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Surviving the E-Revolution: Business Model Trumps Product

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January/February 1999 - Volume 78, Number 1

by Todd A. Hartle


The Internet is changing the relationship between title companies and consumers in ways more profound than you can even imagine. And it could mean your doom if you are not prepared for the completely different future of consumer control. If you do not have a deep, visceral sense of how radically the Internet is going to change today’s hierarchy, you are going to lose. And lose big.

The Internet is empowering consumers like nothing else ever has. The Web will fundamentally change customers’ expectations about convenience, speed, comparability, price, and service. Those new expectations will reverberate throughout the economy, affecting every business. The Internet is the foundation for a new order. An order of the magnitude of the industrial revolution - the E-Revolution.

The Impact of the Internet on Information Flow, Choices, and Price

The Net is not just another medium; it is a profoundly different experience. The Net is about choice, freedom, and control. In the off-line world, the cost of directly comparing products or services was often prohibitively high. No more in the new, net-enabled economy. Our business will be forced to transform because of this significant, enabling technology.

Global information systems, such as the Internet, will let purchasers establish a highly efficient marketplace similar to the stock market or, perhaps more aptly, the commodity futures market. Systems like the Internet make it easier for consumers to assert what they want to buy and what they are willing to pay. Then it is up to the providers to accommodate them.

In highly structured markets (such as insurance and mortgages), the product that is purchased is relatively homogenous. Buyers and sellers can make decisions without specifically knowing the identity of the party on the other side of the transaction. By leveraging the Net, these industries can evolve into a true marketplace where buyers and sellers converge and prices are kept at or near optimal levels. Decisions are made based on information, not identity. And transactions are cleared in a lean and efficient manner.

Historically, informational friction could prohibit the true buyer from finding the lowest potential price. With these exchanges in place, the company choosing to make a purchase can enter a priceless offer and wait for multiple parties to bid. This favors the purchaser and endangers the large organization that was able to profit from informational inefficiency.

The Web makes it possible to hold real-time auctions for just about everything. Customer ignorance about prices and relative product performance has been a profit center for many companies. But consumers are getting much better informed ? and the consequences will be awe-inspiring.

Benefits to Consumers

On the Net, customers will be able to get providers to bid against each other in a way that seldom happens in the off-line world. Think of the e-mortgage firms that link consumers with lenders. Not only do these aggregators provide a wealth of information on rates and the home-buying process, some of these companies put the consumer’s mortgage out to bid to get the best deal possible.

Customers also escape the shackles of geography. Until recently, if you needed a mortgage, you would humble yourself before the local banker. Now you can go to the Web and shop for the best mortgage rates from financial institutions across the country. Systems like these will put pricing pressure on the overall market they automate.

Today’s consumers demand not just independent advice but also neutral distribution channels. The goal is not just to minimize the hassle of finding something but to minimize the hassle of getting it as well. Consumers benefit from these economies through lower prices and convenience. Thus the oligopolistic regulatory nature of title insurance must fall.

It will be difficult to enforce any kind of price discipline in a world in which there are no list prices and newcomers are more than willing to underbid established players to win market share. So for products that are anything close to a commodity, prices will trend downward toward variable costs, and margins will be slimmer than slim.

How Will You Survive?

The E-Revolution’s most immediate demand, confronting the promise and threat of the Internet, is also the essence of the conflict that new technology creates for existing companies. So how can your title company survive in the exciting and frightening new economy? Through relentless innovation, unparalleled service, and an attitude of genuine helpfulness, but delivered in new ways.

Innovation crests when companies find ways to use technology to completely change the original process. This is when technological change has its greatest and finest impact. Over the next few years the breakthrough success stories in e-commerce will be those that seek to lower transaction costs and effort for the customer, not the provider. Early movers will expand their revenues and dramatically lower their costs of sales and support.

However, for most, the E-Revolution will come as a surprise. Companies that move fast can establish the rules in their own favor, but only a few innovative firms are likely to do so. However, I adamantly believe that most companies will choose to be dragged into this new electronic economy by their customers, and they may not like what they see when they get there. These poor souls will not know what hit them.

The title insurance industry is not exactly a poster child for technological innovation, and the Internet has not changed that to date. That is pretty risky for an industry that lives by risk reduction. The Internet can cut costs across the title insurance value chain and improve customer service. Companies that utilize the Internet will undercut traditionally priced products and threaten slower-moving insurers’ profitability. In the cutthroat title insurance industry, business as usual can mean the end of business.

Companies that are quick to try, quick to learn, and quick to adapt will win. Adapt or die as they say. Those that learn fastest, and keep learning, will stay ahead. Companies that take months to assess what they have learned, whose internal processes still run on title time and not on Internet time, will get left behind. The faster a company learns and adapts, the more customers it wins; the more customers it wins, the faster it can learn and adapt.

Somewhere out there is a competitor unknown that will render your business model obsolete. Each time business models change, a new group of leaders emerges. Incumbents miss the early warning signs because they are easy to ignore. Are you convinced that you really understand the potential impact of the Web? Are you sure that your company will be one of the few that define the new Net-centric order?

If you do not believe deeply, wholly, and viscerally that the Net is going to change your business, you are going to lose. And if you do not understand the advantages of starting early and learning fast, you are still going to lose.

Irrelevancy is a bigger risk than inefficiency. If you are just trying to reduce the inefficiencies in your firm, you lose. Competition today is not between products, it is between business models. The hottest and most dangerous new business models out there are on the Web. Consider yourself warned.

Todd Hartle is the President and founder of Fountainhead Information Systems, a provider of title plant automation, consulting, and Internet strategy services.

An 18-year veteran of the computer systems and technology field, Todd has significant experience in developing document imaging systems for county clerks and recorders offices. He also has accumulated several significant "firsts" in the title industry: the first windows-based system, the first local area networked imaging system, the first SQL-based recorders system, and the founding of the first company to put a title plant on the Internet. He can be reached at (404) 827-0366, by e-mail at, or on the Web at

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