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Digital Age Business Model
First of all, I would like to open up your mind on why we should have or own a business. Deep down, what do you really want from your work life? We already used to have an idea that if we work, then we will have money, and eventually we can secure our future. But the fact, can you secure your future by working? The answer is clearly a big NO. What are the reasons that I answered NO for this question? Your job or career in the office or big company are just a temporary title for you. You can still loose your vocation, because when the company doesn't like you, they will sack you, even though you have a position as a vice president, director, senior manager, or what so ever. Am I right? So, how can you secure your future by working?
Now we move on to the basic idea on securing our future. If that is not the goal of your life, then you can just skip this hub. What do you have in mind when I talk on the way to secure your future? Yes, I know you know what kind of answer you are thinking for. Business. Yes, that is the answer unless you have lots of money, then you can become an Investor. I won't talk about Investor in this hub. By definition, business is the practice of making one's living by engaging in commerce.
Business Model in Digital Era
Now, come the next question for you to ponder. What kind of business model in this digital era? One hundred and fifty years ago, traditional businesses ran their daily operations completely different as what modern businesses nowadays. As we know, our business industry has growth from industrial age then move to technology age, and eventually now we enter the new era of digital.The combination of technology combine with advance communication (digital) has made possible people to do business throughout the world in real time. After the year of 1990 (Digital Era), the strategy of business has changed its ways by channeling their businesses using the internet and world wide web. Our internet now has move beyond our expectation. Even our smartphone users now have grow exponentially.
Do you know how long it take to earn US$ 1 billion in business? Henry Ford from the industrial age earn his first US$ 1 billion within 25 years, while Bill Gates from the technology age earn his first US$ 1 billion within 12 years from Microsoft, and in this digital era, Jeff Bezos from Amazon.com earn his first US$ 1 billion just in 3 years.
How can Jeff Bezos earn so much money within a short period of time?
How do you find information that you need?
Changes in Customer Behavior
Jeff Bezos is the Chief Executive of a $100 billion empire build on books. He was chosen as the 12 businessman from the Fortune magazine in the year of 2012. How he work is actually he innovate by starting with the customers and working backward. He observe the changes in the customers behavior within this digital era.
Digital era changes the way customer behave.— Jeff Bezos
What the customer behavior changes that Jeff Bezos observe?
- When looking for a piece of information, customer tend to find information through online media such as through Search Engine like Google, etc., online News, online Magazine.
- Customer nowadays tend to make reservation online when looking for a transportation (bus, train, flight) to travel.
- When looking for a product to buy like book, music, etc., customer use online website to purchase the products that they need.
- Even entertainment like movie, concert, etc., customer now use online web to buy the entrance ticket.
In 2013, Amazon declared that the sales of their digital book are surpassing their physical book sales. This is a clear indication that people are now turning to the internet for the information they needed.
What do you think? Do your behavior as a customer now also changes as Jeff Bezos's observation? This is the era of e-commerce.
What goods that mostly you like to buy through the internet (e-commerce)?
Here is the fact that why it is the right time to start an online business (e-commerce) versus an offline business in this digital era.
- More than 50% of all U.S. retail business by 2016 will be affected by the internet. Buying things at the store will gradually replace by e-commerce. Source: Forrester Research
- In 2015, US$ 542.43 billion will be invested by major companies in online advertising alone. Source: eMarketer
- 78% of U.S. Internet users from 10.3 billion Google searches are use to research online products and services. Source: B2B Marketing
- Online businesses growth at 15% of rate per year.
This is another interesting term in business in digital era. Drop shipping is moving goods from a manufacturer directly to retailer without going through the usual distribution channels. In here, the retailers does not keep goods in stocks. Retailers that drop ship merchandiser from wholesalers can take measures to hide the wholesale source from customer using "private label shipping" (merchandise shipped from the wholesaler with a return address customized to the retailer).
What kind of advantage can both parties gain from drop shipping method? It can reduce the cost of the goods because it can reduce the total inventory management and shipping costs.
What are the benefits of drop shipping?
- Less Capital. You can launch an e-commerce store without having to invest thousand of dollars of inventory in front. With this drop shipping model, you purchase a product when you have made a sale and have been paid by customer.
- Easy to get started, because you don't have to worry about managing your warehouse, packing your goods, handling shipments, etc.
- Low overhead, because you don't have to deal with purchasing inventory and managing a warehouse
- Location can be anywhere as long as you have internet connection
- Wide selection of products, because you don't have to pre-purchase goods you sell.
- Easy to scale because work process will be borne by suppliers.
Although drop shipping business model of e-commerce isn't a perfect way of building a successful business, this model has some definite advantages as I shown you above.
The product itself must also good, if not, even though you have a good e-commerce website and a good drop-shipping method, you will not receive any repeat order on your goods. Good by itself means high quality product which can give the customer's satisfaction and benefit. I will not go through in detail about products in this hub.
Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.— Peter Drucker
A quotes from Peter Drucker, father of modern business marketing: "Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."
When his ideas came on scene, he was considered a contrarian by most traditional business leaders. His five key concept of modern business are:
- Employees are assets and not liabilities
- Manager's job is to make people free to perform
- A corporation must have a standard business process
- A corporation has to be viewed as a human community
Network marketing is an effective role model for modern business. This type of marketing is a marketing strategy in which the sales task force is compensated not only for sales they generate, but also from the sales from the other sales people that they recruited. Let us analyze one by one against the five key concept from Peter Drucker.
By decentralization, the company focus on developing new products, marketing materials, training tools, while the distributors or we can call them the sales task force of the company are focused on getting new customers for the company's products. The concept from Peter Drucker that employees as an asset match the basic of network marketing, on which company can grow only by the distributors who sell their products. Now come the third concept, manager's job is to prepare and to free people performing, which in network marketing the people at the top work very hard to make the people at the bottom successful because that is where the money is.
Duplication is the key of business's success. The fourth key concept that a corporation should have a standard business process means that every person just have to follow the plan (duplication) to be successful in network marketing. Last, corporation viewed as human community match what network marketing does. Every team members encourage each other to success and support each other when things get discouraging. Peter Drucker's view sync with the network marketing which has grown over US$ 200 billions.
A good product combine with powerful e-commerce and dropshipping, either you prefer to sell it through network marketing or other type of direct selling, will become the new business model in this digital era.
About the author:
Hery Yang is business coach in his own company "Transformation Coach and Consulting". He like to observe all modern business in digital era which combine all the power of e-commerce, drop shipping, marketing type that he described above, like Jeunesse, Amazon, Alphabet, etc.