“Tilt” you strategy downstream to consumers
I've just finished reading the new book by my INSEAD marketing professor, Niraj Dawar: Tilt: Shifting your strategy downstream from products to customers. You can order it here.
At first sight, the idea of moving your focus from upstream (products) to downstream (customers) doesn't sound like anything new. But Niraj's book talks about much more than simply being customer-focused. Rather, he proposes re-designing your whole business model so your centre of gravity "tilts" downstream.
Here I share a few highlights from this thought-provoking book.
1. Customer interaction as a source of competitive advantage
Niraj suggests that creating better way customer interface downstream builds more sustainable competitive advantage than just focusing on products. He uses the success of Apple with iPod, iPhone and iPad as an example of downstream focus. Of course, the Apple products are brilliantly designed. But another key factor in Apple's growth has been the "ecosystem" that makes products more exciting and interesting to use, as I posted on here.
This ecosystem started with the Apple online store, followed by the iTunes store and then the App store. Apple has built up an amazing, integrated single data base of customers, with each customer using a single Apple ID to access all these services and others, including iCloud.
Any idea how many iTunes/App store accounts Apple has?
500 million. That's the second biggest account base in the world after Facebook (1 billion), and 2.5 times bigger than Amazon, according to this report. And Apple has the advantage versus Facebook by having credit card details for every customer.
To help you figure out how to tilt your business, Niraj suggests looking at customer costs and risks. He illustrates this with the example of Master Builders, who supply chemical additives to the construction industry. The customer risk here was stock-outs of additives that could bring construction projects to a halt. To address this risk, Master Builders fitted out customers with storage tanks, at no cost to them. Remote monitoring reported back additive levels, triggering re-fills when needed. Customer satisfaction was increased, and the cost to Master Builders was offset by savings in trucking costs.
3. Downstream capability is hard to build, but also hard to copy
Niraj sheds some new light on one of the brandgym blog's favourite brands, Nespresso. He suggests that the brand's incredible downstream system, the Nespresso Club, will help protect it from increased competition resulting from the expiry of product patents. The Nepresso Club has 12 million members, ordering online, over the phone or in one of 300 Nespresso boutiques.
A key point here is the time, money and effort needed to create this downstream capability. I was fascinated to read that a whopping 70% of the company's 8,300 employees are in direct contact with consumers. That's some serious Tilt-ing. And the business took many years to build, with initial uptake slow. Interestingly, I learnt that the direct-to-consumer selling model was only created after an earlier failure trying to sell to traditional grocery retailers!
In conclusion, Tilt is recommended reading to show you new ways of moving the focus of your business downstream to create competitive advantage.