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Net Gain: Expanding Markets Through Virtual Communities

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Prospering in the Virtual Community - Where Are We Going?
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A forerunner on how to create profitable on-line communities
Virtual Communities = Real Prosperity
Good Ideas that can hold in 10 pages

Net Gain: Expanding Markets Through Virtual Communities
John Hagel III , and Arthur G. Armstrong
Manufacturer: Harvard Business School Press
ProductGroup: Book
Binding: Hardcover

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ASIN: 0875847595

Amazon.com

Building relationships with customers has been a buzz phrase in many business circles for years. Now John Hagel and Arthur Armstrong declare that's not enough. They make a strong case that business success in the very near future will depend on using the Internet to build not just relationships, but communities. The payoff, they maintain, will be phenomenal customer loyalty and high profits. But, they warn, this race will definitely go to the swift. Here's a cyberspace book that could make your business future. Not everyone agrees with Hagel and Armstrong, but with stakes so high they deserves a serious reading.

Book Description

Net Gain identifies where the next level of value lies on the Internet and lays out the first economic model to quantify the revenue potential and the investment required to build a successful virtual community. From the offerings of commercial online services such as the Motley Fool Investment group to Internet communities of book lovers, Net Gain offers a multitude of real-world scenarios and lessons for building value and creating competitive edge. The authors clearly show that in order to compete in the online economy, you must establish an entirely new approach to product development, marketing, customer service, and distribution, and rethink your company's relationships to customers, suppliers, and competitors. And they show you how to do it.

Download Description

Hagel and Armstrong argue that a new business model is emerging in cyberspace, constructed around the notion of "electronic communities" whose value lies in their aggregation potential--the ability to recognize, configure, and collect seemingly disparate groups into communities with particular commercial and collaborative interests. Not only do these electronic communities constitute a new way to structure the profusion of information that characterizes the Internet, but they force organizations to rethink their approaches to a whole host of business processes--product development, brand identity, customer service, advertising and marketing, merchandising, and channel management--and the organizations' relationships to their customers, suppliers, and competitors.

Customer Reviews:

Prospering in the Virtual Community - Where Are We Going?.......2006-06-20

Both authors are from the esteemed McKinsey & Company. Even though released in 1997, this book has pretty much mapped out where we are now, and possibly to where the web will evolve regarding Virtual Communities. A community is started with an initial investment - a learning curve investment - then receives the positve network effects. The web is used for three basic purposes, to find content, to interact and to complete transactions. They discuss the 'critical mass' of memebers that a community must acheive before it becomes self-sustaining. They project a curve of this new web envirinoment of villages, constellations, coalitions, to finally infomediaries (a state yet to be achieved).

There are four factors of initial growth: the size of the potential community, the value of being online, the intensity of commerce, and the fractal depth of the community. The fractal depth is the number of possible sub-communities that can be developed through time.

Consumer-based communites are either geographical, demographic or topical. Business-focused communites are either vertical (same industry), functional, geographical, or in a particular business category that meets the needs of other businesses. The authors discuss the virtues of each of these.

A fast start-up would be aided by a strong brand name, established customer relationships, or content to keep browsers interested. Skills to get and retain members are key.

The first emphasis is on generating traffic, then concentrating traffic - convincing the browsers to spend time there - you must always be expanding the offerings and creating excitement through participation. One must then lock-in traffic. This can be done by fostering a relationship between members, improving community functions, and tayloring resources to individual members. Keep the sub-communities small. Give them resources to start additional sub-communites.

Sounds like they are right on track.

Five Stars

Amazon.com.......2006-05-10

New cultures have been emerging in the world computer network. Among these cultures are Amazon.com, eBay, Yahoo, and google. Amazon provided a computer communication network allowing members to read other members reviews. Amazon track individual preferences and buying patterns and offerred products appealing to those interests. There are pitfalls in mixing technology with human relationship. Amazon avoids some of the pitfalls by customizing a portal for their members allowing them to create lists, private and public reviews, and a network of friendship. The member has the option to communicate with the outside world or remain semi secluded. Amazon and eBay virtual community services bring enormous leverage to the ordinary citizen at extremely low costs. The latent technology must be used intelligently and deliberately by an informed public. The power of the virtual community is the ability to communicate through a public medium in some sort of dispersed decision making process. Net Gain is about the conceptual framework of this communication medium.

A forerunner on how to create profitable on-line communities.......2003-08-01

Notwithstanding the many new books on on-line communities, I still keep this book on my bookshelf as a useful reminder of the conceptual framework around which many new businesses - failed or otherwise - were subseqently developed.

It has been nearly six years since I attended a seminar organized by the consulting company McKinsey at which the two authors (both McKinsey consultants)presented their book and what seemed, at that time, to be its somewhat radical proposition about profitably developing self-organizing on-line communities around the passionate interests of their memberships.

As I become more familiar with Amazon and how it is organizing the community through which you are reading this and other reviews, I am reminded about the fundamental concepts that Hagel and Armstrong laid out in their book regarding the economics of virtual communities. Amazon attracts member-generated content which is a key part of its business model which uses the passionate interests of its own customer base to increase its business value. Many doubted the vailidity of this proposition when this book came out, but the evidence does appear to increasingly support it.

Arguably, many might now say that this book is dated, on-line businesses having mushroomed and failed since this book appeared, yielding new lessons that this book could not have foreseen. Many of its claims now seem overhyped.

While this and other criticims may all be well and true, I suspect that this book will come to be regarded in future business histories of the on-line business as one of the seminal pieces of strategic business thinking in the late 1990s. I shall keep it for posterity, if not profitability. In any case, there must now be enough second-hand copies for you not to have to make the investment at the full original cost!

Virtual Communities = Real Prosperity.......2002-03-05

Hagel has co-authored two especially important books (with Arthur G. Armstrong III and Marc Singer, respectively), the other being Net Worth "which builds on a number of the themes originally developed" in this volume. As Hagel and Armstrong point out, Net.Gain "systematically [analyzes] the economic drivers for value creation that exist on networks. It [uses] one particular business model -- the virtual community -- to illustrate the unique capabilities of digital networks and how these might be harnessed to create a substantial business with very attractive economics." The material is carefully organized within three Parts: The Real Value of Virtual Communities, Building a Virtual Community, and Positioning to Win the Broader Game. Hagel and Armstrong also provide a "Management Agenda", followed by excellent suggestions for further reading.

In the Preface, Hagel and Armstrong acknowledge three inevitable limitations in writing Net.Gain: "The first arises from the profound uncertainties associated with evolving electronic networks and the myriad business models emerging in the primordial brew known as cycberspace....Second, the need to be concise has led us to make some generalizations about the likely evolution of virtual communities and the key principles for success....Third, we do not expect virtual communities to be the only 'form of life' on public networks. Indeed, many other commercial and non-commercial formats (including dictionaries, market spaces, 'web'zines,' corporate sites and game areas) will thrive on these networks as well." Working within these limitations, Hagel and Armstrong succeed admirably when describing the power and potential of the virtual community concept. Also, when explaining (a) how to target the kind of community to start-up; (b) the principles of a successful entry strategy, emphasizing the need to generate, engage, and lock in traffic over time; (c) characteristics of community organizations; and (d) criteria by which to select the right technology. Then in Part Three, Hagel and Armstrong shift their attention to explaining the fundamental ways in which the emergence and spread of virtual communities will alter traditional business.

My strong recommendation is that this book be read first, then Net Worth. My further recommendation is that both books be used to formulate the agenda for a workshop or what is generally referred to as an "executive retreat" (preferably for two days and located offsite) with all participants required to read both books in advance. In their Epilogue, Hagel and Armstrong suggest that "the most radical potential impact of the virtual community may well be its impact on the way individuals manage their lives and companies manage themselves. Communities will serve to connect, much like the postage system and telephone before them. But they will go several steps further than the telephone or fax, as they help the individual to seek out and find. Souls in search of relationship, colleagues in search of teamwork,, customers in search of products, suppliers in search of markets: the virtual community might have a place for them after all." Those who share my high regard for Hagel's two books (co-authored with Armstrong and Singer, respectively) are urged to check out Peter Senge's The Fifth Discipline as well as O'Dell and Grayson's If Only We Knew What We Know. Both can also help with the planning and implementing of the off-site workshop recommended earlier.

Good Ideas that can hold in 10 pages.......2000-10-16

Excellent ideas on Internet marketing and business strategies but did not need to write a book, ten pages would have been enough. Read a well condensed summary is less time consuming for the same amount of great information provided by the author.

Average customer rating:

Net Gain: Expanding Markets through Virtual Communities
John & Arthur Hagel III & Armstrong
Manufacturer: HBS Press
ProductGroup: Book
Binding: Hardcover
ASIN: B000LBW5BK

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Net Gain: Expanding Markets Through Virtual Communities
John Hagel The Third
Manufacturer: Harvard Buisness School Press
ProductGroup: Book
Binding: Hardcover
ASIN: B000JR9KK0

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Net Gain, Expanding Markets Through Virtual Communities
John III Hagel
Manufacturer: Harvard Business School Press
ProductGroup: Book
Binding: Hardcover
ASIN: B000S5XRAM

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NET GAIN: EXPANDING MARKETS THROUGH VIRTUAL COMMUNITIES
John III and Armstrong, Arthur G Hagel
Manufacturer: Harvard Business School Pr
ProductGroup: Book
Binding: Paperback
ASIN: B000OFKG5A

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