One Trend Your Business Can Not Ignore
While companies based on shared goods and services are positioned to create the next huge wave of innovation (and disruption), in business, they’re not exactly new.
Some of history’s most aggressive titans, such as Conrad Hilton, well understood the profits to be made in businesses based on sharing. Hilton created the first premier brand of international hotels, a global “share platform.” Railroads, airlines, granaries and mills, and apartment buildings are all based on leveraging a resource over multiple customers—in other words, on sharing.
But today’s share platforms, the so-called “Mesh” businesses, have a crucial edge over older models.
The tremendous competitive advantages of Zipcar, Facebook, Foursquare, Netflix, Groupon, Relay Ride, Swap.com, and thousands of other Mesh companies are rooted in the explosive growth of information networks and mobile devices. By combining the “always on, everywhere” convenience of the mobile web with the efficiency and reach of share platforms, the “Mesh,” is set to become the next major wave of disruptive business innovation. Mesh companies will soar past their more traditional business competitors.
Blockbuster Video was a highly successful share platform. But, despite a data-driven supply chain and club memberships, the company did not take full advantage of share-enabling technologies. Netflix used what I call a textbook Mesh strategy to beat them. They knew that Blockbuster’s Achilles’ heel was late fees. Their revenue model depended on the fees, but customers hated them. Worse, in that model, their best customers were likely to be punished the most.
The then-in-progress shift to DVDs presented Netflix with the opportunity to easily deliver movies through the mail.
Customers wouldn’t have to rush to the rental store after a new release, or wait in line behind a guy arguing with his girlfriend, or deal with an underpaid clerk. Netflix introduced a model that allowed customers to return the DVDs at their own pace. Early on what cinched Netflix’s advantage, though, was that they knew they were an information business, not a movie rental company. By creating a share enabled web service where subscribers can create queues, rate movies, and share recommendations with friends, Netflix gets fine-grained data on what their customers want and don’t want. Rather than spend money on expensive advertisements, Netflix created partnerships with nearly every brand of DVD player. Each new player included a card offering three free rentals and a bold promise: “No Late Fees.”
"Traditional businesses that sell something once, and then watch a customer walk out the door, will be at an increasing disadvantage."
Instead, Blockbuster paid a late fee.
They were late in acknowledging the spreading power of social networks connected to share platforms with frequent customer contact. Netflix’s more robust and networked service gave them the power to collect and crunch consumer, usage, and product data to frequently iterate and shape fresh and customized offers. Their service is delivered locally, but spread through social networks, partnerships, and word-of-mouth. With its more nuanced knowledge of customer preferences and its culture of innovation, Netflix can rapidly adapt offers to particular communities and markets.
These are classic Mesh advantages.
But the core Mesh advantage remains frequent customer contact and cleverly converting that data to delighted customers – it allows a business to continually put its brand and timely, finely tailored offers in front of people. Better yet, businesses can further shape their offers based on greater amounts of data, particularly when coordinated with partners.
Traditional businesses that sell something once, and then watch a customer walk out the door, will be at an increasing disadvantage to those able to gain the trust of customers and their friends by “listening” through multiple touchpoints and data sources.
As a result, these businesses are spreading like wildfire.
At meshing.it, we’ve identified over 2000 of them in categories including energy, food, finance, fashion, real estate, transportation, and dozens of others. Other broad B2B share platforms, such as Amazon Web Services and FedEx, are making it cheaper and easier to build businesses that can scale rapidly.
Other factors, including the recession, distrust of old brands, the increasing cost and regulation of waste, and customers’ growing comfort with mobile technology and social networks, are central to driving the Mesh. The disruptions seen for digital products like music and videos are now quickly migrating to physical goods. We are heading into a shift in our businesses and daily lives, where access trumps ownership.
In this environment, forward-thinking businesses are asking: How can we use Mesh strategies to deepen customer satisfaction and loyalty, and to enrich our brand authenticity?
Lisa Gansky, author of the new book, The Mesh: Why the Future of Business is Sharing is a serial entrepreneur—the co-founder of Ofoto, now the Kodak Gallery; the co-founder and CEO of GNN, the first commercial website, acquired by AOL in 1995; and an investor and board member of more than twenty internet and mobile services companies.