Time to reinvent your business?
Published on 19/04/2016 in Inspire
Business models that until recently seemed unassailable are suddenly being overtaken by new players that often opt for digital innovation, such as Über in transport, Amazon in retail, Airbnb in the hotel sector and Netflix for television. The question is: what if it's your sector next?
The success of the new players is usually down to the fact that they make smart use of technological developments and, at the same time, have a good answer ready for the altered purchasing process of 'the new customer'.
Technology as the basis
As regards technological developments, these days, among other things, it's a question of the supremacy of small screens (tablets and smartphones) over big screens (laptop, television, etc.) and the arrival of wearables (such as smartwatches), smart cars and the Internet of Things. But that's the situation today. Tomorrow there will be other innovations, so it is important to keep a close eye on relevant developments and look at how they might affect your business.
The new customer
Whereas, in the past, customers were led to the purchase via the familiar virtual funnel, now we have to deal mainly with customers who base their decisions on lots of – mainly online – sources and channels such as user reviews, discussion platforms and the like.
Here are four key principles that you can use to convert the challenges of the digital disruption into new opportunities...1. Question your organization
The company behind Wordpress, the system that you can use to build your own website, only has a few hundred employees, most of whom work at a distance. What's more, the company has a largely flat organizational structure and there is no middle management. Larger companies, in particular, still tend to stick too much to the 'old-fashioned' rules, protocols and management structures. That way of working undermines efficiency and hampers fast changes of direction. And in a disruptive environment, fast changes of direction can make the difference between success or failure.2. A new business model
An American chain of electronics stores felt badly disadvantaged by the arrival of cheap online shops. But because consumers like to see and touch products ‘for real’, the chain began to encourage this as much as possible. They also developed an automatic price comparison system to stop visitors buying the goods from an online shop anyway, after visiting the physical store. They recouped the more expensive sales method (shop space, staff, etc.) from the suppliers by having them pay for shelf space and product demonstrations. Without these far-reaching adjustments to the business model, the chain would probably not have made it.3. Dare to cannibalize
The starting-point is that it's better to become your own competitor rather than to let another company become your competitor. For instance, Netflix was once a sort of video shop where customers could order DVDs that were then sent to them by post. With one good idea, by 2005 Netflix already had about four million customers. But Netflix realized that their success would not last and so they invested all their resources in developing a video streaming service. At first they cannibalized their own customer base, but later on they succeeded in attracting 74 million subscribers…4. On- or offline?
Both. It is becoming clear that ‘pure players’ – companies that only sell online – will gradually disappear unless they open physical stores as well. That's because, on average, just 2% of the visitors to online shops actually make a purchase, whereas in a physical store the rate is 88%. On the other hand, physical retailers will largely be pushed out of the market if they don't set up a strong online presence. The strength of online – as far as the retail sector is concerned – lies mainly in influence. The chance that a consumer will go into a particular shop in a shopping street is up to eight times greater if (s)he is influenced online…
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