Facing A Changing Business Model: How To React?

I wanted to write about a blog post I found on Seth Godin's.

Seth Godin discusses about how business model changes when a ground breaking innovation show up:

"When the form changes, so does the underlying business model, which of course changes the function as well.

Mail ---> email

Books ---> ebooks

DVD ---> YouTube/Netflix

1040 ---> Online taxes

Visa ---> Paypal

Open outcry ---> Electronic trading

Voice call centers ---> forums and online chat

Direct mail ---> permission marketing

In each case, the original players in the legacy industry decided that the new form could be bolted onto their existing business model. And in each case they were wrong. Speed and marginal cost and ubiquity and a dozen other elements of digitalness changed the interaction itself, and so the function changes too.

The question that gets asked about technology, the one that is almost always precisely the wrong question is, "How does this advance help our business?"

The correct question is, "how does this advance undermine our business model and require us/enable us to build a new one?"

There are projects that are possible with ebooks or Kickstarter or email that could never have worked in an analog universe. Most of the money made in the stock market today is via trading approaches that didn't even exist thirty years ago.

When a change in form comes to your industry, the first thing to discover is how it will change the function."

I wanted to go further in Seth's point. Indeed, Seth points out that when such an innovation comes up, most of the time, it is not the leader of its market which benefits from it, but a new company mastering and understanding what the innovation will bring. This is what the famous phrase is about: "This is not carriage makers which became car manufacturers".

Most of the time, the large companies dominating one mature markets can not really compete with smaller actors, because their expertise, their business model, and their operating costs structure are going in limbo, and are not organized how they should to adopt the innovation.

But what should the company do? Indeed, if it will not be able to compete with the new business model, the company must find a new way to grow, and to keep its revenues up.

Kodak failed to adapt to the appearance of digital cameras: Kodak ruled the market of personal cameras. Its business model was based on the sales of films. But its business model was not possible anymore once digital cameras appeared, and therefore sales plumetted.

As a matter of fact, it is very difficult to make deep changes in one company in order to change one business model. Some companies succeeded though, like IBM, which shifted from building computers, to becoming more of a consulting firm.

The question remains open. But maybe the easier way to abord dramatical changes due to an innovation is probably to leverage the blue ocean strategy, and to find a new market where the company's ability and skills.

What do you think about it? Do you have examples to share?

How Will The Financial Crisis Impact Customer behavior

Customer relationship management has rose in emerging market, as competition was getting tougher, and the aquisition of new customers more difficult and costly. The spring of CRM also marked the arrival of a new era, where customers where more alert, more sounded, and that they could take over the power companies used to have.

Now customers could switch easilly from one company to another, and they could actually realize that they really mattered for companies. 

Customer relationship management evolved throughout the time, as customers and companies changed. New ways to interract between each others appeared, especially thanks to the Internet: First emails, then forums and since couple of years now social media. Companies had to change the way they handled CRM, as more communication channels had to be managed, bringing complexity, and their use were less mechanical than simply through some questionnaires to fill.

We are facing very difficult times. Since 2008, two main financial crisis hit the world, and the road to recovery seems long and tough. Most of the time, it is during these difficult times that we see the biggest change in customers' behaviors. They need to adapt to a changing world. 

Most of households are hit by the crisis, which means there are strong chances their spendings will be cut down. And probably, the way they interract with companies will also changes. 

How will it impact CRM? We have already seen that social media has emerged as one of the most important place of conversation between companies and customers. But it will probably go further. The concept of loyalty, which has been challenged those past few years, with the multiplication of companies using somehow the same kind of tools to secure one customer, will probably once more evolved.

This more an open conversation than a real answer I am trying to give. Because I don't exactly know how customers will change. But a lot of customer behavior component will evolve within the next few months and years, and we must be prepared.

How Strikes May Impact Customer Relationship Management: Air France Case Study

Customer relationship management is a science which is at the crossroad of the different functions of one company. Of course, most of it is managed by the marketing staff, as it has a lot to do with researches, and communication with customers.

But it is also a focus which th whole company must take care of. This is the reason why a lot of the time we talk about "Customer centric companies", meaning that CRM takes a core part of how a company deal with its business. But most of the time, real 100% customer centric companies does not exist, and therefore it is sometimes hard to get all the pieces together.

Air France is one of the leading airline company in the world. It secured its position thanks to its image of a premium service company. This image has been built throughout the time, thanks to a lot of details, those small details which creates the big things... One of the very good example: A lot of my American friends know Air France because they serve Champagne on board.

Air France is taking customer relationship management seriously, and they have always been a trail blazer in terms of loyalty reward program. They also make their best to respond to customer complaints as fast as they can.

But sometimes, Air France's customer relationship management is experiencing damages, due to unusual circumstances.

For this November hollidays season, Air France personnel was on strike, protesting to job cuts speculations. Due to these protests, Air France's planes had to take off with 50% of their planes empty, due to lack of staff on board. 

Air France knows how to deal with those kind of issues:

First, because they have a very competent risk management department, which has been used to deal with different kinds of problems (the Icelandish volcano crisis this year, other strikes, political issues in some countries)...

Secondly, because strikes are quite frequent at Air France. I could quote French show "Les Guignols", which mention that strikes for November hollidays season at Air France are sort of a "tradition"...

And this is a real issue: You could be as good as you can be analyzing customer data, providing high quality communication material, being responsive in crisis time, sometimes, those social events can impact big time the image of one company.

So what can Air France do?

To be honest, Air France is far from being the worst of the airlines company to work for. But the way they deal with their employees (which are by the way the first ambassador one brand can have) is very important in order to maintain a  high customer service at all time.

In overall, strikes may be prevented by having strong relationship with unions, but sometimes, they are very difficult to avoid, especially in some specific industries. 

But human resources management, and social crisis inside a company can have a large impact on one company CRM Strategy.

Let Your Customers Speak Out

"Always Remember: If customer don't have effective way to voice complaint, they just quit doing biz w/ the co."
This sentence is a quote from @tedcoine I found out on Twitter. I believe it is a very interesting one in term of customer relationship management. Indeed, social media have changed the way companies interract with customers.


They can not anylonger avoid listening to angry customers, and they must now deal with it. This is the job of community managers, a new trade which is blossoming.


It is not a natural behavior for a company to let its customers to speak out its complaints and issues. A company sells products, and is seeking for efficiency, which implies standard processes in order to save time and costs.


But ultimately, customer satisfaction is the key factor which will bring success or not to one company.


A lot of companies have looked for ways to silence unhappy customers. They believed that by doing so, they will be able to keep the happy ones happy, and that eventually, unhappy ones would come back.


But it is no longer possible. And this is the reason why they must deal with it now.




This is the reason why it is important to have a strong feedback management system. A one which is able to deal with the large number of media one customer may use to get in contact with the company:

• A call center if it is via telephone.
• A customer service if it is by mail or email
• A community manager if it is by a social media
• A sales person if it is in a store
• An after sales service if it is because of a broken product.

Those media are expensive to manage, and to keep active. But they are vital, because it will minimize the lost of clientele in case of problems.


Also, something very important to think about is how to manage and leverage the large amount of information you may get from all those different sources.


The infromation will come from various ways, but it is important to have a tool which will allow the analyse of all the dysfunction customers may experience.

Abercrombie & Fitch Growing Fast Thanks To Ecommerce

Abercrombie & Fitch is growing fast those past few years. They have undertaken an ambitious online strategy, in order to grow the share of revenues coming from Internet sales. And the results are great:

• Web sales increased 30.2% $207.9 million from $159.7 million in the first two quarters of 2010.
• Total sales grew year over year 22.4% to $1.75 billion from $1.43 billion.
• Net income increased 641.6% to $57.1 million from $7.7 million in the first two quarters of 2010.
•  

Internet Retailer projects the web accounted for 11.9% of total sales compared with 11.2% in the first two quarters of 2010.

It is very interesting to see that Ecommerce is in the heart of Abercrombie success. We also knows that the company is seeking for international growth, as their recent launch in France shows.

This is the reason why I wonder: Could Abercrombie leverage its Ecommerce skills in order to grow fast? Creating a retail network is very long and pricy for a company which wants to land in another country, especially when it is a mature market, like France. And maybe leveraging Internet sales before a true store chains could be a new innovative strategy retailers should envision. 

We see more and more Ecommerce companies developping links with the mortar industry, either by setting up partnership in order to provide new delivery possibilities to customers, or simply by undertaking a true strategy of creating actual stores.

This is probably the reason why Abercrombie's French website is actually an online shop. It will be interesting to follow, but I am sure that Internet sales will count for a large part of French revenues in the first couple of years.

It could be very interesting for large companies to master the Internet sales channel, in order to leverage it in other countries. 

What do you think about it?

E Commerce Struggles To Spring Up In India

India is a very interesting market to invest in. It has a high growth rate, a large population, and also a great population of computer engineers, which allows the country to be among the greatest country for high tech companies.

Nevertheless, India is not such a friendly country to approach for business men. Indian culture and infrastructures are far from being ready to welcome "western life style", unlike China or Brazil, the two other next to become super power countries. For example, in the retail business, it is hard for companies to settle in India, as roads are not that good, and it is therefore difficult to set up an efficient supply chain.

It is the same thing for telecom infrastructure. This is the reason why mobile phones have experienced such a great success: As the country is very large, it is faster and cheaper to organize a wireless network than an actual cabled one. This is also for that reasons that some experts think India will be one of the leaders of mobile Internet, skipping one technology (wired), and obliged to innovate.

I read not so long ago a very interesting article, detailing the different reasons why Ecommerce struggles to take off in India.

What is very interesting in this article, is that you may think it is because of the lack of Internet equipment that India's Internet commerce is growing slowly, but as a matter of fact, it is mainly due to the lack of credit card penetration. Hence, it is difficult to purchase online if you don't own a credit card. And because India has a low penetration rate for credit card, it is difficult for Indians to buy online.

This is a very interesting concept, because it shows how important the credit card penetration  rate is important in order for a e-business to blossom.

What do you think about it?