From the Publisher: D-to-C End Games

FRAMINGHAM (04/18/2000) - We all know about the business-to-consumer model made famous by Amazon.com Inc. in which new companies--literally legions of dotcoms--raise capital with one intended purpose: to eat the market shares of Goliath companies (a.k.a. the Fortune 1000).

Then along came the business-to-business (b-to-b) model, which is in large part the reaction of big, often profitable, companies to E themselves into relevancy by making their internal business processes and those of their partners and suppliers more efficient. Billions of dollars are being invested in this phase of the new economy buildout. And billions of dollars are being squeezed out of bottom lines around the world.

That's good, right? More efficient businesses produce goods and services that customers want in a more timely fashion.

Efficiency is nice, but I am convinced there is more going on. And the key question that needs to be asked is, What is the end product of your b-to-b strategy? If it is only to improve efficiency, or prove to the world that you get the e-revolution, you will be out of business or acquired by 2005.

Last month I had the opportunity, as I do every spring, to moderate a series of lectures that CIO sponsors at New York University's Stern School of Business Management. One of this year's speakers showed me the future when he told the audience the end game of b-to-b is d-to-c.

What's d-to-c? It has the potential to shake the digital global economy to its roots--roots that got their start when Adam Smith's book, Wealth of Nations, made popular the notion of placing an army of intermediaries between the seller of a good or service and its buyer.

D-to-c stands for "direct to consumer." Think of it as the revenge of the Fortune 1000. For radically thinking CIOs, d-to-c is the end game of b-to-b. It could precipitate an economic headache as large, global, e-energized corporations begin to squeeze intermediary companies--and their employees--out of their business processes.

D-to-c could (and some would argue is intended to) put a major hurt on the dotcom companies that entered the economic food chain prior to the b-to-b revolution. Just as b-to-b companies reacted to the business-to-consumer phase, dotcoms will have to think hard about what their value contribution will be in the d-to-c era. Millions of workers could be displaced or find themselves out of work.

Think I'm crazy? The Boston Globe recently ran this headline in its business section: "Stop & Shop [a large supermarket chain] to launch its own delivery service and is expected to end its partnership with Peapod [a dotcom delivery service]." Some would argue Peapod's value proposition is a delivery service, and if all its food business evaporated, the company could migrate to delivering other goods.

I predict you will read more and more headlines like this one in the future as the d-to-c strategies of corporations become more evident. The shockwaves of the coming d-to-c era could shake the foundation of the new economy to its digital roots. What's the end game of your b-to-b strategy? Send it along to gbeach@cio.com.

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