New Business Models Expedited in the Big Data Era
By Dr. Lawrence WONG Chi Wing, GCE Consulting & Big Data Elite Asia - Managing Partner, Autotoll– INED & Chairman of Internal Audit Committee
In the Big Data era, leading internet and technology companies dominate the world’s top 5 listed companies Apple, Google, Microsoft, Facebook, and Amazon with highest market capitalization. They are all adopting disruptive technologies such as social network, mobile internet, big data, cloud computing, artificial intelligence, internet of things, virtual reality, and 3D printing to create new business models and develop business strategies. These technologies can accurately understand and satisfy customers’ needs, create thoughtful products and services, win customers’ hearts, disrupt the rules of the market, disintermediate and expand into a cross-border competition to disrupt traditional businesses.
1. Sharing Economy – Effective use of idle resources to create business value and satisfy customer needs, and ultimately obtaining financial returns
85 percent of people in the USA agree that sharing economy has brought convenience and balance to their resource management and daily lives. The sharing economy business model is the most symbolic in the big data era. The concept leverages on the widespread adoption in various sectors, and sharing economy has already become a worldwide trend. It is an operation that completely disrupts traditional business operations, and a new system for resource management, with typical examples being UBER and Airbnb. The key of sharing economy is at effectively utilizing and sharing others’ idle resources, create value and satisfy customer’s needs, and ultimately to obtain financial returns. Its core elements include idle resources, low cost, good customer experience, and high level of trust, word-of-mouth, and rights of use against ownership.
2. Customer Oriented – From product focused to customer oriented, emphasize on customer experience and meeting customers’ needs
In the big data era, there is a collaborative network among manufacturers, customers, and service providers with the aim of being customer centric. Based on big data analysis and information exchange, manufacturers produce according to customers’ various demands, and the business model is gradually changing from B2C (business to customer) to C2B (customer to business). Therefore, focusing on customers’ demand means being customer centric, and these changes the way we communicate with the world around customers using technologies.
From customers’ point of view, the current business model implies that the Jane Model is used to understand the needs of each and every customer. (J: Just, A: Acknowledge, N: Needs, E: Every customer) - providing them with relevant products and services, focusing on personalized customer experience and satisfying customer needs.
The Digital Platform Is Becoming An Important Tool To Build Next-Generation Products, Services, And An Entire Ecosystem
3. Fragmented Market – Personalized and small-quantity orders will be the trend; standardized products will become increasingly rare in the market.
As “economies of scale” gradually evolves to economies of scope and also the arrival of Industry 4.0, it is now the trend for companies to focus on personalization, accept small quantity orders, and have a flexible and convenient management. This is especially prominent in the fragmented market, where personalized products and services are highly expected. In the 21st Century, customers have already moved from standardization in the 20th century to personalization now. What customers’ value gives rise to market segmentation, gradually shifting to extremes such as different ages, income, race or culture, life stages, family, and value systems.
Customers will demand more personalization from the market and products, affordable products with high quality, quick responses, and a good customer experience. Therefore, companies must understand the needs and buying power of different customer fragments, which in turns depends on big data, including the power of social media networks and the recognition of key opinion leaders, so as to shift from “economies of scale” to “economies of scope”.4. Outcome Economy – From product focused to outcome oriented, customers pay for the outcome, but not the product or service itself
The change of business model also requires companies to not only be product-focused, but also stress on “Outcome” – placing emphasis on allowing customers to obtain more valuable outcomes. Customers only want to pay for the final outcomes, but not the product or service itself. The application and development of “IoT - Internet of Things” can effectively support “Outcome Economy”, increasing the understanding towards customer behaviors and their expectation for the outcomes.
Outcome economy depends on Internet of Things, but it also requires the standardization between the interactions of devices. The standardization of interactions between machines (M2M) is a key, and the standardization is mature now. This means technologies can undoubtedly play an important role to help obtain outcome values from customers automatically. Qualitative data can be collected through social media to understand how profound and widespread the effect is on people’s lives and this inturn helps in collection of objective data which are important sources of big data that analyzes customers’ needs and behaviors.
5. Platform Strategy – Provide an effective platform that allows all stakeholders to transact and achieve their needs
If companies want to breakthrough, disrupt competitors and not be replaced, the smartest method is to utilize big data for cross-industry competition. Platform strategy is a business model that connects certain stakeholders, providing an interactive communication mechanism for them so as to satisfy their needs and ultimately obtaining a financial return. A typical example of such platform strategy is Alibaba – the most valuable retailer in the world, but without any inventory itself.
The digital platform is becoming an important tool to build next-generation products / services, and an entire ecosystem. It gathers participants from different industries, generating an interrelated eco-system. John Deere agricultural platform, Home Depot’s WINK home intelligent platform, Philip’s medical platform are all outstanding cases of such ecosystem, and it is worth the time and effort for companies to study and learn from them.