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Broadband has been great for most businesses, but it hasn’t been good news for everyone:
Many of these casualties have made intelligent attempts to adapt their businesses, trying to reinvent themselves as broadband’s explosive growth wrought chaos on their traditional business models. They just couldn’t… or wouldn’t… go far enough, fast enough.
Their difficulties offer us some salutary lessons.
As a business, it’s vital to invest in the new technologies & business models that risk cannibalising your traditional business. If you don’t, someone else will, and you’ll lose market share to them.
Even if your product or service is ‘offline’ and seemingly unaffected by broadband, the way your business finds new customers may need to change. Customers are increasingly turning to the web to locate new suppliers and research their options. If your business isn’t marketing itself online, it may be losing out to competitors that are doing so.
Embracing digital is more than just replicating the offline experience online. It should take advantage of the unique characteristics of the disruptive technology to add value in ways that weren’t possible before.
When I listen to music using streaming music service Deezer, I get music, cover art and some meta data. That’s simply the offline experience replicated online. The service then augments that by taking advantage of one of the unique characteristics of the online world (near infinite storage space) to add additional value (letting me listen to 20 million tracks).
But notice just how many opportunities are being left untapped. If I like what I hear, I can’t easily buy a concert video, see artist merchandise, buy related concert tickets, find music that sounds like the track I’m listening to, or subscribe to news updates, such as a notification when there’s a new album from an artist of interest. Countless opportunities for creating additional revenue have been wasted. And the customer relationship isn’t even with the music label. They don’t even know I exist. Is it any wonder the recorded music industry is suffering revenue declines when it’s missing so many opportunities to cross-sell?
You need to take advantage of online’s unique characteristics: the Internet’s infinite space for products and information, it’s potential to give the customer access to information that was historically kept within the company itself (such as stock levels and delivery updates). You need to provide tools that not only sell things to your customers, but help them decide what to buy in the first place, such as personalised recommendations, reviews and need analysis tools.
Customer adoption of the new substitutes changes the economics of the legacy business.
So your ‘digital strategy’ has to be more than tacking on a digital version of your service. It should involve re-evaluating the economics of the legacy business.
Some products or services may need to be discontinued. You may have to focus on higher-value transactions, and shift lower-value transactions to cheaper self-service channels. You may need to look at changing staffing levels and increasing the level of automation.
In some cases, you may need to shift into related products, to capture a larger share of the expenditure of a diminishing number of customers. For example, struggling music retailer HMV has chosen to diversify into electronics, selling headphones and tablets. Currys Digital sells not just TVs but also subscriptions for pay TV services. Banks now offer insurance and investments to make the most of their branch network.
This shift into complementary products and services may involve developing new competences in-house. Or it may involve working with credible external partners that can bring experience, economies of scale and supplier relationships that your business now needs.
Although many customers will prefer to use just one channel, there are many others who want to use both your new and old channels. Yet, often the new and the old are treated as separate divisions and the opportunity to cross-sell is overlooked.
In addition to cross-selling to increase revenues, it’s possible to combine the new and legacy offers to create something that combines the best of both worlds.
An example of this is ‘click and collect’ where retailers let customers shop online then collect their purchases in store. This combines the benefits of online (choice, in-depth product information, customer reviews, convenience, personalised recommendations) and the benefits of the retail network (instant gratification and avoiding the hassle of failed postal deliveries).
For newspapers and magazines, this might include offering a combined ‘digital + print’ subscription option. This is something that The Spectator and the Sunday Times already do.
All industries are being challenged to change the way they do business, to automate more and provide customers with access to data that was previously only available to internal staff.
We may be lucky enough not to face change as rapid as that suffered by the casualties mentioned earlier, but we underestimate the need to change at our peril.
By proactively changing the way we deliver our services, we not only avoid becoming victims of change, but we also have the opportunity to gain a temporary competitive advantage that can help us keep and win new customers.
Ironically, one of the technologies that can help us is broadband. By embracing those things that broadband has made possible – such as online advertising, email marketing, search engine optimisation, customer portals and VPNs, you can help keep your business one step ahead.