Have you ever heard of Mjam? Or Lieferando? You may reply “Sure, impossible not to know them as the urban streets are full of cyclists delivering food in these weird Covid times.”
The two service companies mentioned are one simple and well-known example illustrating a change of the economy and its driving principles which has been an ongoing and constant development for the last years and has been boosted more than ever because of the Covid19 crises. The terminus technicus for the process is known as “Digital Transformation”. This term focuses mainly on the instruments that made the change possible from the technical point of view, but underneath there is a much more fundamental change: The transformation from a “we-are-the-best-in-every-aspect” to a “we-focus-on-where-we-are-really-good-at” economy. As the field in which you are really, really good at is the one with which you really make money but the fields in which you are weak or even bad, are the areas where you lose money. If you end up with slight profits you are lucky. But if you eliminate the money burner aspects, you will be more profitable than ever. This is the concept of a transformed economy.
Transformation in practice – some examples
The biggest accommodation company doesn’t own a single hotel room. We speak about Airbnb. Founded in 2008 it rapidly became the biggest platform for accommodation bookings worldwide. New database technologies and the rapid development of web access whereever you are made it technologically possible to implement this business concept.
And to make it very clear: It’s not at all only positive in every aspect what effects Airbnb created, if you look e.g. to Venice or other cities and their impact on housing prices etc. But the business concept showed a huge market which is accessible as hotels can do something where they are really good at: Creating atmosphere and providing nice rooms, SpA’s and additional services – but they fail to satisfy specific customer needs, as only a very few guests really use all the offered services as they are not in the need of. So why to pay that? Hotels fails in this customer need orientated sales process. They earn money in the core room rental service, but losing it in the sales process which also forced them to give the sales process in the hands of partner who is really good in that, e.g. booking.com etc. A conclusion remark: Public authorities failed and still fail to provide an adequate legal framework to avoid bad side effects of the Airbnb business concept implemented 2008 – now we have 2021!
The biggest people transportation company doesn’t own a single car. We speak about Uber, founded 2009. In continental Europe taxis are most of their working time standing still and waiting for customers approaching them, or just waiting to receive bookings from the radiocommunication with a central booking desk where customers requiring taxi services by phone. Honestly: Taxi drivers do not sell their service – they just wait on place where they expect a higher probability of people requiring their service. Uber takes over this sales process and collects as many requests as possible via an easy-to-use app and distributes it to the registered drivers close to the required meeting point. As this generates constantly bookings for the driver, the average income per drive is lower, but it minimises the waiting times, hence more drives per hour. But the real business of Uber is in the background, Uber collects via its technological background an incredible valueable database: How many people at what age move from A to B at which times? This generates data for infrastructural development of cities (streets, public transport etc.) and many other Uber related services. If you wonna know more about how Uber makes money, visit the CB Insights webpage and search for the detailed report. A conclusion remark: Public authorities failed and still fail to provide an adequate legal framework to avoid bad side effects of the Uber business concept implemented 2009 – now we have 2021!
The biggest printing companies don’t own all their used printing machines. We talk about Saxoprint, Cewe, Flyeralarm, and others – companies specialised in the field of online-printing. Some of them have their own printing machines, but all of them partnering heavily with traditional printing companies. These might be excellent in producing, but they are traditionally weak in the sales process, as the focus is on consulting and servicing the customers approaching them. Additionally, they may not have enough orders for the same type of products to optimize their costs and their production processes – and this is, where they lose money. The online printers take over this role and collecting customer orders, bundling them according to formats, paper type etc. and distributing them to traditional print companies partnering with online-printers. Therefore, online printers are much less producers than logistical coordinators, optimising the production processes – as it makes no difference which business card is printed on a sheet of paper, as long as the machine capacity is filled up and hence the per piece cost is minimized. The traditional printing companies sending the ready produced product, e.g. business cards, directly to the customer under the brand of the online printer – the customer never knows, that it wasn’t an online-printer but a totally different company producing her or his business cards.
The biggest food delivery companies don’t own a single restaurant. This brings us back to the beginning of this article. Only a very few restaurants are professional marketers, making their restaurant a brand. All others mainly waiting for customers dropping in. There is no pre-sales concept and the sales process starts, when the customer already decided to enter the restaurant. The online food delivery companies take over the sales process. Based on the specific needs of the hungry person, they suggest the meals – where it is cooked is second priority. Hence, the concept of professional food delivery logistics with minimising waiting times through the use of bikes and cycles is of outstanding success in urban areas. A conclusion remark: Public authorities failed and still fail to provide an adequate legal framework to avoid bad side effects of the food delivery business concept. Lieferando has been founded 2009 – now we have 2021!
What these examples have in common – the findings for us
We experience a transformation of the economy where production and sales are separated, where sales and service are separated as well as other processes so far handled under one roof. Basically, we move to an economy where everybody should focus on those aspects of the business, in which you are really good at and hence have the chance to earn money in a more and more competitive environment. Wherever you are not good at – and this is a humbling experience to admit the own weaknesses – find partners which can take over those parts and help you to avoid you lose money in these fields. Digital solutions have inspired these changes and will much more in the future through the ongoing digitalisation of society and products, like IoT, Decentralized Finance and much more.
Public authorities are forced to stop their “never change an established system” mentality. Innovative legislation should support the transformation process by creating a solid legal framework developed and constantly adapted alongside technological and business concept inventions – a framework which is appreciated and wanted by everyone – from customers as well as from companies, as nothing is worse than acting in a grey area of uncertainty. One for sure: Transformation is a law of nature – either we are participating and are part of the process, or we are just passengers – it’s our choice!
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