1. Turn a threat into an opportunity
As a general rule, threats must be avoided, but with creativity we can find a way to turn them into a fortress ”, says Lluis Renart, professor in the IESE Commercial Department.
Even threats that keep hundreds of entrepreneurs awake, such as production in China and India and pirating of all kinds of products, can inspire creative entrepreneurs. How do you transform a threat into an opportunity? First of all by getting to know her, being prepared so that she doesn't catch you off guard. And, later, turning the problem around. “For example, production in China, based on cheaper labor, has forced many companies to give up their production and transform into commercial companies. Others like Ficosa, which manufactures auto parts, what they have done is to move production there, but not to simply relocate, but to enter the automobile industry in China and India. It is expected that this market will have a spectacular development in the coming years, when the demand for cars increases there ”, explains Lluis Renart.
Look for the weaknesses of your 'enemy'
Even more spectacular is the case of the North American company Santa Fe Finishing, which has made the threat of textile relocation in China the main inspiration for its business: the importation of clothing with defects. Its founder, Barry Forman, had found that companies that relocate their production in China received greater quantities of items with tare, and that it was very expensive for manufacturers to forward these garments there to fix them. And he created this company to respond to this new need. Get inspired by other business models
Another industry that is under threat, that of record companies, due to piracy, has inspired the business of a very innovative Spanish SME: the Faktoriad record company (www.faktoria-d.com). This company does not sell its CDs, it gives them away, and has based its business on the sale of the spaces on the covers of its CDs for advertising. They have thus created a new advertising medium and a new business model, very similar to that of the free press. “We are an old-fashioned record label, but our retail price is zero euros. We sell advertising space within the album itself to finance ourselves. New advertisers are companies such as Heineken, Dyc, Larios… brands related to the night, since the product is distributed in bars, restaurants, shops and fashionable hairdressers… ”, explains Daniel Diosdado, director of the record company. The business idea was inspired by the free press, and from the realization that the music business had to be reinvented. “People are now used to consuming music for free, and we thought about how to offer a product without cost, but that was profitable. Our business is financially more secure than the traditional one, since we first sell the advertising space, and then we manufacture the product ”.
2. Access the investigation
Research translates into new products and new ways of doing things. But how many SMEs have the necessary capital? Really very few, although there are “mechanisms to transfer research to companies. For example, the OTRIS - the offices for the transfer of research results in the universities - and national networks such as the APTE (Association of Technological Parks of Spain) or the European IRC (Innovation Relay Centers) turn over the offers and demands of technology free of charge ”, explains Fernando Martín, head of business development at the Madrid Science Park.
Your private investigator
“There are also private companies that work on technology transfer confidentially. For example, if you have a good patented technology, they study it, carry out a small competitive intelligence report, determine which customers may be interested in that technology and get in touch with them ”, adds Martín.
3. Go from manufacturer to distributor
Pressure from manufacturers who manage to reduce costs as much as possible (China and India) or a rise in the price of raw materials are the most frequent causes for dismantling a manufacturing business and transforming it into a distribution company. “This is what IBM did as it went from making computers to repositioning itself as a service company. What advantage can this jump have? That in services a greater differentiation is achieved. Any product, a computer in this case, has easily replicable attributes; the capacity, the speed, the screen… can be replicated with another brand. However, positioning towards services offers you greater differentiation. It is more difficult to detect how a service is provided and copy it ”, explains José Luis Barbero.
Take advantage of your resources
This same step was taken 15 years ago by Clavesa, an SME that went from manufacturing nails to converting itself into a business for importing and distributing hardware products. “We started by importing machinery to expand our catalog, but later we also saw the opportunity to import nails, instead of manufacturing them. By reducing trade margins,
we had to look for cheaper products, which we brought from the Far East. Today we have reduced this activity so much that now the manufacturing business volume barely represents 5% of sales ”, explains Alberto Romero, director of the company. This businessman acknowledges that the market itself forced them to make this change, which they faced with time and taking advantage of their resources: “We had to restructure the production of the business, but we already had the commercial network and customers. That has allowed us to reinvent ourselves without taking a radical turn ”.
By stopping manufacturing, they have also become a more agile company: “In addition to cost savings, the change has allowed us to expand the catalog towards products that we could not manufacture, such as nail machines and other products further away from our business, such as garden supplies. Taking advantage of the clients we already had, we have been offering new products. An important change to stop competition, because the variety of products helps to retain customers and attract new ones ”.
4. From service company to manufacturer
The reverse process is more frequent - leaving manufacturing to dedicate to service - but if you have an important client, who needs a very specific product and you want to take advantage of that niche, or if your clients demand very high quality standards, you can consider the vertical integration. You move from services to manufacturing to have an exhaustive control of raw materials and production processes when you want to implement a quality system ”, explains José María Párraga, consultant for the Incyde Foundation. That was the goal of Smithfield Foods, America's leading meat maker, as it entered pig farming.
Manufacture knowledge
Among SMEs, it is the strategy of consulting firms that develop a technology or software product for their clients, such as Addiciona Servicios Informáticos, which has created the filter-e-polite for e-mail. Or the archeology company Cehtex which, in addition to offering a global service to its clients (archeology, geophysics, research…), has developed an electronic publishing house. “A step that responds more to the philosophy of the company than to a commercial action. We created it because we believe that the research has to be disseminated ”, explains David González, one of its founders.
5. Reinventing customer service
When it comes to customer service, the idea of offering more to build loyalty always comes to mind. But many companies have found their opportunity by subtracting customer services, to save costs. The idea is good, as long as the change in turn saves the client time and / or money, as happens with online offers from travel agencies, airlines, hotels ... Why, then, cinemas, theaters, museums and other entertainment venues charge a surcharge for this service?
The total free
“They are companies that consider customer service as a cost rather than something that adds value to the business. More and better contacts with the client offer the company the possibility of selling additional products and services to the client ”, explains Reggy. And the experience of many companies continually proves it. The Parisian cafes Columbus Café, for example, have seen their customers increase by offering them free Wi-Fi connection services. And the benefits are 27 times higher than the cost of running the terminal and ADSL.
What nobody offers
Better customer service can also become your main differential advantage. And as a sample, a button: the Fox Creek Leather store, has specialized in the online sale of leather jackets made to measure! This store sells to customers around the world by removing the main barrier to entry of distance selling: the customer can try on the garment before it is made.
And a closer example. In the construction business, where it seems that the main purchase motivation is square meters, area and finishes, services can be a great advantage. The American real estate agency Hines has created the first all-inclusive luxury residences in Barcelona: tenants will not have to worry about looking for a babysitter, parking the car, shopping or walking the dog.
6. Find new ways of relating
Relationship marketing has helped companies for years to know customer satisfaction, develop products adapted to their tastes, retain them ... A trend that some companies have reinvented with new communication channels, such as blogs or podcasts, in which Users share their opinions and complaints with other potential consumers. Some companies go further and, in addition to asking them to find out their level of satisfaction, they “put them to work” in innovation sessions in which they can participate with the company's professionals in charge of creating and launching new products. “It is a process that can take different forms and is used so that customers have a say in the method in which products and services are developed, designed and produced,” explains Reggy de Feniks. “Lego, for example, invites its customers to design and order their own houses, cars, trains and similar products, in a completely personalized way. The most interesting products are included in the regular Lego assortment and the original designer (the customer) is compensated with a page introducing himself and thanking him for his achievements. An idea with which they have created a community of 2.5 million members. And recent launches, such as the Philips PerfectDraft, which allows consumers to have a fresh and cold draft beer at home, or their hard disk DVD recorder, have emerged from a co-creation session, ”continues De Feniks.
Content generators
But it is, above all, the current trend in user-generated content (what has become known as Internet 2.0) that is changing the relationship with customers the most, even generating new business models. "Companies like Wikipedia and YouTube, based on the generation of content by users, would not even exist without consumer participation," says this marketing consultant.
Supplier clients
Such is the importance of the client in these business models, that some companies even pay them for the services provided. “SMEs such as Threadlesst-shirts (www.threadless.com) that only sell t-shirts with designs shared by the users of its website (who receive a commission for each t-shirt sold); or like Yorkshiresoup (www.yorkshiresoup.com) a company that invites consumers to send soup recipes that can be edited by the company with a photograph of the creator on the label for distribution in stores, they are good examples of SMEs that have known to turn customer contact into a correct offer ”, adds Reggy de Feniks. Another good example of this trend is the company Lulu.com, the first web market where customers can publish, sell and buy any digital product: books, music, comics, photographs, movies ... The company is in charge of managing the business online (including printing and customer delivery service) in exchange for a small percentage of each transaction; customers, for their part, assume the “responsibility” for generating the content and setting the price of their creations. In exchange for "their work", every 15 days they receive a check with their earnings.
7. Change the production model
The production chain is usually reinvented when innovations in technology are created, which allow “shortening delivery times or introducing product innovation. Many times it is a mandatory change because, if it is not addressed, competitors enter who reduce profit margins and throw you out of the market, ”says José Luis Barbero. The problem is that it can involve a significant capital investment. “Especially in the most volatile sectors. Not all links in the value chain can be mastered. If you have to modify all of them, it will be more difficult to make adjustments or you will be continuously making improvements. You must seek cooperation with other companies and focus on the links that have the greatest potential for profitability or in which you have the most knowledge, ”adds Barbero. These small adjustments are usually enough to catch up, unless there is a radical change in the business like the one that the lead letterpress manufacturers suffered, “a model that had remained practically unchanged for five centuries and that in my family it had been in place for 150 years. In 2000 I created the current BauerTypes, the only company in the world that has managed to convert from type foundry to digital studio ”, explains Vivian Hartmann.
8. Transform your core business
It is a change that depends a lot on how each company defines itself. If it is defined by the product it offers, it is possible to reinvent the business again and enter new markets. If it is defined by the way of doing things, by a way of acting that differentiates it from the rest, it should never be transformed. “Three years ago, when the CEO of Medtronic was named Executive of the Year in the United States, he said that the most important thing is for a company to be clear about its mission: what it wants to do and why it exists. And from that mission, design a strategy. Air France, for example, is considering whether it should go into the train business. Here the question is: How do they see themselves? How is an aviation company or its mission to transport passengers safely, comfortably and at a reasonable price? ”, Says Lluis Renart.
The answer to this question is key to knowing where to go, since we are talking about defining the core business of the business, its main advantage over the competition and what can allow it to enter new fields. For José María Párraga, “if you change your activity it is better to always do it within the same market. For example, a construction company can enter the niche of the installation of renewable energies taking advantage of the fact that there is a legislation that forces to build more projects with these installations ”.
This is the idea followed by the Phyllum company, which began in the collection and investigation of marine samples for companies and had to change its activity “when the companies began to carry out this activity themselves. We had to close the business or look for new activities and we decided to focus on environmental training ”, explains Mar Ajubita, one of the founders.
9. Increase the target audience
In the absence of travel to grow in the market itself, many companies reinvent themselves trying to reach customers who have been left out of their business. This is the idea behind the launch of Vodafone Simply, the first mobile designed exclusively for the elderly, who often give up using these products because they are complicated. The Vodafone Simply has basic features, a large screen, a simpler answering service, and affordable prices.
Create a new niche
Another interesting alternative may be to create a new consumer niche, trying to access an untapped market in which to grow without competition. Within this strategy are “many companies focused exclusively on the female public, such as the bank www.womenandco.com or the car insurance company www.ladycaronline.de (with half-price policies for this segment, which usually has less accidents), ”says Reggy De Feniks. Another option is to focus on niches that other business models do not reach because they are not profitable, such as the so-called “long-tail businesses”. They are companies that operate over the Internet, such as Amazon or Lulu, and since they do not have to have large amounts of stock, they can offer thousands of references in books, CDs and other articles to reach all consumer segments. They work with an inverse model to that of other businesses. Instead of selling a lot of a few items, they sell a little of many.
10. Expand the physical market
Companies often take this step when they cannot continue to grow in an already mature or dominant market. The main advantage of this strategy is that it can often be done without changing the product, although there is almost always a need to make adjustments to the business model. “If I have a good product, I am interested in addressing this change, but I will have to expand my sales team, improve logistics, distribution… or partner with companies that can be complementary. It is a leap that should be taken only when it is digestible. A larger physical market makes it possible to obtain a cheaper product, but it also forces us to make changes that must be valued, "says José María Párraga. And he warns that a larger market does not guarantee better results, factors such as pressure from competition, the maturity of the market itself, barriers to entry must be assessed ...
Virtual structure
The Internet has become a fundamental tool for SMEs that, like Rebelio, an online electronics sales company, want to access customers from all over the world without transforming their SME structure and in record time (in their case, in less one year). Your secret? According to their managers, their products cost at least 10% less than the competition. And to guarantee this, they have developed their own software that allows them to check the prices of all their products several times a day and change them when the competition does.
Global Clients
There are also companies that address this leap due to customer demands, such as the sports representation and sports marketing company U1st Sport, which in three years of life already operates all over the world. “Athletes and sponsoring companies move in the global market and need offices all over the world. To serve them, we have opened ten offices of our own and we have another dozen collaborating offices ”, explains David Brabender, its marketing director.
11. Apply your 'know how' to other markets
To make the investment in innovation profitable, some companies reinvent themselves by looking for a crossroads of knowledge. This strategy consists of applying the experience and skills acquired in one area to a completely different area, to develop new products and services. It is a way of reinventing themselves that can be developed especially by companies that operate in technology-related markets. A good example of this strategy has been found in the mythical loudspeaker company Bose, which has managed to apply its knowledge of acoustic physics to the automotive industry. Its technicians have created a new car suspension, an alternative to the traditional absorbing system with springs or liquid, based on electromagnetic motors on each wheel. The suspension is now ready for market distribution and Bose is in negotiations with auto manufacturers to commercialize the product.
12. Find new applications for your products and services
Reinventing a product by looking for new applications allows it to better exploit profit margins, expanding the client portfolio without investing large sums in reinventing production processes. This change allowed Coca-Cola to become the best-known drink in the world (before being a soft drink it was a medicine), or the Pilates method - originally intended to improve back pain - is used in many gyms as a method for keeping fit.
A change of this type can even become the key to the success of a business, as in the case of the Finnish real estate Igglo.fi, “an SME that has completely transformed the concept of selling a house. In this case, they have not changed the product, but the sales process. Instead of using sellers and individuals who want to sell their home, this company offers potential clients the possibility of finding the home of their dreams, even if it is not for sale. To do this, Igglo has photographed all the houses in Helsinki and put them on a website linked to satellite images and maps. Potential buyers can bid on the house. If the owners like the offer, they can sell it in exchange for paying Igglo a 2% commission on the value of the property ”, explains Reggy De Feniks.
Reuse and recycle
Some companies are beginning to reuse their products to make their production processes more efficient and also reduce environmental pollution. “It is a process that is based on the concept known as cradle to cradle, already applied by companies such as Nike; They reuse products that have reached the end of their useful life and reintroduce them to industrial cycles as high-quality raw materials to create new products (http://www.nike.com/nikbiz/nikeconsidered/) ”, adds De Feniks.
13. Reinvent your products and services
Is it possible to transform a company from a new product or service? "Absolutely yes," says Reggy De Feniks. “You just have to remember examples like the TomTom navigation system, which has transformed a small company into a big business; Google browser or Apple iPod. The important thing is that it is a product that offers value to the customer. As our research in Spain reflects, customers do not buy things just because they are innovative, but because they make life easier for them ”.
Lateral marketing
The best thing is that many innovations are based on small changes to existing products, such as the successive reinterpretations of the classic BMW Mini or the crustless Bimbo bread, and which can be reached by applying lateral marketing theories (see Entrepreneurs no89, How generate your own business idea).
Lesser known examples, but no less innovative, are the changes made by SMEs such as the Galician Daveiga, which has reinvented sliced bread with bread that can be kept for up to six months. “We were inspired by the old marine biscuits, but we have used another recipe and a new cooking system. Thus, we have achieved a long-lasting but very natural product ”, explains Xosé Lois Lamazares, founding partner of this family business.
You can also innovate without making big changes in much more traditional businesses, as travel agencies that are beginning to offer themed getaways are showing. Thus, the Evadium Agency, one of the pioneers in this new market, has changed its travel offer by destinations for a concept based on weekend getaways in which all kinds of activities are practiced: relaxation, photography, cooking or dancing. .
14. Inventing hybrid businesses
The reinvention of cocktail bars, restaurants, clothing stores, hairdressers… in which two different businesses come together obey strategies that go beyond the need to create attractive and unique business formats. “What is sought is to differentiate itself from others as a company. It is also a way to obtain synergies to reduce costs; the physical spaces are very expensive and it is a way of making that space more profitable. But the truth is that it is a risky bet; the result is often unpredictable because you don't have examples to base yourself on ”, explains José María Párraga.
Complementary
To reduce risks, Párraga recommends "trying to bet on complementary businesses and looking for partners to help us enter new markets, if we want to start activities that we do not master." Within this complementary business line, many new stores are emerging in which two businesses operate in one: such as those that allow the customer to enjoy a good book while having a coffee (J&J Books and Coffee) or an antique store where you can taste good food (Asiana). Others are actually two completely different businesses, in which two partners share premises: such as the premises that are beginning to expand in England where Abbey Bank and Costa Café share clients; or the Parisian Wash Bar, a cocktail bar in which the appliance firm LG has installed washing machines for the clients of the premises to do their laundry. When ordering a drink, the customer receives a ticket and a little detergent to start the machines. This new concept of establishment is also a strategy of LG to bring its products closer to potential customers, who can thus try them for free.
15. Seek strategic alliances
The most common formula is the joint venture, which consists of the creation of a new company with independent legal personality, subject to the partners' strategies. This alliance allows diversification of sectors little related to the activity of the company and going out to international markets.
Get close to the big boys
But a partner can also provide SMEs with the necessary infrastructure to enter markets where there are many barriers to entry. YouTube, for example, has teamed up with Verizon Wireless to distribute its videos via mobile. And many SMEs, such as the North American Infocus, find the opportunity to develop their products thanks to the alliance with multinationals, in this case with Motorola.
The latter has provided financing, manufacturing capacity, distribution lines… in exchange for the television technology developed by the smaller company.
"It is also very common in the biotechnology field, where small laboratories license their patents for a multinational to manufacture and distribute the product," says José Luis Barbero.
16. Better communicate your business
The most revolutionary communication campaigns are usually driven by large companies, with more money and means to innovate. But some SMEs have sharpened their ingenuity and have turned the communication of their products into their main differential advantage.
An excellent example is “the Grapedistrict store, located in Amsterdam, which bases its business on a new way of communicating wines. They were aware that many clients found it very difficult to find their bearings in this world, in which there are few experts. And they retryed their communication. They do not use countries, regions, years or types of grapes, but rather propose nine types associated with moods and represented with colors. If you want to drink wine at a quiet time, then go for the Easy label. If you are going to share an intimate evening, choose the Deep… An initiative that is attracting many clients ”, explains Reggye from Feniks.
Coffee share customers; or the Parisian Wash Bar, a cocktail bar in which the appliance firm LG has installed washing machines for the clients of the premises to do their laundry. When ordering a drink, the customer receives a ticket and a little detergent to start the machines. This new concept of establishment is also a strategy of LG to bring its products closer to potential customers, who can thus try them for free.
17. Diversify the business
Diversification is a risky strategy, since it involves entering new markets with new products. Companies tend to take this step when they cannot continue to grow in their market, to avoid competitive pressure or to not depend exclusively on products that are beginning to become obsolete. Other times they try to take advantage of new business opportunities and greater profitability than what they can obtain by expanding the business in the market itself.
Unfolds your tentacles
In order not to risk too much, it is best to look for activities in which you can take advantage of your resources and skills in some way: such as knowledge of staff professionals, distribution networks, brand image or the possibility of achieving greater power negotiation with third parties.
This was done by those responsible for Industrias Tagar, a company that had its origin in the manufacture of furniture, and that has been expanding its activity with new companies: a warehouse, wholesaler and retail store of decoration and DIY elements (Su In Plas) ; a firm that produces pieces of wood (Juinsa), its own transport fleet (Muebles Auxiliares) and a company dedicated to works and reforms (Promociones Horchanas). As Pedro García Moya, president of the company, explains, “we have looked for business opportunities that would allow us to diversify activities, with which we have obtained important advantages: we can have direct control without having to depend on third parties, in management, transportation ... AND we take advantage of the synergies in the purchases for all the companies ”.
18. Create new distribution channels
Innovation in distribution channels is a strategy “that allows us to reduce delivery times, reach markets that we could not otherwise reach, and also a way to differentiate ourselves from other competitors. We have seen a spectacular example recently with the Sort lottery administration. It is not a completely innovative idea, but by entering an unusual distribution channel for this product, this administration has managed to sell the 70% of its coupons over the Internet. I find it dazzling, ”explains José María Párraga.
The first P2P bank
In today's market, most of this type of innovation is taking place by adapting traditional businesses to new channels, the Internet and mobile telephony, which in the most innovative cases are creating new business models. Like the British bank Zopa (Zone Of Possible Agreement), the first based on the P2P philosophy (relations between equals). It was created by executives from EGG bank and is based on the idea that customers are the ones who lend money to other customers. They analyze the credit applicants, study the risk (they are traditional banking professionals and use data from the three main credit risk agencies) and distribute the credit among a minimum of 50 people, so that the risk is diluted, in case of default. Zopa has access to the same debt recovery measures as a traditional entity. Whoever lends money decides how much he wants to lend, for what term and with what interest rate. In exchange for its services, Zopa charges 1% of the total amount of the operation.
But you can also innovate in distribution without resorting to technology. “The Discapa company has developed vending machines for Chupa-Chups that are located in airports. A reinvention of the Chupa Chups distribution channel that has allowed it to enter a market in which it was not present before: airports. The idea has worked very well. It is a product that is fundamentally bought on impulse and with which they have managed to create a demand where there was no supply before ”, explains Lluis Renart.
Thematic premises
A new trend in distribution channels is also “thematic stores and venues that, rather than selling a product, sell an experience. Like the Starbucks Coffee stores ”, adds Lluis Renart. Following this same idea, brand stores have now been created, such as Heineken or Mini (nightclubs that reproduce the image and colors of these companies) or Manga Cafes, which reproduce the world of this well-known comic.
19. Renew the company address
Most of the time, the possibilities of reinventing a company depend more on the management team than on the business itself. A change in the management team may be enough to drive stagnant businesses; especially if they are companies led by their founder for several decades or young businesses created by inexperienced entrepreneurs. As José Luis Barbero points out, “in companies you always have to make decisions based on efficiency, and this is something that in family businesses or those in the hands of the founders, it does not always happen. Decisions are often marked by personal ties and often when changes are made it is too late. The last thing the entrepreneur does is give up his company, even if it is to give it to a relative. And usually when he does the broadcast it's late. The company is beginning to have problems ”.
New sap for management
One way to avoid immobility without relinquishing control of the company is to find someone responsible for innovative business development, with the founder keeping control of the core business. It is the model followed in the Globalia Group by its founder JuanJosé Hidalgo, and his son, Javier, the main architect of groundbreaking projects such as PepeCar and Century 21.
Another alternative is to create a collegiate management, made up of the founder himself and professionals with experience in different areas, as did Josep María Lloreda when he took over the modest family business that he has transformed into the KH Lloreda company.
20. Stay ahead of new trends
Market trends are the best sources of inspiration for launching new products. Here the difficulty is in detecting these new trends. As Reggy De Feniks explains, “Traditional market research generally focuses on how consumers are currently using a product; what they like and what they don't like, and what are the motivations and barriers to switching to competing products. This information allows improvements to be made to products, but does not help to make innovations that open new markets. True innovation anticipates consumer trends, determines how consumers will live, and consequently how they might use products in the next five to ten years, ”explains Reggy De Feniks.
What's cooking
The concept of health, the generation of content through the mobile phone, businesses oriented to security at all levels and to comfort, the facilities to reduce the time invested in doing things or the companies that allow the user to become providers of content, such as Wikipedia, Menéame, Flickr ... are some of the trends in which companies are looking for new opportunities to continue growing.
Changes by obligation
There are companies that, more than anticipating trends, have been inspired by changes in legislation, such as the one that the Alegría Activity company has taken advantage of to reinvent its activity. The law made it mandatory to change buses over 18 years old and they, instead of retiring them, decided to reuse them and use them for communication and awareness campaigns on environmental and educational issues. Others have been inspired by changes in the political situation, “such as the enlargement of the EU in 2004. Many businessmen were almost 10 years ahead of this moment, and others did not. It is an obligation of the manager and his team to be up-to-date with the information in all senses. Most of the trends and future changes are anticipated little by little ”, explains Lluis Renart.
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