Tuesday, November 17, 2009

Back to the Consumer

Between a number of disparate activities - planning our annual global meet, a positioning articulation for our consumer services vertical and a number of customer conversations, I am beginning to find numerous sparks blending into the light at the end of the tunnel. The thought is complex - but its a marketing muse task to simplify it. So lets have at it.
I have referred in the past to the fact that the recession was brought on us as a consequence of developed world consumption fuelled by unreal feelings of wealth. The bubble burst - taking all that wealth with it, and the tailspin began. An interesting piece of research by the team shows that a year ago, in the S&P 500, 80% of companies were used to positive revenue growth. In mid 2009 this reversed to 80% actually demonstrating negative revenue growth. However, the story does not end here - the best analyst estimates indicate that by mid 2010, 80% will be back on the growth path. Then what's the New Normal ?
The New Normal is simple. In the old normal - 50% of the S&P 500 were used to > 10% growth rates. This will halve to 25% - meaning that the world of business will either have to reconcile to a hindu rate of growth; or truly engage in disruptive business model innovation to buck this. How will they do this ? This is where I want to ramble and talk about a number of disparate stories.
Facebook will soon become the largest country in the world. Coca Cola is today the third largest music retailer in the UK. 95% of music downloaded last year was free. Bottom of the pyramid market facing innovation has driven India to the top of Nokia's global agenda. The US will not recover without the chinese consumer. Blockbuster vs Netflix has demonstrated that real estate is now digital and not physical anymore. The rockstar status of micro-finance has demonstrated the power of business lies in empowerment. Governments want to control salaries in the financial sector. Google buys Gizmo5 and takes position in the telco race. Amazon becomes one of the largest retailers of diapers. Noble intentions win the Nobel prize - more importantly, the prize becomes a blot on the Obama escutcheon. The world's going crazy - but in a nice way.
Thats because its back to the consumer. It's over for the middleman. Bucking the growth trend will mean finding new consumers and developing a new kind of business to entice them with. And all business value will lie in the relationship between the business and the consumer - intermediation (for instance the financial services industry in the old normal) will no more be a source of value. The world is going 1on1 and obfuscation is out. The simple truth is - if complex derivative products had not concealed it, you and I would have known that the house which was bought at $100K could just not be worth a half million. If all housing purchase was done only for the purpose of living in - it is very unlikely that speculative bubbles could be so easily fuelled. In essence, the game is with the consumer - and not the customer. Businesses which smell the coffee will realise that there is no value in inventory (which is where intermediation plays a role) - all value lies in the act of consumption.
Lets call this the 1o1 Business. Its that old mom and pop store - which continues to battle giant retail quite well. With one fundamental difference. Technology has suddenly made the 1o1 business scaleable. And 1o1 is happening first through content. Economic theory has historically focused on transactions between the producer and consumer as individuals - the concept of the firm / organisation was not allowed to complicate further an already complicated subject. Theory has suddenly become reality - when what is produced and consumed is content. People who like books go to Amazon and exchange content. Out of this a phenomenal business was built - and the story is not over.
The 1o1 business is a platform. One that brings together like-minded indivuals globally in a content sharing experience that is compelling. And then proceeds to convert the content sharing experience into a social interaction. And then proceeds to monetise the experience. Facebook has already done the first two - it is best not to dwell too long on what will happen when they crack item three.
Just imagine the power in the 1o1 business. Pun intended. Energy is becoming a passionate subject amongst people. A power company that focused on bringing together a community around the concept of smart energy - could then become a mart for all kinds of green products. Now think photography, music, sports et al. I-tunes is wildly successful - but has yet do all three 1o1 items. The rug can still be pulled out.
Because its back to the consumer. And the producer.
And they are 1o1.

3 Comments:

Blogger Karan said...

Great Blog Krishnan, I learnt a lot.

How far do you think can google wave go in terms of replacing facebook? Do you see it as a better substitute or something that will not take off?

3:24 PM  
Blogger Tanu Tripathi said...

This comment has been removed by the author.

12:43 AM  
Blogger Tanu Tripathi said...

Wonderful post. This is nice post and gives in depth information. Great tips! CRM Solutions For Finance Services

1:02 AM  

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