strategy

Cadillac: the new transport industry disruptor

True innovation should be bold, not incremental.

True innovation should disrupt and drive an industry forward by better servicing customer needs more cheaply, quicker and more efficiently than before.

Sadly, this too often means that true innovation is reserved only for the start-up world, those ambitious guys and gals who don’t carry with them the baggage and risk aversion so typical of corporate environments. Some big brands do aspire to adopt the nimbleness of a start-up; innovation borne out of bootstrapping, a “move fast, break things” mentality, and no company politics. Some brands do achieve this too, but it is rare. It is even rarer to hear of brands that anticipate the future direction of a market and beat the start-ups to the punch.

Cadillac is such a brand.

In a move that sounds more likely to be dreamed up in a college dorm room than a boardroom, Cadillac have drawn into question the whole purpose of buying a car by launching a subscription model service for their suite of vehicles, called Book by Cadillac. $1500 a month gives you access to a range of Cadillacs which you can chop and change throughout the year at a moment’s notice, without having to pay extra for registration, insurance or maintenance.

What a great example of a brand recognizing that the status quo is ripe for change, and they should be the ones that change it. Just think of the possibilities. Got a weekend trip in the country lined up and want something sporty? Swap your sedan for a coupe. Planning a road trip and need some extra room in the boot? Swap the coupe for an Escalade. Just need something straightforward for the commute? Swap back to the sedan.

Sure it means you actually don’t own a Cadillac.

But do you really need to?

Customer experience and the peer-to-peer economy: What traditional retailers can learn from the new kids on the block

Wouldn’t life be easier if, instead of selling stuff, you just let other people do it and then take a cut?

The rise of the peer-to-peer economy in recent years has flipped traditional business wisdom on its head. No longer need you worry about stock levels, store rental prices and fixed term labour contracts- instead create a platform where incentivised parties come together to exchange goods and services, and leave the rest up to the market you’ve created.  Let the eBay buyer and seller, the Uber passenger and driver, the Airbnb guest and host do the hard work and enjoy the spoils of your self-sustaining network.

Yet in this happy (and admittedly severely rose-tinted) world, where your business’ brand ambassadors aren’t even employed by you at all, how do you ensure that your customers have a consistent customer experience that will keep them coming back? In practice, peer-to-peer companies do a reasonable job of this. They control key aspects of the experience, such as the app interface and the customer service department, to ensure in the first instance customers are comfortable using the platform, and in the second instance are reassured that any issues are dealt with professionally and efficiently.

They then leave the bulk of the customer experience in the hands of strangers- your Uber driver, your Airbnb host, your eBay seller. Now what peer-to-peer businesses do which is smart is that they align the incentives of these individuals with their business interest. The Uber driver is incentivised to get on the road when more people need cabs through surge pricing. The Airbnb host is incentivised to offer competitive pricing through a pricing map showing the cost of other Airbnb rooms nearby. The eBay seller is incentivised to accurately describe the products they have on offer through customer feedback ratings. These mechanisms mean it is in the interest of all these individuals to provide a good service to their customers. This is good for the customer, who feels reassured interacting with strangers, and it is all good for the business, since it encourages customers to come back to the platform again and again.

Smart stuff.

It is clear, however, that these mechanisms aren’t perfect. There have been claims that surge pricing by Uber is exploitative. Despite “clear” photos Airbnb rooms aren’t always as fantastic as they claim to be. Customer feedback systems such as eBay’s star ratings can be inaccurate, giving customers a platform to vent problems rather than offer accurate criticism. The next stage for these businesses is to understand the insights behind these pain points and work to rectify them, working to deliver an even better customer experience, either through intervening themselves or fine-tuning their incentive framework.

Regardless, this mix of incentives and direct customer engagement is a potent and arguably less resource-heavy way of ensuring a consistent customer experience. So, traditional retailers, the next time you’re thinking about your customer experience, maybe take a leaf out of the peer to peer economy’s book?

Incentives, rather than investment, could be the solution to your problems.

Ode to Uber: More than just a Taxi

So, I’m a bit of an Uber fan. Although admittedly a bit late to the party, the ease, flexibility and convenience of being able to summon a taxi at a moment’s notice has turned me into a complete Uber-phile. Let’s face it, I’m always going to be a fan of a service that is faster, cheaper and more convenient than the norm (a typical Millennial trait I’m sure you’ll agree).

The controversy of their ascent, aside, Uber has transformed the way we interact with taxis. From syncing your credit card to the app so you don’t have to worry about carrying cash, to seeing in real time how far your taxi is away, to developing a two-way feedback loop so that both driver and passenger know they’re in for a smooth journey, Uber has completely re-invented the industry. The question is, which industry will Uber re-invent next?

Because I really doubt Uber will be satisfied with just being a taxi company. Let’s think for a moment about what Uber has created. In one sense, Uber had created a network of taxis, allowing for a rapid response taxi service that transports people more responsively and more cheaply than existing taxi companies can. Yet in another sense, Uber has created a rapid response logistics network that has the capability to transport anything faster, cheaper and more conveniently than existing players.

 

If you start talking about Uber as a logistics company rather than a taxi company, you can begin to uncover the opportunities Uber has created for itself. What’s to stop Uber becoming…

…a rapid response food logistics operator, coming to the aid of the disorganised chef who’s run out of fish for tonight’s busy service at his restaurant?

…a mobile corner-shop, for the busy working mum who doesn’t have time to pop to the shops on her way home but still needs a pint of milk?

…a parcel delivery service, for the avid eBay seller who needs a parcel delivered quickly but doesn’t have the time to visit the Post Office? (I may be talking from personal frustration here)

 

The scary thing is, Uber is already doing some of these things. UberEats is a fantastic example of Uber’s potential. Currently in only a small number of cities, UberEats is (in Uber’s words):

…an on-demand meal delivery service powered by Uber. We partner with the best local restaurants to bring you a meal in 10 minutes or less. It’s the same cashless payment as an Uber ride. So all you need to do is tap a button and wait for the goodness to arrive.

In a shrewd tie-up from Unilever, Uber recently ran an activation with Wall’s ice-cream, enabling users to request ice-cream on demand. Not only did it generate a great buzz for both Uber and Wall’s, but it also uncovered an interesting thought: why bother letting your customers go to the shops and see competitor products alongside your own if your product, alone, can come to them?

With this and I’m sure, other partnerships in the pipeline, it seems that setting up the logistics network was only phase one for Uber. Phase two, the utilisation of that network, is just round the corner. The question is, will your business be a future partner or competitor to Uber?

 

Disruptive times lay ahead, and not just if you’re a cabbie.

COKE BUYS MONSTER-A NIGHTMARE FOR RELENTLESS AND BURN?

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To buy or not to buy. That is the question.

Apologies to the Shakespeare aficionados amongst you for the blatant bastardisation of perhaps the bard’s most famous quote.

However, it is a question that many corporations often ponder (presumably with a copy of Hamlet to hand) when considering how to defend themselves from a young upstart in their industry, or when judging how best to enter a new market. Do you pour your resources into building a brand, or do you save yourself the hassle and buy up a rival?

The former seems exciting, and the creative amongst you wouldn’t undoubtedly be chomping at the bit to launch a new brand with all the vim and vigour of a start-up. Yet a new brand is unproven and unfamiliar to consumers, and with this comes an inherent risk of failure. The alternative, buying another company outright means you acquire a key strategic asset in their brand. A proven, ready-to-market brand with an identity in consumers’ minds and a consumer base with which it resonates is surely an enticing prospect. But such acquisitions do not come cheap, and thoughts immediately go to how best reclaim the significant investment.

These musings were undoubtedly swirling around the minds of Coke executives when they decided to purchase a 16.7% stake in Monster, the energy drink brand, a few weeks ago for $2.15bn (£1.28bn). The move will be great for Monster, who will surely benefit from Coke’s behemoth global distribution network. Coke will probably do well out of a stake in Monster too, which is the largest energy drink brand in America, and the only real global competitor to Red Bull.

But spare a thought for Relentless and Burn, the two existing energy drinks brands in the Coke portfolio. Much like a kid with a new toy, Coke has cast aside its existing play things and plumped for something new and shiny to take on the energy drinks market. In recent years Monster has powered ahead of Relentless in terms of market value in the UK (£108.1m vs. £59.9m) with Burn energy drink not even making the top ten. And with the positioning of Relentess, around the alternative music scene, feeling like a subset of Monster’s broader positioning around alternative music and sports, one wonders what the fate is for these lesser energy drinks brands within the Coke portfolio. Is there room for all three brands? Will they be repositioned, catering to an even smaller niche to accommodate their bigger brother? Or will they end up on the scrapheap, their assets consumed (ironically) by a turbo-charged Monster?

To me, the Monster brand has always felt more dynamic and exciting than its Coke contemporaries, with an underground grit that Red Bull had, but seems to have lost in recent years as it has gone more mainstream. So I approve (if they care) of Coke’s decision to buy, not build, its way to greater success in the energy drinks market. However, I suspect that Relentless and Burn will be sleeping less easily with this Monster nearby.

FANCY GRABBING A COFFEE BY THE FROZEN PEAS?

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Shopping at the recently revamped Tesco Extra store in Watford is an experience. The vast 80,000 sq. ft store has been completely renovated to include outlets from Tesco’s expanding portfolio of investments, including Harris + Hoole and Giraffe, as well as a complete reconfiguration of its overall store layout. Tesco is expressing clear intent here, repositioning stores as destination zones, where customers can go to grab a coffee and socialise, instead of just doing a weekly shop.

As such, Tesco aims to offer customers another purpose to visit the store, and hence profit from new revenue streams. Integrating technology into the shopping experience is also apparent here with, amongst other things, digital screens showing enticing cocktail recipes in the drinks section, and a misty, Alien-esque cooling system for the fresh vegetables. I liked the use of digital services such as Click & Collect and Scan & Go in store which integrated the online and offline shopping experience too. Yet what struck me most whilst walking through the store was the definition of the layout, which gave the impression of walking through a bustling town centre instead of a giant supermarket.

The clarity of these spaces generated a sense of variety which maintained interest throughout. And this is exactly Tesco’s intention. This “store of the future” feels like a reaction to the trend of consumers shopping online more and more, and in store less and less. Increasingly, online shopping is offering consumers a more convenient way to shop, and as such, bricks and mortar retailers must look to generate an experience for shoppers that adds value and makes them want to come in store. Whether transforming a food shop into a richer experience will prove lucrative for Tesco remains to be seen. However, retailers could do worse than look to Tesco’s “store of the future” for inspiration.

(Originally posted on The Value Engineers blog on September 13, 2013)