If we needed another example of how the old business paradigms are failing, Walmart delivered this month. They’ve announced the closing of hundreds of stores globally, leaving empty big-box buildings and broken communities in their wake.
Meanwhile, Uber, a vanguard of the new sharing economy, just announced that they’re making it easier for third-party developers to build apps for their fast-growing car-calling service. It’s a path to success that the tech giants like Apple and Google hacked out years ago -- and some of the best companies today are following. They’re using data to restore power and choice to their stakeholders, in the process turning customers into marketers and suppliers into vital yet virtual cogs in their platform.
Here’s how today’s companies are using data to get smarter, cut out the middle man and empower their stakeholders -- all while earning unicorn-size valuations:
1. Put the wisdom of the crowd to work.
Real-time landing page click data, peer reviews, product ratings and other metrics are helping companies at large become better decision-makers than any individual CEO could ever be.
Perhaps the classic and best-known example of companies putting data to work is Apple’s iTunes platform. It doesn’t just show you products in the same category as others you’ve bought but offers intelligent suggestions for all kinds of content -- music, movies and more -- based on users who fit your profile.
Closer to home, my company has incorporated the same technologies and applied them to much bigger and bulkier stuff: home improvement supplies. By tracking what people are clicking and what they’re putting in their cart -- or pulling out before buying) -- we can offer more intelligent buying advice, which beats customers having to chase around a sales guy in an orange apron.
Customers aren’t just telling you their preferences over ever-more sophisticated online platforms, they’re telling you what metrics are important to them. Listen to what the data is telling you and make the big plays -- without taking a big risk -- to make a big profit.
2. Get the most out of your customers by taking out the middleman.
Create a platform where you can take out the middleman. That’s exactly what Uber has done. Without owning a single taxi, they’ve become the world’s biggest cab company. The middleman, in this instance, were the medallion taxi companies that had put a stranglehold on supply and de-incentivized customer service.
Uber restored power and choice to the consumer. Armed with new technology and better access to data, we can now hail rides directly from drivers, without having to be routed through the pinch point of traditional cab companies. In contrast to old-school business models, Uber didn’t monopolize power as much as share it -- minimizing irs own role and relying on scale, rather than scarcity, to profit. It’s worked. They are now said to be valued at $68 billion -- more than General Motors.
With this customer-centric model, companies are able to offer better pricing, convenience and selection than anyone else, without even dealing with physical inventory. When the customers win, you win.
3. Get your suppliers into the game.
The unsung heroes in the business world are always the suppliers -- the manufacturers and service providers who labor behind-the-scenes to actually make and deliver what consumers use. From time immemorial, they’ve been squeezed by vendors and middlemen who dictate terms from on high and leave them scrambling to get by on razor-thin margins.
Sharing data with suppliers provides a better alternative. In Airbnb’s case, for instance, all hosts get access to a dashboard full of detailed information on how often their property is being clicked on and what prices are likely to yield the most bookings at specific times of year. And as a nod to the success of this model, even the traditional hotel suppliers of accommodation who are being disrupted are now latching on to Airbnb as a reliable source of new bookings.
Suppliers are happier, and so is Airbnb which has grown by a factor of 353 over the past five years and is now one of the world’s largest accommodation sites -- valued at more than $25 billion and still growing fast.
In the past, we had put in orders with suppliers based on what we thought we’d need in our warehouses -- how many pallets of flooring, landscape pavers, etc. Not only was this labor-intensive, it was also an inexact science. So we decided to get out of the way. The result? Everyone benefitted.
4. Don’t turn your platform against those who helped build it.
Once you’re dominating the market with your online platform, it can be tempting to put the squeeze on customers and suppliers. But recent examples show just how that strategy can be counter-productive.
Even the biggest heroes of the sharing economy can give in to this urge. For all its merits, Uber, for example, is taking progressively higher cuts from its drivers -- 20 percent bumped up to 30 percent in a tiered plan -- “because we can,” according to their CFO, and the grumbling has already started. A new consortium of competitors, including Lyft and Asian ride-hailing players, are already swooping in to lure away frustrated drivers.
Ultimately, getting the marketplace on board with your team’s game plan means having the right corporate culture in place and taking the long view. Every company wants to maximize profit, but the most promising startups aren’t only about that. I’ve learned that long-term success depends on using your data to empower users, suppliers and other stakeholders. The firms that do that will own the future.