CREATIVE AND BUSINESS THINKING 1
The impact of technology-based change on our lives since Tim Berners-Lee invented the World Wide Web in 1990 has been tremendous. I sometimes tell my students that the impact of the technological revolution on our society seems to me much greater than that of the French Revolution. That revolution was of huge importance in shaping modern western democracy. Today’s digital revolution will be of enormous importance in shaping a future democracy with a global scope.
That is why I am surprised to hear how politicians so often treat, and talk of, today’s crisis as if it was a series of short-term problems instead of a much more complex structural long-term change. They talk about how to get out of this crisis, but scarcely mention how to prevent the next one. What I want to look at instead is how the rapidly changing environment of our brand new economy offers many opportunities for us — but, if you are not prepared for it, how it represents a great deal of threat.
Here are some examples of companies which have found opportunity through new business models.
Nike (nike.com) changed its business model some years ago. It is not a manufacturer any more, but mainly a marketing company. Nike develops its marketing, design and branding strategy within the company, but production is outsourced and carried out in the cheapest place. Nike’s competitive edge is its ideology. With fewer fixed costs the company can focus on ideas and innovation, and come up with concepts such as NIKE iD. (nikeid.nike.com), a website that transforms the visitor into a designer with the possibility of customising his or her own footwear or gear.
Another example is Lego (lego.com). When Lego was in a downturn it sold off one of its fixed assets, the Legoland theme parks, to keep costs down. It sounds strange for a branding and marketing expert to sell a core piece of the brand, one which lets people experience the brand concept — ‘play’ — to its fullest. At that time the company was under immense pressure because of new competitors and copycats, however, and the sale allowed it to survive. After adapting to the new reality, Lego is now back on track.
Another strategy for companies is to buy other companies — or competitors – to increase their market share and presence in different markets, to gain knowledge and patents, optimise human capital and, ultimately, to make business more profitable. Consulting company Accenture works on this principle. In the global economy cross-border M&As (mergers and acquisitions) are a key strategy in the pursuit of high performance; these kinds of strategies, to redefine the business model by using technology and optimising costs, will continue. Ideas and innovation are key factors, and technology enables us to test these innovations in reality. If they work it is easy to scale them virtually and then, if necessary, to buy local companies to adapt a virtual model to a new market. This new reality challenges all industries and markets.
Google (google.com) has created a benchmark for the traditional advertising industry. With just 25% of the staff of the second player in its market Google makes double the revenue and increase its profits fourfold. How will the advertising industry react? No doubt they will come up with an idea — the industry is full of smart people with great ideas — but they now need to rethink their business model and until they have found a solution they will keep reducing their fixed costs to be more flexible. Google, meanwhile, keeps innovating and enters new industries. Let’s wait and see whether and how Google continues to innovate. The results of their past innovations have been impressive. Google Trends, Google Docs and Google Maps are already accepted by the market. Other ideas, like Google Glasses, Google Goggles and Google Mars are very cool, but we consumers have yet to decide if they will work. In any case, and this is the main point, while others talk about innovation, Google innovates, invests resources and is not afraid to fail.
To be continued…
