The fragmentation effect of the Internet

The example of the costume jewellery counter in the world of bricks and mortar, represents a very simplified form of network because there are only two levels of organisation between manufacturer and customer. But, in the world of the Internet, vastly more complexity is involved - necessitating a far larger number of levels. This is because each level is effectively a filter to the information in the level below.

Multiple levels of filter are required, otherwise, the intermediaries at each level would have to have more up to date knowledge than is possible to either absorb or comprehend. Competition will ensure that any intermediary who is working beyond their capacity to cope efficiently will be by-passed. This is a reality that isn't appreciated by people trying to cover too large a range of product or services. They spread their resources too thinly and more often than not produce an under performing solution: a pathological result in the Information Age.

This state of affairs can be appreciated by imagining every manufacturer of costume jewellery in the world having a Web site. Even though it would be easy for any customer to go directly to a manufacturer, it would be unlikely because they wouldn't know where to start looking, or, know what items are currently fashionable. Retailers can solve this problem of over choice for the customer because, as with the counter in Hyper Hyper, the selection they can offer will be selectively limited and constantly in keeping with the current fashions.

If the choice of manufacturing possibilities is too large for the retailer to deal with efficiently, the retailer may well go to middlemen who might be spending the whole of their time with manufacturers and be able to filter out a more convenient selection to choose from. Perhaps the number of jewellery manufacturers grows so large that manufacturers have to start specialising in niche areas to ensure a reasonable amount of business. If there were thousands of niche specialists then there would need to be niche middlemen. If there were thousands of niche middlemen there would have to be wholesales who specialised in niches.

It doesn't take much reasoning to realise that the result of expanding choice on the Internet is going to throw up all kinds of specialisations and this, in turn, will lead to layers of middlemen who, between them, create an information network that evolves to optimally satisfy customer needs. Nobody can compete with this self-organising system; they can only become part of it.

In the world of bricks and mortar, the costs of the middlemen can be quite high. This puts a practical limit on the number of middlemen levels and the degree of specialisation. However, in the world of the Internet, the ease of communication and the low overheads allow the cost of middlemen to shrink to insignificant proportions.

If this situation for costume jewellery were repeated for the millions of different types of products and services possible on the Internet, the Internet environment will consist mainly of middlemen, each taking up some niche in a complex network of information. Each of these middlemen will need to be able to create their own demand and supply connection points and each of these points must consist of a number of people. This puts everyone involved in e-commerce in a similar situation, each, like the girl running the jewellery counter in Hyper Hyper, will need to become the link between two sockets. The only difference is that everyone will have to wire up their own socket connections to the network themselves.

On the service side, the situation is similar. Take for instance the design of a Web site. The number of different applications and programming solutions that can be chosen from is huge. It isn't possible for any one contractor or consultant to know the full capability of every approach possible; every solution provider, contractor or consultant will be forced to have their own particular favorites.

Each approach will have its own large variety of speciality niche areas that can only be truly appreciated by niche specialist. This necessitates a solution provider, contractor or consultant having to use layers of intermediaries to be able to use any chosen approach effectively. Any solution provider, contractor or consultant that tries to by-pass the intermediary levels is likely to under perform with the solution. This will risk both them and their clients becoming vulnerable to competitors who can more efficiently and effectively utilise the full potential of the technology.

Thus, each solution provider can best be thought of as being at the head of a pyramid of middlemen who, between them, can provide an optimum solution. The solution provider being the pipe through which the solution is being delivered.