Focus on where you are really good at
by Jochen Ressel
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!
Let us have your thoughts and comments!
We are looking forward to receiving them!
The modern world of internet is what brings new trends to online shopping and results in less use of traditional service providers such as the Post Office – postage stamps and letters have become almost obsolete due to emails. Food, furniture, clothing, and so much more can be delivered to one’s door without leaving the sofa! Convenience is what drives online shopping for many, and even more now in these difficult times of Covid and Lockdowns- doorstep deliveries have maybe saved lives for some. Technology should be the servant of the citizens, not their master – so support local shops where you can to help them survive but do not feel guilty for using the technology that is available to make life easier.
The slow demise of the High Street shops is almost an inevitable result of those stores unable to embrace and make use of the rapidly growth of online shoppers. There will always be a call for the traditional services where the Personal Touch is a vital ingredient but the road to online buying has no exit slip-roads. It is heading in one direction and unlikely to change any time soon.
You mention Uber: personally I had never used them until I needed to get home at nearly 4 in the morning, after a particularly long dinner session at the Sacker. At that time in the morning, cold and raining (and me being slightly over indulged in the fine red wines of that fine establishment), the idea of finding a regular Taxi and paying an extortionate price to be taken home by a sometimes unpleasant driver, in a car stinking of sweat and old cigarette smoke was not appealing.
But then came the hallowed words from a friend “I will get you an Uber”!
– What a revelation. In 5 minutes my ride was waiting for me, a pre-fixed price already paid for in advance by his credit card, (so I already knew exactly how much I owed my friend) – The driver was polite, the car was spotlessly clean and fresh and at a price maybe 20% cheaper than I have previously paid with normal taxis at that time of night/morning. Uber and/or BOLT have become my regular ‘Ride Service’ of choice ever since.
Following a series of complaints and campaigns against the likes of Uber the traditional taxi providers demanded action and controls from the government to stop these new competitors. The government departments did exactly that and issued directives to set out rules which resulted in the best solution – compromise. Uber increased their prices slightly, Taxi companies reduced theirs slightly, and the result is that the Public are the winners!
Importantly, I believe we need to embrace the changes the future will bring us and learn to work with them as long as controls are in place to ensure the safety and security of the public.
Your Blog raised the issue Data Collection and its use and misuse. Frankly it would be naive of anyone to assume the collection and sale of personal details is anything new and only a modern day threat created from the likes of these online services and providers. I can assure you it is far from new! Unsolicited phone calls (COLD CALLING) is decades old and lists of hundreds of thousands of individuals and companies are readily available for sale to anyone willing to pay for them. How else do these call centres and cold call offices get the numbers to call? Names, addresses, phone numbers of individuals all over the world have been ‘farmed’ and sold even by some banks, Credit Card companies, shopping Loyalty card producers, magazines, newspapers, even the simple newspaper or magazine Competitions frequently farm and sell these lists people: these lists are a massive and profitable business and worryingly uncontrolled.
I think we should all recognise why things develop from what we have now to what we will have in the future. In my opinion change comes from the necessity to adapt or improve what we have – or, as the saying goes – “Necessity is the Mother of Invention” – never more true than the world we live in today.
With my best wishes for a safe and healthy future to all!
Steve Read
( A British European)
Fascinating article. Really good. But the notion of “franchising” or “networking” is not new. In my business years ago my hotel was part of “Best Western”. Best Western does not own any hotels. Its strength is the world wide Marketing. And you pay for that service. As an Independent Financial Adviser I was part of the Network “Sesame”. Sesame did not own me or paid me nor was I in any way dependent on them. Sesame provided me, the sole trader, with the necessary software and compliance in this very complicated market. Without this support my job would have been nearly impossible to carry out (This was one option and there are other options obviously). For that service I had to fork out money. Sesame and Best Western for example equally, against payment, supported me throughout with further education, courses and the necessary diplomas, for which you had to pass the necessary exams. In short: yes, they allowed me to focus on the things I was really good at.