It’s a dirty little secret that investors – and veteran entrepreneurs as well – look to build companies on the back of a business megatrend. This strategy is based on the truism that “a rising tide lifts all boats.”
But what is a business megatrend and how do you know you have found it? First of all it’s not a technology megatrend, like AI which plateaued for decades until finally the intersection of rising computer power and the dropping price of data acquisiton and storage enabled it to finally take off. Business megatrends affect customer buying behavior and supplier selling behavior. You don’t have to be a technologist to understand a business megaTrend. But if you are a technologist who ignores a business megatrend your venture is missing out on the opportunity to draft behind very powerful forces.
Self-service was the business megatrend of the last century. Whether it was ATMs or self-checkout at supermarkets, this megatrend caught on for the simple reason that it benefits both two sides of the business equation: supply and demand. From the suppliers’ viewpoint self-service cut costs. Why pay a teller when you could replace one with a machine that never took sick days or vacation days and didn’t mind standing in a cold vestibule or even outside! ATMs, like many tech advances, follow the hockey stick curve, very, very slow growth followed by an inflection point where they take off and become ubiquitous. From the demand side, otherwise known as the customer, self-service saved time, which has become the most valuable commodity of the past and this century. Why stand in line when you could just scan your items yourself at your super market and check out yourself? Fast and equally importantly, simple and easy. The key with megatrends is that they always have secondary characteristics that make them very attractive to one or both sides of the business equation.
While many businesses initially worried that self-checkout would result in customer theft what they found instead was that it cut down on employee theft (and errors).
So today we just take self-service for granted as it spreads from airline ticketing kiosks to smartphone payment systems. Fast, easy, simple for the customer; saves costs, collects data, and reduces losses for the business.
Personalization has superseded (NOT replaced) self-service as the megatrend for the 21st century. Burger King encapsulated this trend with the ad slogan “Have it your way!” The beauty of mass production for the supply side was economies of scale, from the supply chain to the manufacturing floor to the retail store. Mass production greatly benefited the supply side by cutting costs, helping to ensure quality and cutting down on returns and customer complaints. But the prmiary characteristic driving personalization is novelty. Customers seek novelty – they always have. Otherwise teenage men could have done just as well with just a single copy of Playboy rather than a subscription. “New” is probably the second most used and powerful sales term after “Free”. Trendsetters are on a constant prowl for what’s new. But what happens when the masses all discover what’s new? It’s no longer cool. Enter personalization. Amazon proved to be a master of self-service with it’s invention of the “one-click buy” – a business process it even succeeded in patenting. But Amazon soon discovered it could use it’s massive amounts of customer data to personalize the buying experience by providing recommendations for additional purchases – known as upselling- based on what the customer was buying. Real time personalization! While Spotify was a great success, where it has hit its inflection point has been its successful implementation of personal playlists for its customers. So just as fast and easy is the secret sauce of self-service, finding what’s new is the secret sauce of personalization. And what could be better than “what’s new FOR YOU?” Talk about reducing returns and customer complaints, personalization greatly benefits the supply side. With AI finally coming out of its doldrums, coupled with big data, businesses will be able to harness the power to personalize more and more of the customer experience, because it is based on the customer’s own behavioral data. Google now uses its knowledge of your prior searches to personalize your new searches. Soon AI-based systems will achieve the ultimate in personalization: they will know what you want before you do!
The bottom line
While there are many reasons for the amazing success of Amazon, you don’t have to look to far beyond the two megatrends of self-service and personalization, which Jeff Bezos harnessed so brilliantly to achieve his relentless focus on the customer.
So if you are doing a startup today, take a step back. Does your venture take advantage of the power of self-service by saving the customer valuable time? Is it simple, easy and quick to use? Does your product or service utilize customer data to personalize the product or service so each customer gets their personal and optimal buying experience?
What will be the next business megatrend?
It may well be the demise of cash and credit cards – supplanted by Bitcoin or its cousins. But while you may win big betting on the next megatrend will be, the safe and sound way to go is to capitalize on the proven megatrends of today and yesterday: self-service and personalization. There are still billion dollar businesses to be built on top of these two megatrends.