Friday, March 8, 2019

7 Lessons From Airbnb and Uber On Customer Values

airbnb-customer-valuesContrary to popular myth, to be a disruptive new businesses, you don’t always need an innovative new technology to win. Many notable recent successes, including Airbnb and Uber, have done it by finding disruptive customers, with essentially no new technology. They seek customers willing to decouple from accepted buying models, or are actively looking for a better total experience.

These customers, and they are becoming the norm these days, are ones actively looking for new ways to discover, buy, or use a product they need, and won’t hesitate to break the single-source company link between these activities. They have no problem shopping in retail to see and test items, yet order online for a better price, and jump to another company for add-ons or support.

As a new business, you need to intimately understand today’s customer value chain, to allow you to peel away a piece for your business from the Hiltons, Yellow Cabs, and the General Motors of the world. I found some real guidance on this challenge in a new book, “Unlocking the Customer Value Chain,” by Thales S. Teixeira, based on his recent Harvard Business School research.

From his work with many new companies that have made it big, even without disruptive new technologies, he offers the following seven lessons that I, as a long-time entrepreneur advisor, believe every new business founder should take to heart:

  1. Focus on acquiring an initial customer set in bulk. Acquiring users one by one takes too much cost and time. As a startup, you need to build a large customer base quickly, as Airbnb did with social media work around oversubscribed big-city conferences. Uber used promotion of major sports events and concerts, where masses of people sought rides.

  2. Hit competitors where they are vulnerable. Don’t put yourself in the crosshairs of established incumbents, or directly target their customers. Instead seek out customers they can’t or won’t serve. Uber and Airbnb managed to remain “under the radar” of the giants by snatching up excess demand until they had their own foothold in the market.

  3. Don’t be afraid to start with less-scalable tactics. To launch a disruptive business, focus on more people-intensive tactics that yield insight into customers and their needs, no matter how small the impact might be at first. Scale should only be a concern later in your company’s lifecycle. If you lack customers early on, you have nothing to scale.

    Large tech companies, like General Motors, tend to obsess over building only scalable strategies, like a dealer network. Their view is that if it doesn’t work for millions of customers, it is a poor investment. Tesla quickly built their base by eliminating dealers.

  4. Build your supplier base before early customers. Your initial customers are critically important, yet their relationship with you is extremely fragile. Without suppliers, the customers walk away. For two-sided marketplaces, focus on acquiring supply-side offerings, like Airbnb rooms, before going to the demand side (people needing rooms).

  5. Capitalize on offline and low-cost strategies. Tech startups tend to dismiss offline customer acquisition strategies, such as organizing events, creating on-the-ground operations, or incentivizing users to promote their services. Birchbox was able to make big money only after turning off television advertising and relying heavily on social media.

  6. Favor operations over technology to prove it works. For your disruptive business to succeed, it needs to work, plain and simple. Early on, you cannot expect technology to recognize problems and be flexible enough to quickly adapt as you learn.

    Uber thus went door-to-door to get its first drivers to sign up. Airbnb did the same for its renters, and convinced people to list their homes. Employees went out of their way to find a person to rent each home. Only later was technology used to accelerate the process.

  7. View your business only through customer’s eyes. As your new business is seeking customers, you have to maintain the customer’s point of view at all times, making operational adjustments quickly to lower customer effort, time, and monetary costs. This holds doubly true if you have an online marketplace, with disparate customer groups.

I’m convinced that finding disruptive customers and new business models is often more important to creating a new business than new technology. Thus it’s critical to target your customers well, understand how their value chain can be decoupled, and work to deliver unique value compared to competitors. In the end, it is your customer, not your company, who drives disruption.

Marty Zwilling

*** First published on on 02/22/2019 ***




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