Posts

Do you really know what you want your client? Just ask!

Why is it so important to create customer value

Seguramente te has preguntado alguna vez porqué hay empresas que triunfan de forma espectacular como Google, Facebook, Amazon, Apple, Booking para citar algunas, y otras empresas que tuvieron su momento como Nokia, Sony, AOL, Yahoo, pero que hoy en día, en plena era 3.0 y entrando en la 4.0 no han sido capaces de sobrevivir o están agonizando. El mundo está cambiando de nuevo. De hecho, está siempre cambiando, pero los modelos de negocio que fueron válidos en la era 2.0, la de las redes sociales, la primera década de los años 2000, ahora no son suficientemente robustos para retener a los clientes actuales, mucho más sofisticados y conocedores de las herramientas online y de las posibilidades de internet. No tenemos más remedio que evolucionar.

The importance of generating value in the business model

In academic definitions of "What is a business model" that is found mostly an abstract concept that no one dares to define with specificity. Luckily we have Osterwalder (the same as in 2009 created the framework Canvas Business Model) that helps us clarify terms and business model defined as "the system that creates, delivers and captures value." On their website you will find more info about this model https://strategyzer.com/

So a good business model revolves around creating value and ability of the company to recover the value as billing and profit ... but how can we create value?

How do we generated value for a customer 10 years ago?

En la época del 2.0 había negocios que con solo formar parte de ellos ya se generaba valor, lo que se denominaba “las externalidades de red” (network externalities, en inglés). Eran el tipo de negocio de floreció desde 1998 hasta más o menos 2010 y que se regían por la llamada “Ley de Metcalfe” que postula que el valor de pertenecer a una comunidad incrementa al cuadrado del número de usuarios que forman parte de ella. Este es el caso de Facebook, de eBay, de todos los portales de citas, de Wallapop, y un sinfín más de negocios online. En 2004 escribí un artículo donde explicaba qué es la Ley de Metcalfe y qué es una Red de Metcalfe, si quieres leerlo lo encontrarás aquí: What is Metcalfe's Law.

The point is that in 2000 businesses operating in a network of Metcalfe are those who triumphed at that time and the value was generated by the market efficiency, the complementarity among the products offered, los lock-in’s who managed the sellers were faithful to the market and novelty posed this market. These are the keys to success SoloStocks, from Infojobs, from eMagisterTo name a few of the businesses that create from IntercomBut also the most online companies created in the early 2000s and had good life until 2010 approx.

From a time, which can be between 2008 and 2010, many businesses began to go into decline. At first it was attributed to the crisis ... wear brand ... but the truth is that the online world was changing and we were starting to get into the web 3.0: Mobile internet, pervasive, intelligent devices, augmented reality, virtual reality, big data and new business models, many of them based on e-commerce and social interaction.

How to create value in today's world?

This question has no easy answer. Each company must analyze how ... but there are several fronts on which we can create value:

In the product: making it reliable, with the exact features you need the client that is easy to use, ...

How to offer the product: a good marketing process, a good process sales, extraordinary customer service, a clear billing process, ...

How we relate to the client: resolution of incidents flawlessly, quality technical support, confidence in our company, ...

... Surely you're asking in your case you do not see clear ... read on ...

How do you know what your customers consider value?

There is a term that is becoming fashionable that is the co-creation ... How can we apply the concept of co-creation with the challenge of knowing what a customer wants? Well, by asking customers own! Something that previously would not have done that would have seemed a weakness of business or weak leadership and vision of the direction ... but now, at the customer has great power (... and knows it) makes perfect sense in the world we do participate in finding new ways to create value.

Here are some examples

LEGO - Example of co-creation of value creation product: through LEGO Ideas this company includes proposals to create new products and ensure that when the product reaches the market has accepted and at least a certain number of buyers will be with him. In addition, the person who proposed the idea gets a share of the profits and is cited in the boxes as the creator of the idea, and rewarding creativity and participation, while loyalty of users.

ALAIN AFFELOU - Example of co-creation of marketing value: This eyewear manufacturer has created Ideas4afflelou.es to propose challenges, receive new ideas and customer loyalty. The challenge today is marketing they have open and ask users how would like the "Black Friday" of Affelou this year 2018. Do you realize the change? It not that the marketing department does not have ideas, is that the ideas offered and voted by users ensure good customer orientation, while client loyalty and are innovative.

BANK SABADELL - Example of co-value creation from employees: since 2010 the Banco de Sabadell has BS Idea on the intranet of this entity, a community created by employees, regardless of position, they offer ideas for improvement to the bank's management. So far 21,000 have contributed ideas on evolution processes, product processing and new business lines.

So summarizing:

  1. The future of your company depends on your architecture value. That is, how to detect what your customers think it is worth, how you manage to generate that value and how you are able to recover as billing and profit.
  2. Forms of value creation on the internet that were valid 15 years ago, now they are no longer. We need new formulas.
  3. Do not cut and Ask your customers how think your company could generate more value for your business (if B2B) or how they think your company you might be more useful (if B2C) ... plus useful for loyalty, make this question is trendy.

We're going talking

Montse.

Why eBay (and possibly Google) open source code to developers

Quick to "why" answer: so what is the logical evolution of a Save the Metcalfe a Red Group. If you are interested in topics ... read on.

Lets start by the beginning:

What is a Network Metcalfe?

A Save the Metcalfe is a business with a particular structure thus generating value from Metcalfe's Law.

(... yeah okay, thank you)

What is Metcalfe's Law?

Metcalfe's Law postulates that the value of a network increases as the square of the number of system users. This is not true 100% (after I explain why), but the truth is that this law is of great application to determine the expected growth for a business and creating value that is linked to this growth.

Consider this ...

The structure of traditional business

(Whether they are online as if you are offline)

In a traditional business, a provider offers a service or sell a product to a number "n" of customers. And the number of potential transactions to be performed in a given repeat customers without time, exactly equals the number of customers you have. (See Figure 1)

Traditional business

Image 1: Business with traditional structure

The value of this business depends on the number of customers who have (of course, there are more factors that influence business value, but in a hypothetical formula for calculating the value, our "n" is one of the variables ... and it is in this article we will analyze).

In a traditional business, the number of possible transactions grows linearly. That is: +1 customer equals +1 possible transaction.

The structure of business networking

Hay ciertos negocios, como el de una red telefónica, que no funcionan como un negocio tradicional. Todos los usuarios son oferta y demanda a la vez (emiten llamadas y reciben llamadas), así que el número de posibles transacciones es prácticamente n^2 (“n” al cuadrado) … y digo “prácticamente” porqué en realidad es n*(n-1) ya que la oferta son todos los usuarios, pero la demanda, son todos menos tú mismo… no se realizan llamadas sobre uno mismo. (En el resto del artículo, consideraremos que es n^2 para no complicar las fórmulas, pero por favor, téngase en consideración).

The first person to apply a law on this kind of behavior in a business was Robert Metcalfe (or so the legend goes), inventor of the Ethernet when Xerox invented the first laser printer in 1974 and did not know how to connect more than one computer while this printer. Metcalfe's Law It postulates that the value of a networked system grows at approximately the square of the number of users of the network itself. (See Figure 2)

Save the Metcalfe

Image 2: Business Network structure Metcalfe

Hence businesses with circular structures where all users can be supply and demand at the same time, they are called Metcalfe Networks.

El ejemplo más bello de Red de Metcalfe lo tenemos en eBay. Tiende a la perfección, concretamente, en su vertiente C2C (consumidor a consumidor). Cualquier usuario es un potencial vendedor y cualquier usuario es un potencial comprador. Su crecimiento es lo más cerca de n^2 que podemos encontrar en Internet.

Las webs de contactos que tanto están proliferando estos últimos años, también son claros ejemplos de bellas redes de Metcalfe perfectamente redondas. Y digo redondas, porqué hay redes cuya estructura no es redonda como la de la imagen 2. Son las redes donde claramente hay un lado con oferta y otro con demanda. En ese caso, el número de transacciones potenciales sigue siendo oferta*demanda, pero no tiende al cuadrado ya que son números distintos. Por supuesto, están elevadas a un coeficiente que es mayor que 1, que sería el del negocio tradicional; pero es menor que 2, que sería el de una Red de Metcalfe perfecta.

An example of this type of network would be SoloStocks.com not perfect, where companies sell their stocks, are not all potential buyers of stocks (except if all brokers ... then yes, you see the difference?). (See Figure 3)

Metcalfe red variant

Figure 3: Business with varying network structure Metcalfe

If the number of potential transactions in a perfect network Metcalfe 8 users would be 8 * (8-1) = 56, the number of possible transactions in a network noncircular 8 users (4 suppose that offer and 4 demanding) it would be 4 * 4 = 16 ie the coefficient network externality that market would be 1.33 instead of 2, and therefore value generation grow at lower speeds than those of a Save the Metcalfe perfect since it offers more value to its users, but higher than those of a traditional business that offers much less.

In a market like SoloStocks it is interesting to note that the greater the imbalance between the number of bidders users and demanding users, the lower the growth of the business and therefore always have to struggle to balance the number of bidders and plaintiffs .

Veamos un ejemplo de esto: supongamos una red de 8 usuarios donde 5 son oferta y 3 son demanda, el número de potenciales transacciones sería 3*5=15 y, por lo tanto, el coeficiente de externalidad de red 1,29. Si la desequilibramos más y tenemos 6 ofertantes y 2 demandantes el número máximo de transacciones es de 12. Y así…, hasta llegar al máximo desequilibrio posible, que sería el negocio tradicional (o cualquier comercio electrónico), donde hay 1 vendedor y 7 compradores (…para seguir con una red de 8 como teníamos antes); el número de potenciales transacciones sería 1*7=7 y por lo tanto el coeficiente de externalidad de red, sería 1, que es justamente lo que comentábamos cuando hemos explicado al principio la estructura de un negocio tradicional: el número de transacciones potenciales equivale al número de clientes.

Well ... if you have not giddy with both numbers and letters, and you read on, we will pass to the next level of evolution of a network and discover finally :-) why eBay and maybe Google (judging by the rumors by the network) open source code:

Las Redes Grupales o Group Forming Networks

When a Save the Metcalfe technology allows users to organize around common interests or goals, begin to appear small Metcalfe networks gravitating around a large network to which the feed. (See Figure 4)

Red Group

4: Business structure Red Group or Group Forming Network

For some time, eBay has been creating or participating in the creation of small sites specializing in certain types of auction and, therefore, has evolved into this model of network structure reminiscent of a daisy. Opening its code, leads to an infinite number of programmers begin to develop applications that revolve around the great network and eventually forming daisy petals.

With closed source, only they can create the petals. With open source have a chilling potential of possible petals to be created.

Growth Networks group tends to this formula: a ^ n, where "a" depends on the number of possible channels that can be opened, and where "n" is the number of users.

The theoretically perfect business would be one that consiguiese that for each user of the main network, possible to create a subnet. Its structure would be something like: n ^ n (I know of none and I'm sure it's just a theoretical model ... but the less, it is interesting to keep in mind).

Summarizing:

Traditional businessesGrow linearly as the number of clients (plaintiffs service) having: supply * 1 * suit or buyers

Businesses with network structure MetcalfeGrow almost square of the number of users who have: n * (n-1) or simplifying: n ^ 2

Businesses with Red Group structureGrow exponentially: a ^ n
Opening codes applications accelerate this growth, growing "a".

If you have not already bored and you're still reading, here's a gift:

What happens when you join several networks Metcalfe?

Business 1: m number of users

Business 2: n number of users

Sum of traditional business users 2: m + n
Sum of users 2 networks Metcalfe:
(m+n)^2=m^2+n^2+2mn –> synergy appears !!! 2mn

(... and yes ... this is the Binomial of Newton studied at school! ;-)

Growth Metcalfe two networks together is greater than the sum of both growth separately.

Is not it beautiful to see the word "synergy" represented mathematically?