Will Web 3.0 shatter axioms behind your current business model? I am writing from in the future, thanks to a day with the University of Wisconsin Madison’s E-business Consortium conference. Experts are presenting the implications of Web 3.0 for marketing, supply chain management, IT infrastructure and information security. Aged-old assumptions underlying many business models no longer hold true as Web 3.0 tec hnology changes how we communicate and communications infrastructures. First, for the uninformed (count me in) – Web 1.0 – One-way Internet sites for commerce. 10M users. Gave birth to Amazon and other on-line retailers and information sites. Web 2.0 – Two-way conversations. 100M users. Gave birth to Facebook/Linked-in and collaboration. Web 3.0 – Real time instant communication. 1B users and rising. Started in 2006, it gave birth to Twitter, video, location-aware applications and cloud computing. So what? Web 3.0 will obsolete…
The New Normal
In an earlier post I discussed P&G’s experimentation with lower cost offerings. The company’s recent analyst call confirms management’s commitment to chase the growing pool of frugal buyers, a response to what the P&G CEO’s calls “the new normal.” On a recent shopping trip with my daughter in advance of her return to college I easily identified other companies that “get” and do not get the new normal. BBCG, the brand my daughter yearns for yet cannot afford (unless there is a really great sale or a birthday check is in her hand) significantly lowered its entry price points on this season’s clothes. Same great look and high quality, and what I suspect is a less expensive fabric and simpler lines to sew. The saleswoman at SAKS (where we ended up after outlet stores turned up no shoes that fit) reminded us that…
On CNBC’s “The Call”, I Disagreed with Supply-siders Predicting Higher Inflation
I had occasion yesterday to be on The Call, a CNBC television show hosted by economist Larry Kudlow. Like other supply-side economists, Kudlow follows Milton Friedman in assuming that the inflation rate is driven solely by monetary policy. My topic as a talking head: Where is inflation headed in the US? Inflation matters because it affects the stock market, interest rates and our real wealth and income. I think horse racing is a good analogy for inflation predictions. A lot of people are betting on the horse called inflationary expectations: the Federal Reserve’s monetary stimulus will create higher inflation rates so let’s build that expectation into today’s interest rates and prices. Another horse is medical costs: pharmaceutical companies and health care providers are raising rates in anticipation pricing pressures once the Democrat’s national health care policy is enacted. Yet another horse is energy…
Capitalize on Customer Frustration with Your Industry
“What is your bank trying to sneak by you?” appeared in bold letters on my computer screen. The screen was then filled with the complex and confusing words we’ve all seen in small print documents communicating our banks’ fees and financial charge practices. I hate those documents, don’t you? In one of the cleverest business model innovations of the year, GMAC Financial Services, a $180 billion global financial institution built initially upon the General Motors’ brand, has renamed its bank as Ally Bank and redefined its value promise. Like a river seeking lower ground, Ally Bank moved right into the heart of our frustrations and forced compromises with the banking industry, offering a solution that we’ve been waiting for – a bank that’s on our side. Ally Bank’s value promise is relevant, compelling and differentiated: Bank with us and you’ll keep more of…
Growth Strategy During a Recession
Image via Wikipedia The rock face has many parallels to business’ external environment. Rock climbing starts by understanding it. Stand back too far, you see everything, but can’t see initial steps up the rock. Stand too close, you’ll likely climb to a dead end i.e., without safe steps up the face. With the right distance (the one that an exciting new growth strategy is discovered from) you see a promising directional route. B2C companies should throw out existing assumptions about customers. A 20% and growing decline in household wealth is transforming our consumption patterns and preferences. We’re at a pivot point where change is non-linear, not trend-like. The greater your insight into this transformation, the stronger your organization will be. Your B2B strategic planning should focus on this question – What can or could we uniquely do to help a target market become…
Value Promise and Profit Potential, Part Two
If you need a differentiated, superior value promise to win customers’ votes, how do you know when your value promise is no longer working and business model innovation is called for? Make sure you measure repeat purchases, your consideration rates and your win rates. Discover where you’re losing business and why you’re losing business, as losses signal a weakening value promise and threats to profit potential. Lost order autopsies can reveal – Nascent industries reducing customer interest in your categories Your differentiators becoming standards to be considered Non-traditional competitors entering your space Subgroups of customers exiting for simpler offerings Reduced profit margins also indicate a weakened or less differentiated value promise. But leaders too often forget that a compelling value promise creates the best context for reliable profit potential. They fix profits by cutting costs, forgetting value promise implications. A vital strategic leadership…
Value Promise and Profit Potential, Part One
Image via Wikipedia All customers buy on perceived value. Unfortunately, Walmart’s advertising has led us to define value as lowest price. We’ve forgotten that there are value promises beyond lowest price in today’s recession. Value is a mental scale with benefits on one side and costs on the other. Both sides contain tangible and intangible, emotional, functional and/or social factors. More benefits, more value, a formula Target exploited and Sears forgot. We stay in business if the customer exchange (benefits for price customers pay) is consistently profitable for us or, if we’re a venture-financed start up, promises profitability. Value promise and profit potential are interrelated. Understanding this interrelationship explains how to win. Way #1. Build the lowest cost structure for delivering required benefits. Your higher margins can be channeled back into the business to create further advantage. McDonalds dominates Wendy’s. Way #2. Offer…