The "Big Picture"

What are the stakes of winning in the VC business?

"The power of a global, interactive computer network lies in transforming the means by which consumers satisfy their critical desires." (The Rise of the Electronic Community)

How will VC's re-define the structure of industries and distribution of products and services?

These communities will redefine the structure of industries, which have been organized since the dawn of the Industrial Age by the production process, the flow of raw materials into finished products. And they will eliminate companies that no longer add value in an electronic marketplace that directly links the producers of goods and services with end consumers." (The Rise of the Electronic Community)

THE QUESTIONS

Strategies for Winning in the VC Business

What mindset is conducive to winning in the VC business?

"Conceiving of a world in terms of consumer processes rather than producer processes" (The Rise of the Electronic Community)

What customer needs in the purchase and use of products/services can be met by VC?

Knowledge

"Searching for relevant information to make sound decisions. This search includes discovering the alternatives, the prices at which products and services are offered, and the quality of those products and services." (The Rise of the Electronic Community)

Interaction with other members

Interaction with vendors

Sensory experience

"Using sensory input such as sight and sound to arrive at a consumption decision. Technologies such as virtual reality are advancing to the point where people will be able to enjoy nearly full-sensory experiences on-line." (The Rise of the Electronic Community)

Ubiquity

"Having the things you need at the time and place you need them rather than at the provider's convenience." (The Rise of the Electronic Community)

Product aggregation

"Bringing together a number of required goods and services in a consumer process..., the cyberspace equivalent of one-stop shopping." (The Rise of the Electronic Community)

Customization "Tailoring products to the individual's need rather than creating them to be one-size-fits-all." (The Rise of the Electronic Community)

THE QUESTIONS

What benefits should VC host companies deliver to VC members?

Consumer process made more efficient and effective.

"A consumer process is a collection of tasks or steps that people go through to achieve a goal. The consumer process of buying a home, for example, includes visiting real estate agents, driving around neighborhoods, obtaining a mortgage and homeowners' insurance, and getting inspections. Redesigned for cyberspace, the home-buying process can be made dramatically more efficient and effective." (The Rise of the Electronic Community)

Cutting edge information

Industry trends & unbiased analysis, columns by notable journalists, helpful tips, workarounds and hints from customer support, news of new developments.

Support to member networking

Member finders: directory & search tools to locate members with similar interests, needs or purchase patterns (automated filtering)

Content integrated with communications

"Communication capability... allows members to maximize the value of this content, enabling them to clarify their understanding of the content by communicating with its publisher and to evaluate the credibility of the content by communicating with each other." (Net Gain: expanding markets through virtual communities)

Empowerment through publishing member-generated content

"It gives members the capability to compare and aggregate their experiences, which in turn creates for them a fuller range of information and a perspective independent of vendors and advertisers on the resources that are important to the members." (Net Gain: expanding markets through virtual communities)

Support member generated projects & activities

Aggregating members and resources

"The virtual community organizer must focus on two imperatives to deliver the value proposition: aggregating members and aggregating resources relevant to members." (Net Gain: expanding markets through virtual communities)

Attractions / gifts

Purchase discounts and credits for contributions, downloads for fixes & enhancements.

THE QUESTIONS

What are the necessary steps in designing VC's for improving the consumer process?

1. Analyzing the consumer process of buying and using--for example--a home office router or high-speed modem (ethnographic approach)
2. Identifying processes which are inefficient, fragmented, costly or time-consuming
3. Map VC opportunities for improving those processes

What strategies are required to win in the VC business?

• Pick your niche carefully
• Enter the market first or early
• "Re-define consumer processes effectively" (The Rise of the Electronic Community)
• "Bring core assets to the community" (The Rise of the Electronic Community)
• Generate, concentrate, and lock in membership quickly (Net Gain: expanding markets through virtual communities)

THE QUESTIONS

How to Build Business Models for VC?

Where will the business return come from?

From expanding markets by (excerpted from Net Gain):

Reduced search costs: Vendors and customers can find each other more easily because virtual communities provide an environment for aggregating relevant participants and information about those participants.

Increased propensity for customers to buy: Customers perceive less risk and experience more excitement. By aggregating a broad range of information and options for its members, community organizers help to reduce the perceived risk of purchase.

Enhanced ability to target: Virtual communities will accumulate detailed profiles of members and their transaction histories, not only with a single vendor but with multiple vendors across an entire product category. Vendors would then be able to access information on high potential customers within the product category in general, not just on their own current customers.

Greater ability to tailor and add value to existing products and services: Access to integrated transaction histories and the ability to interact with customers and potential customers improve the vendor's ability to understand individual buyer needs. By aggressively using this information to tailor products and to create product and service bundles, vendors can both expand the potential customer base and generate more revenue from each customer.

THE QUESTIONS

Where to enter the VC business?

Accumulated benefits in the consumer processes enhanced by VC

"Many failed attempts will have targeted consumer processes that weren't broken, or weren't broken enough to greatly benefit from an electronic community. The most attractive consumer processes are those in which [the meeting of] several consumer needs can be improved greatly." (The Rise of the Electronic Community)

How to build critical mass for reaching the trajectory of increasing returns?

"Generating traffic (getting target community members to travel to your site), concentrating traffic (getting them to spend increasing time in the community), and locking in traffic (creating switching barriers that make it increasingly difficult for members to want to leave the community once they've joined). Until this critical mass has been attained, none of the subsequent revenue-triggering events can occur." (Net Gain: expanding markets through virtual communities)

What will be the barriers to late entrants?

Moderated forums

"One of the reasons there is such a high churn rate today within on line offerings is that few on-line initiatives have focused on developing the moderated communication forums in which these personal relationships can develop." (Net Gain: expanding markets through virtual communities)

Escalating investment requirements

"These barriers to entry take a variety of forms: unique assets accumulated by early entrants, switching barriers for members, factor cost increases, and scale and scope economies. The result will be to send the price of entry beyond the reach of most, if not all, potential players." (Net Gain: expanding markets through virtual communities)

THE QUESTIONS

What are the emergent trends in the VC business?

• lower entry barriers (intuitive interfaces, design flow, text options, turn off sound, graphics and video)
  
• support for privacy gradients, members have a place to retire for private conversations
  
• clear guidelines, low or little structure (let the members build)
  
• importance of maintaining flow, rhythm and energy. Recruit quality hosts.
  
• increasing role of staged "events" i.e. short term high traffic activities
  
• simulation / interactivity and games e.g. how long will it take to transfer x if I use product y.

How do VCs affect the race for improved business effectiveness?

"The degree to which a community fosters networking, the ability of consumers to talk to one another, will provide another big incentive for vendors to improve their offerings. Managers will have to ratchet up their performance improvement standards in cost, time and quality. For many companies, electronic communities will be a dynamic, powerful, yet unforgiving marketplace." (The Rise of the Electronic Community)

THE QUESTIONS

© Copyright, 1999, Community Intelligence Labs, Soquel, CA