Revolutionary Measures

Elon Musk and brand safety – a cautionary tale

Consumers increasingly want to engage with genuine brands with a personality. And in many cases this goes back to the founder and CEO. Think of Apple and Steve Jobs, Microsoft and Bill Gates, Burt’s Bees and Burt. Or, as I heard yesterday on Radio 4, Gwyneth Paltrow and Goop.

battle black blur board game

Photo by Pixabay on Pexels.com

In a world where consumers are bombarded with slogans from faceless corporations, having a figurehead that they can relate to should be an excellent shortcut to drive success. And, in many ways it often is. However, one of the key factors that drives people to found and grow businesses is self-belief that whatever they do is right, and that they need to battle the world to maintain their success. Add in that the more success they have, the fewer people there are around them who are willing to tell them when they are wrong and you can see a recipe for potential reputational disasters.

Elon Musk is a classic case in point. He’s built Tesla into one of the most recognised car brands on the planet, from scratch, and helped accelerate the spread of electric vehicles. Earlier in the year the company had a stock valuation of $50 billion – larger than Ford, despite its much smaller size (and profitability).

Of course, the key phrase is “had a stock valuation of $50 billion”. Musk announced in a tweet that he had the funding in place to take the company private at $420 per share. When it turned out he didn’t he was sued by both investors and regulators. A further tweet after he was fined for this saw the stock fall further, knocking $10 billion off its value. And don’t forget this is the man that called a British diver involved in the Thai cave rescue a ‘pedo’ and was recorded smoking pot on a podcast.

So how can organisations combine the creativity, drive and charisma of a founder with brand safety? There are four ways to achieve this:

1          Trust the CEO
You could, of course, just let the CEO do what they like, Richard Branson style, but that’s assuming that they understand that there are limits to their behaviour. In the case of true loose cannons (like Musk), this isn’t going to work. In the case of public companies it is also going to make the share price gyrate on a daily basis.

2          Focus on the product
A longer term strategy is to shift the focus from the founder to the product. So while the CEO might be introducing what the company makes, they are talking about what goes into it and what makes the company special, beyond their own personality. Bring in outsiders such as celebrities to subtly shift away from a single founder – a good example is the Virgin Media ads featuring Usain Bolt alongside Branson.

3          Build a team
No one person can run a multi-million pound company successfully. Leaders need help, so build a team and make sure that they are increasingly seen in the media. They are never going to have the same appeal as the founder – for example compare Tim Cook with Steve Jobs at Apple. But creating a wider team will deflect some of the attention over time and prepare for the point when the founder is no longer around.

4          Have people who can say no
Probably the hardest thing for an underling to do is to disagree with their boss, particularly if they have built the company from the ground up. Not many employees would embrace such an almost certain career-limiting move. That means telling founders that they are on the wrong track has to come from boards, independent mentors and from creating a culture where messengers are not shot, but encouraged. This is another long-term process, but one that needs to be thought of early in the process.

Balancing the marketing value of a charismatic figurehead with their wayward side is never easy – just ask Ryanair – but if brands want to stay around for the long-term they need to be ready to outlive their founder and put in place a framework and culture that turns ‘me’ into ‘we’ without losing the brand essence and magic they bring.

 

 

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October 10, 2018 Posted by | Creative, Marketing, Startup | , , , , , , , , , , , , , , , , , , | Leave a comment

3 ways to make people buy your stuff

The world is full of start-ups touting technological breakthroughs and innovations. But a substantial majority never make it to the big time, especially not as independent companies. This is particularly true in research-driven hotspots such as Cambridge.

advice advise advisor business

Why is this? A lot is down to a lack of understanding of the importance of marketing and sales, with tech-led founders believing that having the best technology is enough and will bring buyers flooding in. Therefore, they reason, there’s no need to focus on disciplines like marketing as the product is so good and so advanced that it will simply sell itself.

Clearly, nine times out of ten this is never going to work. As Tony Wilson discussed at this week’s Cambridge Marketing College Brainfood for Breakfast event, the uncomfortable truth is that “nobody is going to buy your stuff.” For a start people don’t like spending money, particularly in B2B, and are normally happy doing what they’ve always done – you don’t tend to get fired for sticking to the status quo.

Obviously there are ways that you can get people to buy your stuff, as Tony explained, but you’ve got to meet one (or more) of these three conditions:

1.Their business is better off after buying it
You can’t sell a product on its own. It has to solve a specific business problem and therefore deliver a quantifiable benefit. That could be speeding up a process (such as getting a product to market), or increasing efficiency. Essentially, to borrow a phrase from Clayton Christiansen, you need to help them with their “jobs to be done”.

2.Their customers’ lives are improved
Its an obvious fact, but businesses rely on customers for their survival. And in an era of rising customer expectations and ever-expanding choice, consumers are very happy to move elsewhere if a business isn’t providing what they are looking for. So your product has got to deliver benefits that help your customer’s customer in some way, shape or form.

3.They can differentiate from the competition
The other thing that keeps CEOs awake at nights is the competition. How can they differentiate their business while preserving margins? We’re increasingly in a winner takes all world, where premium brands can charge much more, leaving their competitors to scrap amongst themselves for higher volume, but lower margin business. Smartphones are a case in point – Apple, and to a lesser extent Samsung, can set high prices, confident that loyal consumers will see the value they deliver, while rivals are forced to discount. Each handset is broadly similar in terms of what it does – but it is differentiation and a focus on the customer’s needs that allows some brands to charge more. So, how does your product help companies to differentiate themselves from their competition?

It is clear that tech companies, particularly in B2B, need to focus on the needs of their customer, and their customer’s customer. But many don’t do this – or even understand how their product is being used or the value it is providing. The answer is simple, but does require marketers and sales teams to change how they operate. As Tony Wilson points out, you need to go out and talk to your customers, embed yourself in their world, understand their pain points and how you can solve them. That might mean revamping your product or bringing in additional functionality or partners to deliver this – but by providing a solution to a problem, you’ll increase sales, boost loyalty and preserve margins. The question is, are technology businesses ready to really listen?

Photo via Pexels.com

June 13, 2018 Posted by | Cambridge, Marketing, Startup | , , , , , , , , , , | 2 Comments

Making it work – the marketing challenge behind smart technology

We’re now in the midst of the Consumer Electronics Show (CES), which sees more than 170,000 people descend on Las Vegas to view and play with the latest technology. And with consumer electronics now covering everything from connected cars to smart appliances and household robots, it provides a real glimpse into the future of how we will live, work and play.

And if people think that this is hyperbole, just look at the speed at which innovations such as Amazon’s Alexa digital assistant and electric cars have entered the mainstream. Morgan Stanley predicts that 22 million Echo devices, which feature Alexa, were sold in 2017, while countries such as the UK and France have banned the sale of new petrol and diesel cars from 2040. You can even buy those sci-fi staples jetpacks and hover boots.samsung-ces-2018-7971

That’s why the issues tat LG’s new Cloi robot suffered at its CES debut should be a wake-up call to marketers. The device, which is designed to help consumers manage their smart homes, initially co-operated at an onstage demo, but then simply gave up and refused to do anything apart from blink when asked when the presenter’s washing would be ready and what was for dinner. As the owner of an Amazon Echo Dot, I know exactly how the poor chap feels, and have to commend him for not shouting abuse at Cloi in public.

But what this shows is that complicated technology is exactly that – complicated. It can be difficult to get it set up correctly in the first place, to then get the best out of it or link it to other devices in the home. Compare this to the analogue products that most people are used to interacting with, and you can see the problem. They work straight from the box and are designed to be simple to use and get value from.

In many ways this follows the classic framework set out in Geoffrey Moore’s Crossing the Chasm, setting out how new technology is adopted. This is the order it provides:

  • A small group who don’t care about things going wrong and have the skills and knowledge to fix them
  • Early Adopters – a bigger group that simply wants the latest thing and puts up with idiosyncrasies
  • Early Majority – pragmatists who adopt the technology when it is mature
  • Late Majority – conservatives who adopt the technology late on, perhaps within existing products that they are familiar with
  • Laggards – sceptics who will only adopt new technology when absolutely essential

This model worked in the past, but I think the acceleration of tech means it is no longer accurate. We all have constant exposure to technology, such as smartphones, and the falling cost of devices, and their omnipresence, means that the majority/laggards often don’t have a choice about adopting them. This potentially divides society into the technologically-skilled and the Luddites who cannot manage to stay on top of innovation, and consequently miss out on the advantages it brings. In turn this leads to resentment and, I believe, drives frustrations which can be manifested in concerns over the future and consequent support for populism and insularity.

What does this mean for marketing? Essentially, we need to stop just pitching technology at the Early Adopter, but make sure that it appeals to everyone. We have to be clear on the advantages, clear on how it used and provide the support to assist people in getting the most from it. And by support I don’t mean an impenetrable, jargon-filled manual or a premium rate phone number – I mean tailored assistance that shows how users can benefit.

No doubt CES 2018 will see a whole raft of wonderful technology innovations unveiled – but in order for them to be really successful companies have to address the fundamental marketing question of “What does it do for me?” in a much better, more understandable way.

January 10, 2018 Posted by | Creative, Marketing, Startup | , , , , , , , , , , , | 1 Comment

4 challenges to the rise of the virtual assistant

Home automation is the next battleground for technology. Following on the heels of Amazon’s launch of its Echo and Echo Dot devices, which feature its voice-controlled personal assistant Alexa, Google has unveiled its plans for a range of hardware to control the smart home. The Google Home speaker features a virtual assistant, excitingly called Google Assistant, that lets you give commands and then either provides information or controls your smart devices. For example, you can stream music, control the temperature and turn the lights up/down/off, as with the Echo. And Amazon and Google are not alone, with Apple announcing its HomeKit standard which will allow users to control devices through their iPhone via either apps or Siri.amazon_echo

When it comes to mass adoption, it is early days in the home automation market, and each one of the major players will need to overcome four big obstacles:

1          Do we need it?
Smart home kit has yet to really take off, with many consumers not willing to pay extra for internet-enabled light bulbs or thermostats. While Google Assistant and Amazon’s Alexa can do more than control your home, with the ability to find information, check the weather/traffic, book an Uber taxi etc., you don’t really need a separate device for this. You have one – your smartphone. So what each player has to do is find ways of encouraging people to adopt it, developers to create apps that use its functions, and manufacturers to incorporate it into their own hardware. Given that we’re talking about white goods such as fridges which are replaced infrequently and are normally price-sensitive purchases, this last point is going to take some time. As an early adopter I’m going to give Alexa a go, but I can’t see a compelling reason for mainstream consumers to buy an Echo or Home, until the ecosystem around them are more mature.

2          Is it clever enough?
As an existing Siri user I know that for a smart assistant it can be pretty dumb. It doesn’t really know enough about me to provide helpful answers and most attempts at ‘conversation’ end with switching it off and trying a Google search instead. Amazon and Google promise that their assistants will be much cleverer and will learn about you in order to provide a personalised experience that understands your context, location and previous behaviour. The jury is still out on whether it can be intelligent enough to replace human interaction for basic tasks.

3          Is it private?
The self-learning promise of Assistant and Alexa also has a darker side. Essentially, you are putting an internet-enabled microphone in the heart of your home, where it can listen and learn about you, before sharing that information with Google and Amazon. While both have privacy safeguards, the less you let it share, the less useful it will be. Many people will be concerned about where their data is going, and how it will be used – particularly given the amount of information Google and Amazon already possess about us all.

4          Are we going to be trapped in silos?
For me the main issue behind each of these platforms, is that essentially they are silos. You can’t play any music stored on iTunes on either of them for example, but have to either rely on Amazon Music, Google Play Music or Spotify. Even in an age of technology giants, very few of us rely on just one platform – we tend to use bits of each and value the fact that we can pick and choose where we get email, buy products or listen to music from. By their very nature, rivals are not going to push their competitors’ services, and no-one wants to have to buy multiple hardware to cover all their bases. What is needed is some form of interchange between all platforms, a kind of one ring to rule them all – but I can’t see that happening soon.

As with any innovation there’s a lot of hype around virtual assistants, and the hardware that they control. What is needed is some equally smart marketing that overcomes the objections listed above and really focuses on the benefits – otherwise mainstream consumers are likely to simply keep their dumb homes as they are.

October 26, 2016 Posted by | Marketing, Startup | , , , , , , , , , , , , , | 2 Comments

Back to the Future

Picture of the EO Communicator (source: the Un...

For anyone like myself who was around during the dotcom boom, it is hard not to feel that you are suffering from déjà vu. Many of the exotic ideas and concepts that spectacularly flopped at the time have been reborn and are now thriving. Take ecommerce. Clothes retailer Boo.com was one of the biggest disasters of the period, burning through $135 million of venture capital in just 18 months, while online currency beenz aimed to provide a way of collecting virtual money that could be spent at participating merchants.

Offline, we were continuously promised/threatened with smart bins that would scan the barcodes of product packaging as we threw it away, and automatically order more of the same. And goods might arrive from a virtual supermarket, run as a separate business from your local Tesco or Sainsbury’s. You could pay for low value goods and services with a Mondex card instead of cash (though initially only if you lived in the trial town of Swindon). The first Personal Digital Assistants (PDAs) were launched, providing computing power in the palm of your hand. We’d already laughed out of the court the ridiculous concept of electric cars, as typified by the Sinclair C5.

Fast forward to now, and versions of all of these failed ventures are thriving. There are any number of highly graphical, video based clothes retailers, while you can take your pick of online currencies from Bitcoin to Ethereum. We’re still threatened with smart appliances that can re-order groceries (fridges being the latest culprit), but Amazon’s Dash buttons are a neater and simpler way of getting more washing powder delivered that put the consumer in control. And Dash bypasses the supermarket itself, with goods dispatched direct from Amazon. I can pay for small items by tapping my debit card on a card reader – even in my local village shop. More and more cars are hybrids, if not fully electric, while handheld computing power comes from our smartphones.

What has driven this change? First off, the dotcom boom was over 15 years ago, so there’s been a lot of progress in tech. We have faster internet speeds (one of the reasons for Boo’s demise was its graphics were too large for most dial-up modems to download), better battery life for digital devices and vehicles (iPhones excepted), hardware and sensors are much smaller and more powerful, and network technologies such as Bluetooth and ZigBee are omnipresent.

However, at the same time, the real change has been in the general public. Using technology has become part of everyone’s daily lives, and those that are not online are the exception, rather than the rule. It is a classic example of the move from early adopters to the majority, as set out in Geoffrey Moore’s Crossing the Chasm. And it has happened bit by bit, with false starts and cul de sacs on the way.

So what does this mean for marketers? It really brings home the importance of knowing your audience and targeting your product accordingly. Don’t expect raw tech to be instantly adopted by the majority, but build up to it, gain consumer trust (perhaps by embedding your new tech in something that already exists), and prepare to fail first time round. And the other lesson is to look at today’s big failures, and be prepared to resurrect them when the market has changed in the future……

 

September 14, 2016 Posted by | Creative, Marketing, Startup | , , , , , , , , , | Leave a comment

Why ARM’s acquisition shows that Cambridge is changing

The official logo for the ARM processor archit...

Like a lot of people I was initially shocked by the recent £24 billion takeover of ARM by Softbank of Japan. Not only was it the biggest acquisition ever of a European IT company, but it was also widely seen as the jewel in the crown of the Cambridge/UK tech scene.

A few years ago Cambridge had three stock market listed companies worth over a billion pounds each – ARM, Autonomy and Cambridge Silicon Radio (CSR). All have now been acquired, with varying degrees of success – HP, Autonomy’s purchaser is still suing the previous management about alleged overstating of accounts.

At the same time a large number of the next tier of Cambridge companies, such as Jagex, cr360 and Domino Printing Sciences, have also been bought, leaving many people wondering where the next tech superstar will come from. This is particularly true as an increasing number of earlier stage businesses in exciting markets have been acquired by tech giants – Internet of Things startup Neul was bought by Huawei, Evi by Amazon and Phonetic Arts by Google. And that’s just the acquisitions that were announced. I’m sure that in many cases promising technology has been snapped up without making it into the press, as the deal size has been relatively small.

So, as someone involved in the Cambridge tech scene, should we be worried? Is Silicon Fen going to turn into an offshoot of Silicon Valley – a bit like the tech towns around Heathrow, but with a bit more IP? Thinking about it more rationally, there are two main reasons for the flurry of acquisitions, particularly of smaller businesses.

1          Cambridge’s reputation
All of these acquisitions are actually recognition of the strength of the Cambridge tech sector. Big companies are attracted to the area because of the talent and innovation on show, and are increasingly willing to take a punt on earlier stage businesses to get in first and lay their hands on new technology and IP. They’ve realised that not every acquisition will work, but that the wins should outweigh the losses. So, Cambridge’s PR has worked in attracting the largest tech companies to the area.

2          Changing mix of companies
Traditionally, a lot of Cambridge startups were built on biotech, science and engineering, either from the University or the innovative consultancies that differentiate the city from many other clusters. As Cambridge grows, a greater number of companies are software-based, which means that developing their technology is faster than when trying to commercialise a product from an interesting piece of lab research. Therefore, they are likely to have a steeper growth curve, and potentially a shorter lifespan as they reach maturity (and acquisition) quicker.

A further reason for optimism is given by the new Cambridge Cluster Map, which lists the nearly 22,000 businesses based within 20 miles of the city centre. With a turnover of £33 billion, the map demonstrates the range of companies and the strength of the local economy. A third of this turnover is made up of knowledge-intensive businesses, employing nearly 60,000 people. That’s a lot of innovation, whoever ultimately owns the companies concerned.

Looking back, I think commentators will see that the ARM acquisition is part of a change in Cambridge as it matures and becomes a recognised part of the global tech sector. The economy will continue to grow, but more of the capital will come from outside the city. While this means we will have fewer ARMs and CSRs, and more outposts of Amazon, Apple and Google, it won’t stop growth and innovation, which means the Cambridge Phenomenon is likely to go from strength to strength.

July 27, 2016 Posted by | Cambridge, Startup | , , , , , , , , , , , , , , , | Leave a comment

Is there space for Google Spaces?

Google

Today our internet use is dominated by just a few tech giants – Google, Amazon, Facebook and Apple (GAFA) in the UK and US, with the likes of Baidu, Tencent and Alibaba leading the way in China.

What is particularly interesting is that generally each of these is good at one thing, or group of things. We turn to Google for search and email, Amazon for ecommerce, Facebook for social and Apple for mobile apps. There is obviously some competition – Google’s Android versus Apple iOS for example, but in general each giant has stuck to its knitting.

That’s not for want of trying – Google has tried to get into social media several times with projects such as Wave, Buzz and Google+, while Apple tried to launch Ping, a music-focused network. All failed, although Google+ limps on as everyone with a Google account automatically has a logon.

It isn’t all Google’s fault – the most successful social media networks tend to start small and grow from there, such as Facebook, Twitter, Instagram and WhatsApp. Users are attracted by the features, rather than the brand name, and then it grows exponentially through the network effect – essentially the more people who join, the more value everyone involved gains from being part of it. Social media starts at the grassroots, and that’s one of the reasons that people join particular networks. Mark Zuckerberg at Facebook understands this, hence splashing out on Instagram and WhatsApp rather than trying to develop clones of them from scratch. This neatly neutralises the competition while keeping users within your orbit when it comes to the time they spend online.

So that’s why Google’s latest attempt at a social media network, Spaces, looks like it is unlikely to take off in a big way. Described as a cross between WhatsApp and Slack, it allows users to have conversations and share information around specific topics with groups of people, avoiding, Google says, the need to hop between apps or cut and paste links. The trouble is it means installing/learning another app, and as far as I can see there’s no compelling reason for this to make it to the mainstream in its current form. Sure, people will use it to share information, such as when planning a holiday or big event, but it is hardly a threat to WhatsApp or Slack at present.

What would be more interesting is if Google used it as a basis for more complex, artificial intelligence driven services, such as bots that could be sent off to gain information. So, keeping with the holiday idea, you agree where you’d like to go and use Google to collect and sift relevant information, such as accommodation, weather and flight times, and present it in a single place. Given how long it can take to find all of this normally, that would attract users – and of course provide Google with much deeper data on what users are looking for, enabling them to sell more targeted advertising and hence boost overall revenues.

It is early days for Spaces, but it looks like it needs a bit more of a wow factor if people are going to use it seriously. Google has been burned before on social projects that have been well designed, but fallen short when it comes to getting consumers excited – so time will tell if Spaces joins the likes of Buzz and Wave in the failure column or carves out a loyal user base. However at the moment Spaces risks being seen as neat, but non-essential – hardly the best way to attract us from existing applications.

May 18, 2016 Posted by | Social Media, Startup | , , , , , , , , , , , , , , , , | 1 Comment

The typewriter trap and innovation

English: QWERTY typewriter key layout depicted...

Despite all the talk of innovation, there are plenty of things that people continue to do, even though they are no longer the optimal way to achieve something.

Take typing for example. The QWERTY keyboard dates back to the first, manual typewriters, where the typist hit a key manually pushing the inked letter onto a sheet of paper. The problem with the first typewriter designs was that people could hit the keys faster than the machine would cope with, leading to jams as multiple keys became intertwined. Hence adopting what was essentially a sub-optimal system in terms of speed, in order to make typewriters more efficient overall. Now, in the digital age jamming is no longer a problem, yet everyone still uses a QWERTY keyboard, as that is the de facto standard, irrespective of the fact that it can give you carpal tunnel and repetitive strain injuries.

Driving is another area where tradition dictates what we do. The reason that in England we drive on the left dates back to the days when people rode horses – as the majority of the population was right handed you could hold your reins with your left hand, leaving the other free for your sword. As part of the French Revolution this was reversed in France, and then imposed by Napoleon on the countries he conquered. This means that the majority of countries in the world now drive on the right, despite the fact that accident rates are lower amongst left hand drivers, perhaps due to right eye dominance.

These two examples demonstrate two things:

  • The most logical, sensible solution can’t necessarily overcome the status quo, particularly if it means people have to completely relearn how they operate.
  • People continue to choose a particular course of action, even if the reasons for it are lost in the mists of time. Tradition rules.

Why is this important? I meet a lot of technology startups, and many of them enthusiastically talk about how their invention will completely change a market or sector. Build it and they will come seems to be the mantra. All it takes is for people to see how outmoded and inefficient the current technology is, and switch to their new, unproven, but potentially much better solution. And normally relearn how they operate. And pay a bit more. Often, they then wonder why they fail to get market traction or growth.

Essentially people weren’t sufficiently convinced of the advantages to change what they did. They preferred to be inefficient rather than invest the time to solve a problem. We’ve all done this, spending an extra minute or so doing something on our PC because that’s how we were taught 20 years ago, rather than spending 15 minutes reading the manual and upgrading our knowledge.

This isn’t to say that innovation can’t happen. Look at the Dyson vacuum cleaner – the advantages of changing (no bag, better performance), outweighed the higher cost and learning how it worked. But in that case the benefits were extremely clear, and, most importantly, marketed very well.

So, the lessons for every business, whether a startup or not, are clear. The vast majority of the population generally doesn’t like change, and therefore the benefits of something new have to dramatically outweigh the disadvantages of how things have always been done. Innovation has to be clearly marketed if it is going to take root with the majority, as opposed to early adopters – it won’t just sell itself. It has to fit inside the ecosystem of what people are comfortable with, and provide them with the best overall experience. That’s why VHS beat the technologically superior Betamax technology – it had the content from Hollywood studios and was easier to operate. Often it can be easier to sell a better mousetrap than a completely new method of rodent killing device. Therefore talk to your audience, understand their pain points and make sure you provide a simple, powerful solution – otherwise you are likely to join the ranks of technically superior, but unused products, and all your innovation will be wasted.

 

March 2, 2016 Posted by | Cambridge, Marketing, Startup | , , , , , , , , , , | 2 Comments

Death of a (car) salesman

Like anything, buying a new car has positive and negative parts to the journey. The excitement of choosing and test driving a shiny new vehicle has to be balanced with haggling with a salesman in a dealership and painfully avoiding the add-ons and extra warranties that they want to burden you with (and co-incidentally give them a bigger commission than on the car itself).

Automobile dealership - service and repair are...

Yet, the internet was meant to remove middlemen and enable us to deal direct with the producer. It has worked in industries such as travel, where package holiday companies have had to reinvent themselves in an era of cheap flights, AirBnB and TripAdvisor. But for bigger ticket purchases we still rely on car dealers and estate agents rather than dealing directly with manufacturers or those selling their house.

The end of middlemen?
So why are these middlemen still here and will they survive for much longer? After all, most buyers now read car reviews online, check manufacturer videos on YouTube, get information on options from websites, and can arrange finance quickly at the click of a mouse. No wonder that the average number of dealers that buyers visit when purchasing a new car has dropped from 5 to 1.6 in the US over the last ten years. As in a lot of fields, more and more research is carried out online without needing to interact with anyone, let alone a sweaty dealer in an ill-fitting suit.

Illustrating this trend, upstart electric car company Tesla is looking to go direct to customers in the US, cutting out dealers altogether. Other manufacturers are trying more limited experiments with special editions sold online only or dealerships remodelled to be more like the Apple Store, with advisors providing information and help, but no hard sell.

The pace of technology change within the car also threatens to make the dealer obsolete. Modern cars are computers on wheels, streaming data back to the manufacturer and able to refresh their operating system remotely without human (or mechanic) intervention. Tesla regularly updates the software on its car over the air– with an upgrade in January 2015 improving the performance of its Model S, meaning it can match the acceleration of a McLaren MP4-12C.

However as a recent piece in The Economist points out, changing the system will be difficult. Dealers are a powerful lobby, and while they don’t make much money on each new car they sell, the ancillary products and ongoing servicing relationship can be extremely lucrative. It also provides buyers with the opportunity to get a better deal by haggling between rival garages – if you have the inclination to do so.

I think that there are more basic reasons for any middleman, whether a car dealer or travel agent, to survive – adding value, trust and ease. These are important concepts for any company in the digital age to embrace and it is worth looking at your business with these in mind.

1. Adding value
With the vast majority of information now a Google search away on the internet, and prices displayed for everyone to see, do you really add value or are you a hindrance to the process? Again, the Apple Store is a good example to follow. You can buy your iPad from one of a hundred shops or websites, but the help you receive and the ability to get your questions answered in a positive, unpatronising way naturally leads people to the Apple Store.

2. Trust
Do consumers trust you? Or more to the point, do they trust you more than the manufacturer you represent? One of the factors I think will hold back the demise of dealerships is that consumers trust car makers less. You only have to look at botched recalls and unreported faults to see why. Car makers are also much more distant than your local dealership, making it difficult to build a relationship of trust. That’s not to say dealers are safe – they regularly top polls of least trustworthy occupations, but in the kingdom of the blind, the one eyed man is king.

3. Ease
People have to do more and more with less and less time. In many ways the internet has made us more time-poor. Whereas before a holiday could be booked by marching into the travel agency and asking what they had available, it now takes hours of internet research, comparing the relative locations of villas on Google Maps and poring over TripAdvisor reviews. Those middlemen that still have a place recognise that they need to make things easy, providing a helpful service that cuts down the time you need to spend and removes roadblocks from the customer journey, without charging the earth.

Looking at your own business, do you meet these three criteria? If not, it is time to change, before pressure from consumers and manufacturers squeezes you out of the market.

August 26, 2015 Posted by | Marketing, Social Media, Startup | , , , , , , , , , , | 1 Comment

The battle for banking – Amazon enters the fray

In a previous post I talked about how the big four internet companies Google, Apple, Facebook and Amazon (GAFA) had quickly developed their businesses. They’ve all moved beyond the sector they started in, extending what they offer to compete with each other in areas such as ecommerce, social networks, mobile devices and mapping.amazon_logo_wb_2328

How have they done this? They’ve used the four strengths that they each possess:

1. Agility
With the exception of Apple, GAFA was born on the internet meaning they aren’t burdened with long-established corporate structures compared to their traditional rivals. So they can make decisions quickly, unhindered by the warring departments and turf wars that characterise first and second generation technology companies.

2. Data
Rather than purely physical assets, GAFA’s USP is data and what it does with it. From selling our search histories to monetising our personal pages, the four companies have built up extremely detailed pictures of their users and their lives. This allows them to accurately predict future behaviour – how many times have you bought something suggested by Amazon even though you had no idea it existed until the recommendation popped into your inbox? The advent of even cheaper machine learning and potentially limitless cloud-based resources to crunch data means that this is understanding is only going to get more precise.

3. Focus on the customer experience
Even though the majority of interactions don’t offer the personal touch of a bricks and mortar shop, these companies have gone out of their way to create a simple to use customer experience. Compare the Apple iPhone to previous ‘smartphones’ – the only difficulty for users was unlearning the convoluted way you had to access information on Microsoft or Nokia devices. I know, I had one of the first Windows phones – the user experience was terrible. Innovations such as one click ordering, reviews and simple sharing all mark out internet companies from their rival.

4. Scale
The final differentiator is scale – and the speed at which it is possible to grow on the internet. Rather than taking 20 years to become dominant in an existing market, companies can create a sector of their own and expand globally within months. Part of this is down to the network effect, but scale has also been achieved by moving into adjacent markets and just adding them onto the offering for existing users. This lowers the cost of entry for the company with the user base and creates a barrier to entry to rivals.

Taking these four factors into account, banks should be worried about Amazon’s latest move as it builds on all four of these strengths. Amazon Lending will make loans to small businesses in the UK that sell through the company’s Marketplace platform, after the service was successfully launched in the US. The beauty of the scheme is that Amazon knows exactly how the small business is performing as it can track their sales, and then use this data to offer selected companies short term working capital to improve their business. As it handles all the billing and cash collection for Marketplace sellers it can even take repayments directly from their profits, before they it pays them, minimising risk.

Adding to this data advantage, it is also offering the same simple to use customer experience that sellers are already familiar with. Compared to faceless or unhelpful banks, this is just the sort of thing that expanding small businesses are looking for.

The ironic thing is that, on the face of it, there is nothing to stop banks offering something similar. Their merchant services arms handle online and offline debit and credit card transactions, so they have access to data that could be used to work out creditworthiness. They have a network of branches to provide loans through, as well as a significant online presence. But all of these are separate departments and banks don’t have the agility to bridge the silos and provide the one stop shop that businesses are looking for.

In the same way that Apple Pay is disrupting payment services, Amazon Lending will take another bite out of the traditional business of big banks. And, as more and more of such services launch that nibble away at banking profits, then they face being outmanoeuvred by nimbler, more customer-focused and cleverer competitors. It is therefore time for retail and business banks to get joined-up or face becoming low margin commodity businesses in the future.

July 1, 2015 Posted by | Marketing, Social Media, Startup | , , , , , , , , , , , , , | 2 Comments