Jeffrey F. Rayport knows about Net markets. Back in 1994, while teaching at Harvard Business School, Rayport coauthored "Managing in the Marketspace" for "Harvard Business Review," coining the term "marketspace." He is currently on leave from his professorship and is executive director of the Marketspace Center, a research and consulting unit of the Cambridge-based consultancy Monitor Co. Recently, Net Company spoke with Rayport about what's happening in marketspace.
What problems do new markets solve?
The great lament about consumer research is that if you ask people questions in focus groups or surveys, they'll tell you one thing, and then do another. Markets on the Net tap into what real people are going to do. They point to where their hearts, minds, and pocketbooks actually will be.
How does the Web fit into all of this?
The Web gives you foresight instead of hindsight. It provides an early understanding of the forces, desires, and preferences that shape markets. These new markets are widely disparate, but they're all digital platforms that give you visibility into what people want. Think of the Web as a real-time snapshot of what's in people's minds — not what they're doing yet, but what they're visualizing.
What are the consequences for businesses?
The traditional value chain in business starts with a product or an idea for a product. Markets on the Web represent a 180-degree turn. They start in the psyches and hearts of consumers. Then companies look to create economic benefits or sources of value. Take the case of Mercata, for instance. The idea of people pooling their purchasing power is nothing new.
What's different now is that you have a real-time medium where you can bring people together, aggregate their interests, and create markets to support those demands. It is a good example of the kind of reversal that the Web enables: The world is being driven from the market side instead of from the company side.
The ".coms" shouldn't be the only businesses looking at the Web and how it works. Companies that create information-enabled versions of the old industrial-supply chains make it possible for all industry players to move more quickly in response to changes in demand patterns. Companies can no longer afford to have six- or eight-week cycles to respond to the market. Companies need to respond to markets minute-to-minute, not month-to-month.
What does this say about the future?
There's total visibility into markets where real money changes hands — the NASDAQ or the Dow, for instance. And there's total visibility into what's going on inside people's heads. One is "real" — trading on the New York Stock Exchange and following it on E*Trade or Charles Schwab. The other is "unreal" — trading movie names and stars on the Hollywood Stock Exchange. I think this means that we'll see a convergence of fantasy markets with real markets — they will both become legitimate markets.
A version of this article appeared in the Prototype Issue issue of Fast Company magazine.