The first wave, as we call it, primarily exploited differences in labor and other input costs between developed and developing markets. By contrast, the second wave is driven primarily by business model innovation and typically leverages new technology. These companies are characterized by extensive and often radical reconfigurations of the profit formula, resources, processes, and relationships within a broader stakeholder ecosystem. They may have a sophisticated global orientation from the start; for example, in Viki’s case, the company was “born global,” beginning as a class project by graduate students who were studying in the United States but who later moved the company to Singapore.
When nearly 400,000 people raised their hands for the Model 3 and cemented the conviction with a $1,000 deposit, a new business model in a staid industry was born. While conventional automakers seek board approval to tap cash reserves or issue bonds to pay for new vehicles, the ever-unconventional Tesla showed crowdfunding gets the job done in two weeks.
Even Musk was floored by the response. He anticipated fewer than half the deposits he received and must now scramble to find a way to build all those cars.
Digital is not only a means to optimize a company’s existing operations. It also gives both attackers and incumbents the power to disrupt value chains, enter new sectors, and create innovative business models. Established companies face threats from new competitors like Amazon Business, which offers millions of products, from automotive components, industrial lifts, and ramps to lab products, protective gear, and electrical equipment.
To get ahead of threats like this, industrial companies can use digital to transform and extend their own business models before change is imposed on them by attackers reshaping their industry. Some incumbents are joining digital platforms and B2B marketplaces to aggregate demand and sell direct to end users. BASF, for example, was the first chemicals company to sell products online through Alibaba. Other businesses, such as the 3-D printing start-up Sculpteo, are selling services rather than products. Still others are offering their manufacturing capacity as a service to third parties.
‘The notion of building a flexibility engine, which is essentially the software that runs this thing, is applicable in a broad range of industries. Any industry where the complexity of the purchase relates to the customer's flexibility ultimately will use these kinds of flexibility engines. I believe we're really the first of an entirely new category of software here. I'll give you an example. In health care, if you say to me, "If you'll be flexible and drive an extra five minutes to get this X-ray, your health care provider will give you $50 in incentives to do it." Of course you're willing to make tradeoffs and be flexible as long as you have confidence in the product quality you're buying. The same is true with us. As long as we put you on a major airline and you get to see the airline in advance before you buy the package, your flexibility is something you're willing to modify. Show me what my flexibility is worth. It's true in health care, it's going be true in business travel. I suspect it's gonna be true in a fair number of places where people have flexibility. Nobody has ever been able to show them what it's worth. I'm willing to trade off comfort and convenience often for other benefits I want more. Right now those things are all invisible in the data set. But what big data software allows you to do is make invisible things visible.”
But the good news is that the indies are quietly resurging across the nation, registering a growth of over 30 percent since 2009 and sales that were up around 10 percent last year, according to the American Booksellers Association, the indies’ main organization with more than 2,200 stores.
“Existing stores are selling once more to a new generation of owners,” said Oren Teicher, the A.B.A.’s chief executive officer, noting that such stores could never be resold during the gloomiest years, when they were under threat from Barnes & Noble and then later, Internet sales. The indies now find that readers are looking for life beyond their computer screens. They want to embrace books in all three dimensions and to select them in a tactile, less anonymous marketplace. Booksellers are fellow readers who converse knowledgeably and jot down their current favorites on helpful bookshelf notes.
Denis Pombriant shared a copy of his new book. The words “Solve” and “Customer Science” on the cover grabbed my analytical attention. In the introduction he says:
“Customer Science is now a necessity because so many customers are so dissatisfied — and they are not timid about telling the world why. This is a business problem and much can be done to solve it. “
The book, however, turned out to be full of empathy for the customer with terms like “bonding” and “moments of truth”
In his foreword, Paul Greenberg expresses it well:
On the one hand, businesses value profitability, revenue, shareholder value, and customer satisfaction — things that you easily can measure. On the other hand, customers value being valued. It’s a feeling, not a mathematical construct.
Not that Denis avoids mathematical areas – he simplifies complex concepts like subscription pricing and quantification of customer sentiment. My books tend to be case study heavy so I liked Denis’ similar exploration of concepts using HubSpot, HP Vertica, New England BioLabs and United Airlines among other examples.
It’s an easy (and humorous)180 page read - and shockingly under-priced at $ 2.99 for the Kindle version.
There’s a shift under way in large organizations, one that puts design much closer to the center of the enterprise. But the shift isn’t about aesthetics. It’s about applying the principles of design to the way people work.
This new approach is in large part a response to the increasing complexity of modern technology and modern business. That complexity takes many forms. Sometimes software is at the center of a product and needs to be integrated with hardware (itself a complex task) and made intuitive and simple from the user’s point of view (another difficult challenge). Sometimes the problem being tackled is itself multi-faceted: Think about how much tougher it is to reinvent a health care delivery system than to design a shoe. And sometimes the business environment is so volatile that a company must experiment with multiple paths in order to survive.
Jet's consumer proposition is as simple as its algorithms are complex: Spend $50 a year for a membership and you get the Web's lowest prices on 10 million-plus goods.
Here's how Jet works. As you add items to your basket, a discount tally starts accruing. The more you add, the bigger the discount, aided by specific choices such as opting out of a product return (a cost that Lore says is built into most shipped goods) and non-credit card payments (debit cards and linked checking accounts cut your final bill).
Lore's real-time trading reference speaks to the system's ability to adjust your discount based in part on where suppliers are. The closer the supplier, the lower the price. It gets Lore thinking about a bottle of ketchup.
“As cities become more and more congested, people are becoming increasingly open to new means of mobility, and car sharing is proving to be an appealing model,” says Ken Washington, Vice President of Ford Research and Advanced Engineering. “A crucial part of delivering effective car-sharing services is to learn alongside these drivers what best meets their needs and expectations, and complements their location and existing transportation infrastructure.”
GoDrive uses a pay-as-you-go approach to pricing and trips are charged by the minute, which includes the cost of the central London congestion charge, insurance and fuel. During the trial phase, cars were primarily located at public transport hubs, like Victoria railway station, but that’s obviously now being widened out to include other parts of the capital.
“To make the numbers, Knight figured that managers would need to deliver 15% annual returns on all new business and capital outlays.
Today the network planning group of 70 analysts oversees this process from cubicles on the 11th floor of Union Pacific’s office tower in Omaha. The “smart guys” are anything but wonks. Many are managers from the field who spend a year or two in the department and blend excellent math skills with rail yard know-how. A case in point is Danny Torres, who spent most of his career working in repair facilities and depots, and now runs a network of 10 terminals in Iowa. “We work with a financial model that says, How much profit will adding this siding or extra track add? Will it slow or increase efficiency in other parts of the network? When it’s all taken together, will the total return reach 15%?”
Knight also built a second financial function that might be called “green, yellow, red.” In each of the big operating businesses—coal, industrial products, chemicals, and so on—Knight installed financial managers to evaluate new business. They enter the proposed pricing on all new contracts, as well as the extra costs in fuel, manpower, and everything else the business will require, into an online operating system that projects the rate of return. If the number is well over 15%, the system flashes green. If it’s on the margin, the signal is yellow. “If it’s red,” says Knight, “and it’s the best pricing we can offer, we let it go.””