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SAVVE White Paper
Grant Thornton's Look Inside the Minds of New York's
Internet Business Leaders
100 Internet CEO's Define an eService Economy
The Silicon Alley Vision Venture Executive Retreat, the first
brainstorming event of its kind on Thursday, July 24 delivered
an astonishingly rich, varied and times, contentious business
view of the New Media future.
After 100 executives arrived by limousine at the Westchester Country
Club from Silicon Alley to brainstorm in 4 separate groups to
develop new business plans for the future, numerous themes emerged
that define the mindset of this exploding community.
In July 1998, Grant Thornton, in conjunction with TECHmarketing,
producers of the Silicon Alley Breakfast Club, arranged a one
day retreat where 100 leaders in the New York Internet industry
were invited to collaborate in competitive teams to develop new
businesses. The objective was to create a type of applied "Rorschach
Test" of new media leaders to determine the current thinking and
their outlook on the future of their industry. In aggregate, this
extraordinary event provided a clear picture of Silicon Alley's
view of the New Media world and their role in it.
Produced by TECHMarketing and sponsored by Grant Thornton LLP,
in conjunction with OnSite Access, CBS MarketWatch, Renaissance
Multimedia, InterOffice Online, Let's Talk Business Network and
Info River Valley, SAVVE was a day of structured brainstorming
about a vision for the new media industry and what types of businesses
might be successful in the near-term future, based on an assessment
of business and technology trends.
Executive Summary
One of the participant's statements that set the tone for the
event was, "we're done surfing the Internet for fun, we want it
to do things." Most of the plans that were hatched reflected this
kind of thinking.
The universal sentiment expressed by participants is that the
future of the new media industry is bright. Most of the ideas
generated were based on these key assumptions:
• Bandwidth will increase, enabling TV-like qualities in New Media
(faster, easier to use, little lag time in processing)
• Universal access
• Security will improve to the point that it will no longer be
a behavioral impediment to consumers
• Privacy will be a business opportunity, although most of this
group tended to see this as a marketing opportunity, not a protection
of privacy or moral/political issue
• Increased market access and acceptance of the Internet as a
distribution/communications channel by consumers and businesses
• Continuing surge in entrepreneurial spirit
• Continuing support and interest in the new media industry by
the financial markets and investors
Build Business Using the Internet -- Not Internet Businesses
An underlying theme of the conference was the need for companies
to see themselves as businesses that use the Internet rather than
as "Internet businesses."
Service-Based
Conspicuous by their absence were ideas for future businesses
based on manufacturing, convergence (TV and the Web) and telephony.
Most of the ideas conceived were for services businesses. Only
one group considered manufacturing of a transponder chip but not
for profit -- only as a giveaway. The others considered businesses
based on higher level data management and the ability to market
and leverage ideas. The regional backdrop of Wall Street, Madison
Avenue and to a lesser extent, TV media are culturally ingrained
in the participants' thinking: they are interested mostly in adding
processing value, marketing or distributing manufacturing work
done by others.
Surprisingly, for a media town, there was very little talk about
putting the net on TV or in other ways taking advantage of the
convergence of these media. Likewise, opportunities based on telephony
failed to appear. As one participant put it, "this is infrastructure
-- just wait for it to appear and then take advantage of it."
Using Software Tools Not Developing Them
Likewise, none of the participants floated ideas about developing
software companies or any company with an enabling software tool.
Presumably, this is a key difference between Silicon Alley and
Silicon Valley.
Primarily Selling to Consumers
New York entrepreneurs dream about worldwide mass markets and
very few participants floated ideas pertaining to business-to-business
enterprises.
The Vision Venture Enterprise
Although SAVVE participants were divided into four separate teams
that independently addressed a common set of questions, the conclusions
reached showed a remarkable consensus about the future. There
were striking similarities in the business concepts that were
vetted and ultimately developed into plans at the end of the day.
BUSINESS CONCEPTS OF THE FUTURE
Working independently, the four teams of SAVVE participants facilitated
by GT, identified very similar types of business concepts. Common
threads across each of these concepts were ease of use, value
to both customer and supplier, privacy, globalization and profits.
All teams focused on a business to consumer model. This was based
on a sense that with increasing penetration of personal use, the
sheer scale of and breadth of the consumer market would make future
opportunities greater than with business to business. In addition,
participants felt that any type of infrastructure company would
be too prohibitively expensive to start.
Finally, each team tried to find a way to peacefully coexist with
the technology and media giants of the future, rather than take
on whoever the dominant "Microsoft type" companies of the future
will be by entering into direct competition with them. The new
media businesses conceived for the future were focused around
their core competencies, relying on strategic partners and outsourcing
for ancillary activities.
New Types of Intermediaries
As more and more consumers and suppliers become connected electronically,
it was agreed that the opportunity will emerge for a new type
of intermediary who will aggregate demand as opposed to today's
models which aggregate supply. Several teams used this model
to create a scenario where customers in the market for particular
goods or services in 2002 contact on-line intermediaries about
their requirements. Those intermediaries match buyers with sellers
in return for fees that are significantly less than traditional
middlemen. This proposition would have enormous value to both
vendor and customer. As an extension of this concept, marketers
and intermediaries would develop and refine targetable marketing
based on the habits and preferences of customers (see below).
Managing and Controlling Information Flows
Gold in The Data
Many participants saw wealth in consumer lists with the ability
to add value by attaching or mining data about the lists. Many
dealt with this phenomenon as if it were a kind of currency.
Information Overload
As more information and service options become available and the
Internet becomes an increasingly popular means of communication,
information overload will become a reality for more and more consumers.
This will create significant opportunities for businesses to
integrate and simplify those enormous flows of information
Consumers will be looking for ways to identify and access information
that is of most value or interest to them and to eliminate those
that are not. Out of this need will emerge "agents" to act as
filters to reduce unwanted intrusion and to minimize overload.
Underlying Omissions
One key implied assumption is the rise in artificial intelligence
(AI) applications to process, enhance and mine data. While few
people specifically mentioned AI, they assumed its existence under
the general rubric of "intelligent agents".
One key omission was any discussion of developing specific tools
that would help filter or in some other way reduce the information
overload.
Personalized Packaging of Information and Services (Mass Customization)
Personal Preferences
In a similar vein, capturing information about the characteristics,
habits and preferences of people, for their own use as well as
for others, will create value on which new businesses can and
will be based. As technology evolves, businesses will emerge
to offer consumers customized arrays of information sources and
services based on individual characteristics, expressed preferences,
and behaviors.
"Customized Portals", with personal icons, will enable sellers,
marketers and advertisers to bring "targetable marketing" to a
new level. They will be able to concentrate their offerings and
messages on those potential buyers who have previously expressed
interest and given "permission" to contact them. Individual delivery
of information will not only be based on entered preferences and
historical transactions, but will be based on predictive modeling
as well.
This concept will have considerable appeal to consumers, who will
have access to customized service offerings that they define while
being spared the increasingly difficult task of searching and
sorting through the virtually unlimited sources of information
and service providers.
Critical Mass and the Value-Added Proposition
For such a concept to be successful, however, businesses must
achieve critical mass in their base of customers who make data
available about their individual characteristics, preferences,
behavior, etc. This can only come about if they are offered distinct
value or incentives in return for providing data about their buying
patterns and preferences. It was agreed that value could be in
the form of ease of use or improved quality of life, or in the
form of discounted prices or the ability to obtain services that
are not available to those who do not participate.
Privacy
Another key to customer acceptance of this concept is that these
intelligent agents must have the ability to be selective. Users
of these services need to be able to opt in or opt out of reporting
or tracking specific preferences or behaviors that they wish to
keep private. This ability is essential if consumers are to develop
trust in and subscribe to the intelligent agent concept.
In the SAAVE view of the future, individual privacy will be maintained
by the fact that the focus of these agents will be on characteristics,
behaviors and preferences and not the individuals themselves.
The essence and identity of an individual will be their behavior
and preferences, not their name, social security number, etc.
Finally, new forms of identification, such as voice recognition
and biometrics, are expected to emerge to provide other methods
that will identify customers while maintaining their security
and privacy.
Measures of Business Success Will Change
While new media companies of the future will continue to rely
on multiple revenue streams, the parameters that guide judgment
of success will change. Such income producing relationships as
affinity programs, co-branding, licensing, subscription/ membership/user
fees, transactions and advertising revenue will all continue to
be important sources of revenue. However, today's measures of
success, i.e., number of subscribers, visits, hits, etc. will
be replaced by the more traditional business measures of profitability,
return on investment, etc.
UNDERLYING ASSUMPTIONS
A number of basic, widely held assumptions supported the business
concepts put forth by SAVVE participants:
The Internet will become a part of daily life and no longer a
novelty.
Advances in technology, such as unlimited bandwidth, will make
the Internet available, and affordable, to a much greater percentage
of the U.S. and global population in the not-too-distant future.
Beyond that, there are other trends which will contribute to
a more universal acceptance of the Internet:
Educational systems are introducing students to technology at
earlier ages with the effect of making them not only more comfortable,
but also more dependent on computers and the Internet.
Aging baby boomers, with considerable financial assets, are anxious
to catch up with the burgeoning technology wave to stay competitive
and make their lives easier.
As the Internet becomes a more integral part of life, it will
be seen as a means to address fundamental and routine requirements
of human existence. Instead of remaining a novelty or a diversion,
Internet access will become the mechanism for acquiring and maintaining
the day-to-day necessities such as food, clothing, shelter, as
well as news, information, entertainment and banking.
With more universal access and acceptance, the technology will
become more transparent - we will no longer think of getting on
the Internet any differently than we think about getting on the
telephone.
The days of the PC (desktop) are numbered -
There is an inexorable trend towards integrating the family of
personal instruments and vehicles such as the telephone, TV, PC,
Internet, satellite/cable and wireless communications into a single
network appliance that will make connected, ubiquitous personal
technology available as an independent, universal communications
workstation. If such "convergence" is to become a reality, it
will require open protocols- access anywhere from any device.
This will lead two divergent trends:
Mass Marketing (product-oriented concepts based on high volume)
and
Personalization (What many are calling one-to-one marketing).
The trend is toward a "Virtual World." -
Advances in technology will limit the need for physical proximity
and allow for greater flexibility in how we create and interact
with fundamental entities, institutions and activities such as:
businesses, offices, stores, schools, experiences (e.g., entertainment,
travel, sports, etc.). The world of the future is the world without
walls.
Breakdown of SAVVE participants by:
Title:
CEO: 21
COO: 51
Chairman: 8
Managing Director/General Manager: 9
VP Marketing: 2
Partner: 9
Industry:
Media: 16
Marketing: 18
Web Developer: 12
VC/Banking: 12
Advertising: 8
Consulting: 8
Law: 6
PR: 4
ISP/Telephony: 4
Accounting: 2
Fortune 2,000 Corp/other: 12
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