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From daily round business to long term value creation

Tue, 01 Dec 2020 13:59:43 GMT

In Q3 2020, during the Covid-19 wave 2 in Europe and wave 3 in USA, the Venture Capital eco-system hits various new records

a total global funding reaching $70 B (highest level since Q4 2018),
an average deal size of $17 M (+33% vs Q2 2020),
the Unicorns club surpassing 500 companies.

Venture Capital money represents only a part of the investments but these account for some of the key innovations & business growth across all type of segments, markets or business sectors through

new entrants,
new products or services,
new user experiences,
new usages,
new problem-solution fit,
new industry boundaries,
new business models, …

Even if some results of the Eurochambres economic survey 2020 indicate that the macro-economy recovery will take some time (this could be accelerated by the Covid-19 vaccine availability), 70% of Belgium enterprises declare that their investments will stay stable or increase in 2021 .

It means, among others, that innovation and business growth are certainly not the prerogative of the VC funds, start-ups or scale-ups.

All type of companies can strengthen their long-term value creation , if they don’t focus mainly on their daily round business, in stand alone or with partners in various ways like

market penetration or globalization,
(un-)related diversification,
vertical integration, …

Here below examples illustrating the different types & mode of business growth.

Let’s focus on 2 of them occurring in 2020 during the Covid-19 crisis.

Cora delivery by Uber Eats

In October 2020, Cora signed a partnership with Uber Eats allowing Cora’s customers to order via the Uber Eats App prepared dishes but also fresh products, groceries, everyday essentials,… delivered by Uber Eats. The delivery should occur in 30 minutes within a radius of 3 kilometers.

With this partnership Cora has the ambition to answer new consumption habits of a younger audience .

Serial 1 electric bicycle by Harley-Davidson

In November 2020, Harley-Davidson decided to enter the electric bicycle market, a new growing market for them, with a worldwide value of $15 B. The H-D strategic move is sustained by the launch of a new company, a new stand-alone brand “Serial 1”.

The main reasons of this market move were i) the Millennial & Gen Z seem less attracted by the current H-D portfolio, ii) this last does not answer current mobility concerns.

The new normal accentuates the digitalization needs, the environmental issues, the mobility concerns, the new organization of work,… This unique socioeconomic environment brought new problems, new needs, new usages, new ways of interacting, new users experiences, new business models, new solutions,…

The new normal abounds of business growth opportunities. Furthermore, a single cost reduction strategy i) has only a time, ii) is not inspiring for employees and customers, iii) does not create long term value.

So, whatever your sector, at one time or another your business growth will be linked to one of the types & mode of Corporate growth in order to capture new demand and not to fight only for existing customers.

It will create long term value for your company and shareholders.

From Products to Services, from One-off Revenues to Recurring Revenues

Mon, 05 Oct 2020 14:17:22 GMT

The majority of companies are looking for predictable, regular and growing sources of incomes creating long term value. The business model sustaining this economical vision of recurring revenues known as the subscription economy is not the primacy of some sectors or some famous companies.

Moreover, this model is not new. The premises of the subscription economy date from... the 17thcentury and the first subscriptions to books & newspapers.

The model really started to develop as from the 90’s (mobile phone flat rates, PayTV, SaaS, ...) and since the beginning of the 21th century, the subscription economy is accelerating (SVOD, music streaming, consumer goods box, …) with 85% of the European citizens having at least 1 subscription .

The subscription economy is growing faster and faster across all sectors, both in the consumer and business markets mainly due to:

digitalization of the economy,
penetration of broadband mobile and fix connectivity,
availability of reliable and flexible IT solutions,
amount and variety of generated data’s,
promotion of this business model by start-ups,
introduction of this business model by established companies,
emergence of new ways of consuming:

usage instead of ownership,
access instead of purchase,
customized experience instead of standardized possession.

The subscription business model is much more than just a subscription , a leasing, a loan, a monthly payment, a long-term contract with preferred price, … giving access to a service.

The subscription is one key component (but certainly not the only one) of the value proposal the company will bring to its user in order to deliver a unique and customized experience.

Subscription economy examples on the consumer market:

The Porsche Drive Multi-subscription in USA & Canada. For a monthly subscription of 3,100 $ (gasoline excluded), the driver has access to the whole Porsche fleet and can change of the model as often he wants. Using the Porsche Drive app, he requests his preferred Porsche and schedules its delivery. A Porsche concierge will bring the new model and make the exchange.
The Flora Insurance by Ethias in Belgium. Flora is a fire insurance for tenants targeting mainly digital native (service is only available via the web or the mobile app). The monthly subscription is paid via PayPal or credit card. This user value proposal includes declaration of damages through chat, relocation in hotel up to 7 days, payment of lease termination indemnities, …

Subscription economy examples on the business market:

The Otis One by the elevator company Otis in the real estate sector . Based on IoT solution and platform sustained by a subscription fee, the facility manager can monitor in real time (24/7) elevators via web or mobile app. The maintenance engineer is able to spot, diagnose, predict and fix a problem before anyone in the building notices.
HP Instant Ink by HP in the printer’s sector . Pro-active delivery of ink cartridges based on the number of pages printed. The user selects the monthly subscription linked to the quantity of printed pages and not the quantity of cartridges used. The subscription includes, among others, delivery (predictive based on IoT solution within the printer), recycling and modification of fee at any time.

As previously mentioned and described in examples, the subscription is only one component of the value proposal that should include information, services, support, touch points, brand, .... A well-designed value proposal including subscription will provide you the opportunity to up-sell, cross-sell and keep your consumer or business users.

So, whatever your sector, the subscription business model is nearly infinite (it can be combined with Freemium, On Usage, Per User, Per Feature, … pricing models) and will provide you competitive advantages to capture new needs, delight users and link them emotionally to your brand.

Introducing (partially or totally) recurring revenues to target existing or new users instead of only traditional one-off revenues should be part of your business growth strategy and suitable innovation. It will especially create long term value for your company and shareholders.

From Business Protection to Business Growth

Thu, 20 Aug 2020 06:39:09 GMT

Up to now, all crises that we have known created recessions, bankruptcies and unemployment but all the crises have also created many business opportunities in mid-long term. In all financial and economic crises, some companies and entrepreneurs have encountered advantages to initiate new businesses, launch new products & services, answer new customer needs, fit problem & solution, meet product & market, create new business units.

The Covid-19 crisis that we meet today will be no exception to these potential business opportunities despite its scale, suddenness, violence, damages, rebounds, …

Do you remember 2008? The last major banking & financial crisis which in particular led to the bankruptcy of Lehman Brothers.

But do you remember that the year 2008 was also the launch year of some companies in Belgium like Newpharma, Silversquare, Energreen?

Followed in 2009 (still in recession phase) by the creation of some more famous businesses like Airbnb, Evaneos, Leetchi, Slack, Uber, WhatsApp,…

We could go back in time like in 2000 (bursting of the Internet bubble) and the launch of Baidu, in 1987 (stock market crash) and the creation of Burger Time, in 1973 (oil shock) and the kick-off of Patagonia, …

The world before will never come back. The world and especially the economy that we are starting to know, the new normal, is plenty of opportunities for companies that will anticipate and allocate resources (time, people, budget) as from now to ensure their future business growth.

• Business protection: facing the covid-19 crisis, all companies have gone into survival mode allocating the majority of their resources to protect all the components of their value chain and reduce all costs as much as possible.

• Business reboot: after a period of adaptation to their new environment, the majority of companies reboot all or part of their activities combined with business protection measures due to worldwide environment uncertainty.

• Business continuity: running the business focusing on key strengths and assets much more than before. Almost all the resources of the companies are therefore allocated on day to day activities creating mainly short-term value.

• Business growth: The mid-long term winning companies will be those which have found the right balance between business protection, reboot, continuity and additional resources allocation on their growth. These resources are not a cost but an investment for the future of these companies.

So, whatever your sector, even if you are still in business protection, business reboot and/or business continuity, it is the right timing for you to anticipate and to allocate additional resources to rethink your strategic priorities considering your key strengths & assets facing the new normal.

This reconsideration of your strategy will provide you competitive advantages to differentiate from your competitors and new entrants, capture new needs, grow your businesses and especially create long term value for your company and shareholders.