concept of VACs and metamarkets at work, the authors use the case of Cisco Systems, which develops and markets multiprotocol internetworking systems. Cisco outsourced its production to manufacturers, distributors and logistic partners, then created a portal, called Manufacturing Connection Online (MCO), to connect the entire supply chain to the company. Thus the authors explain, "Cisco's business partners are able to directly monitor orders from Cisco customers and ship the assembled hardware - without Cisco directly touching an order. The system then prompts Cisco to pay for the parts used."
A similar portal on the front end, called Cisco Connection Online (CCO), creates another network for customers, suppliers, resellers and business partners. CCO, the authors write, "is essentially a portal to information stored in Cisco's ERP databases, legacy systems, and client server systems, and to more than 1.5 million web pages."
These two major pieces of Cisco's metamarket structure are joined by a third piece, Cisco Employees Connection (CEC), which deals with e-business initiatives for employee services. Cisco has thus created a single enterprise system, tying together chip manufacturers, electronic manufacturing services, component distributors, logistics partners, Cisco employees and customers into a single information system.
A Compelling Concept
A snapshot review may overemphasize the theoretical nature of Means and Schneider's book. The authors offer the details that make the metamarket concept compelling and believable. Few will argue that companies have already started to discover the opportunities created by decapitalization and supply network management. Whether, as the authors maintain, firms have a maximum of two years to get into the game if they want to be winners in the next decade remains to be seen. Nevertheless, strategists should add this book to their e-business reading as they ponder the competitive implications of the Internet age.