Keeping your e-business successful is like working on...
Our economy and society is changing. Customers no longer settle for being passive consumers. They want to be active co-creators, they want to contribute and they want to share. At the same time, digital commerce is going through the roof. Customers are now shopping everywhere – at home, on the subway or while standing in line. But what is important for the digital consumer today? What does this mean for your online business? And where do you go from here?
MARKET asked Dr. Jonas Ridderstråle, author, professor and business speaker, who is currently working on a new book about what it takes to be a serial game-changer. According to him the road to ensuring constant development resembles the one to a happy marriage …
But let’s start from the beginning. What strategies for success have you seen within e-commerce so far?
In the beginning, too many companies tried “selling less for more”. Hardly surprising, that was not a sustainable strategy. When the hype died, so did those firms. In essence, there are three sustainable strategies on the Internet and elsewhere:
- Offer a little less for a lot less
- Offer a lot more for a little more
- Offer more for less
The Internet just opens up for completely new ways for us to cut costs and add value, but it is an enabler and not a substitute for exclusivity or a business model.
So, what can we learn from these?
Two things come to mind. First, a plain vanilla ice cream is still a plain vanilla ice cream – even if you sell it on the Internet. Your value proposition needs to be unique.
Second, historically, the key to success was all about controlling supply, now controlling demand is at least as important. One of the big changes that we are currently witnessing is the transition from a world where intellectual capital was the scarcest resource to one in which relationship capital is even more critical.
Relationships in business life and elsewhere revolve around trust. What is key is not so much trust in a transactional and payment sense – that stuff is necessary but no longer sufficient – but building a business model that is sort of self-regulatory, like the ones of Ebay or Amazon, where you and I can link up to become ‘we’.
What is important for the digital consumer today?
Number one, customers always want exactly what they desire – no more, no less. I don’t really want 143 different versions to choose from, I want MyStuff: MyPhone, MyBank, MyCar, etc. In the era of increasing ‘prosumption’, invite the customer to take a more active role as a co-producer, or face the fate of Kodak.
Number two, consumers are schizophrenic, some more than others. On the one hand, we use consumption to express our individuality and uniqueness. On the other, we also want to signal tribal belonging with the stuff that we pay for. The best brands get this and don’t see individualism and collectivism as substitutes – two end points on a continuum – but rather as complementarities.
What does this mean to the e-companies?
Some will make it, most will not. Of the companies that made up the original Dow Jones industrial average a century ago, only one (GE) is still in the index. Of the top 100 firms in the UK in 1907, only three were traded independently a century later.
Think about Eastman Kodak. Once it was the Google of its day – a cool, innovative company that completely dominated the early days of photography – but it was unable to respond effectively to the digital revolution and it declared bankruptcy in 2012. Kodak missed the we-train and went for a strategy focused on individual printing rather than virtual sharing of photos on the web. “You press the button, we do the rest.” said their famous 1888 slogan. It’s just that, in recent years, the meaning of “the rest” really changed while Kodak didn’t. 125 years after that catchphrase, it was the “we” that did them in. As you know, a few months after Kodak’s bankruptcy, Facebook acquired the popular photo-sharing application company, Instagram, for a billion dollars – an organisation with 13 employees. The photo-sharing program had been launched in October 2010.
Let’s face it, economic progress has winners and losers. But progress doesn’t happen in a random fashion. There are some predictable elements, and by learning the lessons of history, as it is often said, we can avoid repeating them.
What are the largest challenges for e-companies right now and how can they be overcome?
The traditional response to an uncertain future was to make plans. The more uncertain the future, the more plans we would make. But gradually, companies are figuring out that this “arms race”, where an ever more complex world is matched against an ever more complex plan, isn’t working any more.
If you cannot make any decent predictions about the future, you cannot really make any plans. If you cannot make a plan, you obviously cannot have a strategy, because at the end of the day a strategy is nothing more and nothing less than a fancier word for a plan. And if you cannot formulate a strategy, you cannot have a budget, since a budget is simply a plan in numbers.
So the old tools don’t work any more, and in fact, most business people wouldn’t disagree with this statement. But the trouble is, the new tools aren’t well-developed, and we still have those old tools to play with. So we keep fine-tuning those old tools and frameworks long after they have lost their relevance.
I’m writing a new book with Julian Birkinshaw from London Business School – a book about what it takes to be a serial game-changer. In this we talk about four key principles for dealing more effectively with the situation:
From Trends to Scenarios:
We cannot predict the future but we typically know enough about how the world is changing for us to play out a range of possible futures or scenarios. By increasing our awareness of these future scenarios, we are likely to respond more effectively when they transpire. “Stimulation by simulation” ought to be the new mantra.
From Strategies to Simple Rules:
The best way of managing complexity is through simplicity. If we don’t know what the future holds, we need to let those on the front line adapt in real-time to unfolding events. In the language of military doctrine this is called Mission Command – a style that promotes relatively decentralised decision making, freedom, speed of action, and initiative, but within certain constraints.
From Project Plans to Agile Loops:
For decades, software, for instance, was developed through highly detailed project plans, with careful specifications, cascading goals, and the rest. But the state-of-the-art today is agile development. Here, some of the key principles are “to satisfy the customer through early and continuous delivery of valuable software”, “to welcome changing requirements, even late in development”, and “business people and developers must work together daily throughout the project”. Think real-time insight rather than foresight.
From Pilots to Experiments:
A pilot is a way of keeping your options open without actually taking any risks in the first place. A much better term is experiment, because it says we don’t know what is going to happen. If we want innovation, we need experimentation. Experiments are risky. Every once in a while we will fail. If we punish failure, people will stop trying. So, if we’re serious about innovation we should reward magnificent mistakes instead of mediocre success.
So must e-businesses constantly reinvent themselves to keep up with the consumers needs?
Yes! Unless you’re willing to settle for being a one hit wonder like MC Hammer.
And the million dollar question – how do you do that?
Do you have an hour or two? No? In short, then. The organising logic and leadership paradigms at hyper-innovative organisations are based on notions that conventional managerial wisdom is anti-evolutionary and ultimately results in economic euthanasia. Interestingly, the road to ensuring constant development resembles the one to a happy marriage.
Here are four principles to guide the efforts:
Just like in a marriage, recruitment matters. Don’t relegate talent attraction to a secluded part of the HR-function and don’t hire clones. Productive diversity is key.
Some people marry out of love, others out of convenience. I guess any purpose is OK so long as both parties agree on it. The same goes for corporations, with the additional requirement that ideally the purpose should also differentiate you from the rest of the pack.
A master-servant type of marriage may function but it rarely leads to much development. Dito for companies. Different voices must be heard.
In a self-organising firm, the kitchen table of marriage is replaced by an advanced infostructure + extensive traveling and rotation of people across borders.
Finally, what is your best advice for e-companies on how to succeed in this new digital world?
Well, let me give you the most important one: act as rationally as possible to get people around you to react as emotionally as possible.
Dr. Jonas Ridderstråle