Entries in consumer demand (17)


Power of platform business models

Marshall van Alstyne (MIT) paints a compelling picture of the power of "platform business models" (like iTunes, Nike or Amazon), captured in this presentation from late 2013 (video, slides only). In my opinion, he gives an effective and powerful list of the factors fueling the business success of "platforms":

  • Direct connection to the consumers / users ...
  • ...and therefore an opportunity for data collection (data being the most fundamental asset and currency of the knowledge economy)
  • Network externalities (in simple terms: "more developers unwittingly attract more users, more users unwittingly attract more developers", this is why Google subsidized Android developers until they reached critical mass)
  • Radical consumer centricity
  • Openness to partnership with complementary services / players
  • A radical cultural shift from a product or service mentality to an "ecosystem" mindset, where companies often have to relinquish part of their total control over their products or services to profit from the ecosystem (Google does not control what applications are put in its store by developers, it just takes a cut of the profits)
  • Smart asymmetric pricing strategies based on a good understanding of multi-sided platform economics (e.g. a bar that offers free drinks for girls to attracts more girls and therefore more boys for whom the prices will be much higher).

The video is a bit long but I really recommend it for anyone interested in a thoughtful interpretation of why Apple and Amazon are such successes vs. companies that may have looked similar at some point but clearly did not achieve the same success.

Image source: Redactie Emerce

-- Yassine El Ouarzazi


Catalyst Content Briefing

In this week's look at what else is new and interesting: » MUTUALITY LAB • Developing external knowledge sources and the importance of internal connections • The effect of population decline on the economy and the labor force » CULTURE LAB • A performance culture does not necessarily drive strategy execution • Developing and nurturing a successful intrapreneurship process » DEMAND LAB • Facebook develops tool allowing advertisers to monitor, determine relevance of ads • Marketers take notice of sensory-based marketing

Click to read more ...


What can design firms teach us about innovation and product development?

Manuel Sosa, an associate professor at INSEAD, wrote an interesting piece this week on the concept of design as an innovation catalyst for incumbent product companies.

He reviews the case of Samsung, a company that instituted a successful turn-around in the mid-90's when it began collaborating with design firms and created an in-house design school. How did Samsung leverage design in the process of rejuvenating its business?
Many firms developing new products or services carry out insighting, ideating, and iterating, so what sets design firms apart?
Design firms place a greater emphasis on setting a direction than adhering to organizational silos, and focus on shaping creative ideas to serve practical requirements.  Looking at the methodology these firms employ, Sosa identifies three distinct phases:
  1. Aligning process and organisational elements to encourage user-centricity when insighting
  2. Fostering the generation of many and distinct ideas during ideating, and
  3. Celebrating the creation of rapid and cheap prototypes during iterating.
Sosa argues that the challenge for businesses is to align their internal structures and processes to produce their own versions of insighting, ideating, and iterating in a way that does not disrupt the efficiency of their internal operations.
-- Segundo Saenz


Customer social identity as an indicator of purchasing behavior

If you spend much time comparing market research and comparing that data to actual customer behavior, you know that the two can vary, and in certain circumstances they present significantly divergent pictures. Many theories have been put forward regarding the cause(s) for the discrepancies, but in this months Harvard Business Review, Guy Champniss, Hugh N. Wilson, and Emma K. Macdonald outline an interesting remedy in an article titled "Why Your Customers' Social Identities Matter."
The trio conducted research that suggests that consumers hold onto multiple social identities, and the social group that a customer identifies with when encountering a product or brand influences how he or she reacts to that product or brand.
This presents a challenge to traditional market research because a customers' social identity--the one they will take on at the moment of purchase--can’t be easily captured through questions on surveys. Champniss et. al. note:


Subtle shifts in social context can dramatically change what group we identify with at any instant."

The solution proposed is that market research should take social identity into account, shaping customer responses by reinforcing a particular identity, redefining what it means to have that identity, or finding a way to change the identity. This also applies to those who desing customer experiences, and companies are also advised to create new identities that will inspire desired customer behaviors.

-- Segundo Saenz



Experimentation in business vs. prediction

The key theme in Michael Schrage's December article in the MIT Sloan Management Review is that data trumps intuition. He points to evidence that this is true even when experienced senior leaders and subject matter experts are involved, and this can have significant consequences for how companies approach the task of anticipating customer demand.

Organizations may be confident they know their customers, but they’re very likely to be overconfident."

-- Michael Schrage

  • I am particularly sensitive to his call to “embrace our ignorance”, that experts and managers are notoriously bad at predicting the outcome of experiments / decisions, that empathy and experience are very poor replacements for data and careful experiments.
  • Only humble and systematic experimentation is really “customer-centric”.
  • If big data can help us identify promising patterns and correlations, pervasive (and now cheap) experimentation can close the causality loop, creating "virtuous cycles of profitable insight between big data and small experiments”.

This view radically challenges our managerial hero complex (admit it, reader, you, like me, fall prey to it on a regular basis!). Imagine a world where the most valuable skills or personality traits we are looking to hire and retain are humility and curiosity instead of leadership and expertise?

-- Yassine El Ouarzazi