Digitisation turns existing business models upside-down, and new platform-based ecosystems are being developed in line with new customer needs. Successful businesses focus on computer-driven decision-making to deliver the experiences their customers expect.
In particular, the utility companies such as banks, insurance and electricity companies and broadband and mobile telephony providers are among the most vulnerable and need to change their core business. They can do this by redefining and adapting their own roles and growth strategies in the new ecosystems that are being developed.
New platforms connect industries and businesses
In the new ecosystems, you will find that the traditional terms and conditions relating to competition are changing. Actors across different industries and sectors are appearing as facilitators or collaborators in building new products, services and customer experiences. Some companies are pushing their way into new sectors using existing platforms – others are creating their own.
Data-driven businesses are using their knowledge to reconfigure their business models through a better understanding of user needs and behaviours. Information is also being used to determine the relevance and potential of different models, as well as to review the role and location of the various business modules in order to maximise the bottom line
Put another way; The data available will help your business identify what to market tomorrow, how to market it and to whom.
Successful partnerships are being formed between suppliers and actors in an extended value chain
Knowit works a lot with insurance, and we are seeing home insurance companies being forced to collaborate with smart house technology manufacturers, and car insurance companies positioning themselves in the value chains of vehicle producers. Likewise, we are seeing new collaborations between health insurance companies and, for example, “fitness tracker” producers and apps to develop new services.
One of our customers, a new disruptive insurance company, which is based on principles of sharing economics and digital customer travel, has now entered into a partnership with the world's largest insurance company, AXA; simply based on getting new technology out into a large and powerful distribution channel.
These examples show how newly developed services and businesses in a digital age are finding new ways of positioning themselves. Not only in a single segment of the value chain, but through cooperation with other companies, it is possible to share risk and resources to create common values.
Business models based on platforms depend on network effects
The value of a platform will increase as more users are found on the supply side and the demand side. A platform-driven business model is based on a link logic – ideally, links between professional companies (suppliers) and private individuals, between businesses, or between individuals. A marketplace is platform-based. The same thing as a community of interests. In order to grow strong, such business models depend on network effects to achieve a large number of users both on the supply side and the demand side. We often refer to this as critical mass.
The most important criterion for success is value creation – not volume. If a platform-based business model does not create sufficient value for users over time, it will deteriorate and become outdated. In such business models, overall value creation could be very high. For the company operating the platform, even marginal transaction revenues based on value creation could yield high earnings and good profitability. The company's value creation is marginal, but the transaction volume is high. Airbnb is an example of this.
Will GAFA sell electricity, mobile and payment services in Norway?
It is unlikely that all four data giants, Google, Amazon, Facebook and Apple will sell end-user services within the next few years. But it is likely that one or other of the four will do so. We believe that if they do, they will redefine the rules of the game. Amazon is, for example, best known for taking an aggregator position in a new market, that is to say, the consumer can choose between many or all of the suppliers of a utility service. We now see that Amazon, for example, is doing this in the insurance sector in certain countries.
What is common to GAFA (and other data-driven companies) is that their focus is not on the actual utility service, but on the entire home or residence – and eventually our “life”. Power or insurance will only be a naturally-connected service in a much larger ecosystem. Their strategic advantage is data – not platforms.
What does this mean for you?
You need, to an even greater degree, to become a data-driven business. This is characterised, inter alia, by your using:
• Cloud-based big data solutions
• Advanced analysis and development of algorithms
• Machine learning and artificial intelligence
• Data from sensors and smart products
• Robotic Process Automation & Marketing Automation
A good strategy is to change your position from being a leading single product supplier to a more complete supplier of useful and attractive services related to the customer's home, dwelling, family and life situation. Simply reposition yourself as the most attractive provider of “all useful everyday services in our busy family life”.
The position “closest to the customer” can only be won by focusing on the customer's total life situation and the customer's everyday life – in the customer context. Superb user experience, simplicity, relevance, insight, competitive price and high quality become the criteria for success.
The best starting point is an already strong brand, effective sales and customer processes, financial strength and an ability to invest in new products and services when emerging markets establish themselves. Rapidity is a criterion for success.
A robust and flexible platform is a necessity for success. But competing on platforms will not be powerful enough – many have already built modern platforms – and there are more to come. A platform is a necessity – not a competitive advantage. We believe the position “closest to the customer” is won by way of five strategic initiatives:
• The strongest brand and highest trust capital
• The largest and fastest growing customer portfolio
• The richest and most relevant datasets
• The best seamless user experience
• The best strategic alliances and partners
In a digital future with interconnected platforms and ecosystems (“system of systems” as Michael E Porter calls it), exclusivity will probably be an expensive, risky and limiting strategy. This entails exciting opportunities to connect with a number of other strong and attractive brands. In an ecosystem (a universe), customers can choose from a number of leading suppliers (brands), but at the same time these latter will also offer their products through other ecosystems, and directly to end customers. There will be a market battle and power struggle between the strongest brands and companies. A battle where the biggest and strongest will set the rules and the lesser must find their place.
From a national perspective, many of Knowit's customers are among the strong ones. From an international perspective, they become lesser players. If you do not succeed in establishing yourself closest to the customer, you are forced to subordinate yourself to the very biggest. Here is where the major strategic opportunities of many of Knowit’s customers can be found, but alongside the threats. The battle is for the long term. The possibility room is significant.
Knowit believes there is only room for a few “ecosystems” around the home and the family and "my life" in Norway. The companies with the best customer experience and the best datasets will win.