In a world where the internet has revolutionized the way businesses operate, the concept of capturing value has shifted. The traditional belief that controlling supply was the key to profits no longer holds true. Instead, it is now the ability to aggregate demand that determines success.

Kazuki

Hatched by Kazuki

Aug 16, 2023

3 min read

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In a world where the internet has revolutionized the way businesses operate, the concept of capturing value has shifted. The traditional belief that controlling supply was the key to profits no longer holds true. Instead, it is now the ability to aggregate demand that determines success.

The rise of the internet has brought about the "death of the middlemen." These intermediaries, who used to connect suppliers and consumers, are now being commoditized as markets become more efficient. The internet has created a barbell effect, with both consolidation and fragmentation taking place. This is evident in the form of aggregation and specialization.

Previously, middlemen captured profits by controlling supply. However, in the post-internet era, value is captured by aggregating demand. The best companies are those that provide the best experience, attracting the most consumers and suppliers in a virtuous cycle. This shift means that value capture will more accurately reflect value creation, resulting in the top companies making significantly more profits than before.

Venture capitalists (VCs) have traditionally played the role of suppliers in the business ecosystem. However, with the internet commoditizing suppliers and making the market even more efficient, the role of VCs may be replaced altogether. This highlights the extent of power that lies with those who generate demand. If they choose to exercise this power, middlemen may find themselves squeezed out of the equation entirely.

The lesson to be learned from this shift in value capture is the importance of passion. Jeff Bezos, the founder of Amazon, emphasizes the significance of being focused on something you are passionate about. Early internet companies were successful because they were driven by a genuine interest in their chosen field long before the internet became fashionable.

When building a company, it is crucial to choose something that genuinely creates value for customers and aligns with your passions. By staying focused on this intersection, you can ride the wave of success. Following trends and fashions will only lead to a lack of direction and purpose.

So, how can one adapt to this changing landscape and capture value in the digital age? Here are three actionable pieces of advice:

  • 1. Focus on providing the best experience: In a world where customers have a plethora of options, the companies that stand out are those that prioritize user experience. Invest in creating a seamless and enjoyable journey for your customers, and you will attract more consumers and suppliers, ultimately capturing more value.
  • 2. Embrace specialization: Instead of trying to be a jack-of-all-trades, identify a niche market and become an expert in catering to its specific needs. By specializing, you differentiate yourself from competitors and become the go-to solution for a particular customer segment. This specialization can lead to increased demand and value capture.
  • 3. Collaborate and disrupt: The internet has given individuals and businesses the power to collaborate and disrupt existing industries. By teaming up with like-minded players and challenging the status quo, you can create new opportunities and capture value directly from consumers. This mindset shift is crucial in a world where middlemen are becoming less relevant.

In conclusion, the internet has reshaped the way value is captured in the business world. Middlemen are being commoditized, and companies that aggregate demand are coming out on top. Passion and focus are key ingredients for success in this new landscape. By providing the best experience, specializing, and embracing collaboration and disruption, individuals and businesses can navigate the digital age and capture value in a meaningful way.

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