Brian Huang

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Find the Next Wave to Ride On −New Business Strategies in the Changing World

1. The business environment today：

With the improvement of technology and resultant shrinking of the world, people nowadays are working at an ever more hectic pace. Because of this tidal wave of change that has came upon the world in a few short decades, businesses now must be quick in finding new strategies to ensure their continued survival.

Being fleet of foot is crucial to the survival of many if not all companies, this is because in the world that we live in, “Time is money”: every second wasted might be a million dollars gone. That actually is actually the result of customer demands. Here, by 'customers' I don’t just mean the general public, instead what I am referring to are the trade agent. Take this example, if, for the same price and the same quality, company A says that it would get the mission done in one week and company B in ten days, which would you think the agent should go to? In think the answer is a definite company A. The demand for quick results obviously would make employers put more stress on the employees.

Nobody can survive under immense pressure before cracking at some point. Therefore, when people get off work, what they might prefer would be just to sit down and relax. Of course, there aren’t so many work maniacs, who like working day and night. Generally people still need the time and space to stretch their legs? a bit. At times such as these, interesting things will definitely have the best chance to get into the brain of those who had already had a whole day of boredom.

2. Key factor 1: Innovation：

Thus, “innovation” is a key to success in any cooperation, business or individual. Yes, it is an old concept, and dates back to at least 1934 when Joseph Schumpeter defined economic innovation, but it is nonetheless still useful in our current day. Innovative ideas quickly capture the mind of people and therefore have the potential to create great business. Take this for example: [1] In the Kayabukiya tavern in Tokyo, for two hours each day, monkeys are on show! Here they bring people beer, hot towels, ash trays and even take money and deliver change. And business is 'going bananas': “Because of my monkeys we get all kinds of customers” says the tavern’s owner. “We’re not affected by the economic downturn.” Thanks to [2] You-Tube, people from all over the world are popping in just to check it out, something they might never see back home.

3. Key factor 2: Transmission：

In the above, there is another thing that might be a key success factor in the current world, and that is “YouTube”. In today’s world, the internet has become such a must have that more and more people rely solely on the internet to gather information. You Tube, being the largest video sharing site on the planet obviously could become a “customer friendly” advertisement provider. Here is one company that obviously has already caught on and harnessed the power of it: Blendtec, and its [3] “Will it Blend?” video series. By chucking everything from hamburgers to iPhones into the blender and blending them up, online sales of Blendtec

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Brian Huang

Global Initiatives Symposium in Taiwan 2009

Brian Huang

blenders have increased five-fold over the company's old record revenue prior to the videos. [4] Here is direct proof of the power of the combination “innovation” and “You Tube”. This doesn’t mean that companies or businesses must use You Tube to boost their sales: rather; a business should know how to let information get out and about. Most businesses already know that of course, that it why we have so many “unwanted” ads, internet pop ups, and spam. Now, this is where the problem arises. Generally, people don’t really “like” boring ads whatever shape ads are in. So the crucial thing of course is to find a way to “let information get out and about in a way that will be applauded by the public” leaving good impressions on the potential customers, so that someday the act of purchasing will happen. We could see clearly that Blendtec has done such that. By dropping all kinds of stuff into a seemingly boring blender, Blendtec not only increases its own popularity level but also sends an important message to the customers: If even this, say, an iPhone which everyone knows to be made of all kinds of tough metals, could be ground and reduced to iPowder, could there be any difficulty in grinding up any fruit? Let’s now consider what would happen if Blendtec merely took a banana or a mango and mashed it up in the blender. It is without a doubt that “any” blender would be able to give the same result of mashing up the fruit. Then there would be nothing to make Blendtec stand out amongst all the blending companies out there.

4. Key factor3: Uniqueness：

“Uniqueness” is also a great success factor. As we have just seen with Blendtec. Here I want to jump back a bit to the Kayabukiya tavern because this uniqueness factor was also employed by the tavern’s owner. The fact that “one can’t find monkeys serving in restaurants elsewhere in the entire globe” quite evidently makes it stand out from other taverns. Apple, and its iPod plus iTunes strategy is also a good demonstration. Before the year 1998, the situation of Apple had been going downhill for quite a while and it looked like that Apple was

doomed. Here are some quotes： The Economist, 23rd February, 1995： “Apple could hang

on for years, gamely trying to slow the decline, but few expect it to make such a mistake. Instead it seems to have two options. The first is to break itself up, selling the hardware side.

The second is to sell the company outright.” Fortune, 19th February 1996：“Apple’s erratic

performance has given it the reputation on Wall Street of a stock a long-term investor would probably avoid.” However, in 2003, when Apple added Windows compatibility to the iPod, its sales saw an immediate upswing. How did this come into being? Beside the reason that adding Windows compatibility widened the customer range to non-Mac users, what really made the iPod a smash success is that it “scores on looks, clean design, and ease of use”, which makes it unique from other mp3 players. In Q1 of 2005, the iPod sold about twice as much as Q4 of 2004, and Apple’s sales skyrocketed, achieving a 68% growth.

Financial period Net sales (Mil USD) Net profits (Mil USD) Revenue growth Return on sales

FY 1999 6,134 601 3% 10%

FY 2000 7,983 786 30% 10%

FY 2001 5,363 -25 -33% 0%

FY 2002 5,247 65 -2% 1%

FY 2003 6,207 57 18% 1%

FY 2004 8,279 266 33% 3%

FY 2005 13,931 1,328 68% 10%

FY 2006 19,315 1,989 39% 10%

FY 2007 24,006 3,496 24% 15%

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Find the Next Wave to Ride On - New Business Strategies in the Changing World

Q1 2008 9,608 1,581 35% 16%

Q2 2008 7,512 1,045 43% 14%

Q3 2008 7,464 1,072 38% 14%

FY 2008 YTD 24,584 3,698 40% 15%

5. Business fundamentals: pricing and quality：

In the paragraphs above, the main focus has been on more “additional options”, which are based on the assumption that the companies or businesses are competing on the same cost and quality. Here, since this is not the main emphasis, we will discuss only briefly the two greatest fundamentals—price and quality. These two topics are somewhat in contradiction to each other. This is quite easy to understand because generally speaking, the determination of price comes from the production cost, and usually the higher the quality, the more the cost. So, if we exclude those businesses that must set either as the top priority, such as an airline having to put the quality “safety” as top priority. The problem facing now is balancing the two contradicting topics. The large retail discount store Wal-Mart is setting a good example. Compared to any other retail shop, Wal-Mart has cut prices by 15% for the same product. [5] Wal-Mart’s core value is “delivering low prices”. This is the Wal-Mart effect: “Whatever Wal-Mart is charging, it's a safe bet it’s the best price you can find.” Target, another retail store chain, is also giving quite a bargain: “Spend $125, save 15%”, but in contrast to Wal-Mart, it puts a bit more emphasis on style. This is giving it an advantage over Wal-Mart on the fundamental “quality”. Numbers show that in 1999, Wal-Mart rose by 8%, in 2001, 6%, since then, 5%(2002), 4%(2003), and 3.3%(2004) whilst Target was up 5.3% in 2004 and 6.5% in 2005, more than twice that of Wal-Mart! [6] Apple, on the other hand, is at the other end of the scale. It focuses almost absolutely on the quality side and its business has skyrocketed with the release of the iPod plus iTunes. Apple’s iPod’s sales since its release have been constantly on the rise: 8.183 million in 2004, 31.960 million in 2005, 46.432 million in 2006, and 52.685 million in 2007.

6. Implementation of Key factors：

Theory is always easier to understand in economics than the messy reality; so the real problem is how to make theory into reality. Therefore I will next focus on some ways of how I think theory could be made into reality.

A company/business could form a small group called the “innovation group”, whose main focus is to virtually “do almost nothing but think” Do the so called “blue sky research”. [7] That is because creativity, which is the root of innovation, could be jammed by doing too much routine work. [8] This is something called “Habitual ossification”. When an individual starts focusing too much on a subject, it gets more and more difficult for him/her to think outside of the circle. As for the other employees, although their minds may be a little blunter, there is still the chance that they may come up with some great ideas. So I suggest employers open an “innovation box” E-mail account, where names aren’t required so any employee could feel free to put forward their ideas.

After the “innovation group” has come up with ideas, the next natural step is conduct surveys, give out free samples or create focus groups to observe public reactions. If the surveys, public

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Global Initiatives Symposium in Taiwan 2009

Brian Huang

reactions, focus groups, or taste tests are obvious that the products and services would definitely be profitable, then don’t hesitate to release them.

7. Be fast responding：

Last is the company’s sensitivity to change in response to public reaction. This is of extreme importance since the human mind is at times weirder than can be conceptualized by any economical theory. Sometimes, even the surveys produce faulty results. Here is an example: [9] The great failure of the biggest soft drink company—Coca Cola and its “New Coke” which was later renamed Coke II. When Coca Cola first introduced New Coke after doing taste tests, focus groups, and surveys, Coke’s sales were up by 8% over the same period the year before. However, after merely 77 days, the company was forced to restore the original version of Coke to the shelves mostly just because the original buyers were so emotionally connected with the old flavor! If Coca Cola hadn't been quick to react, that might have been catastrophic. Numbers show that New Coke's sales dwindled to a three percent share of the market by the end of the year.

8. Conclusion：

The most important of all for a business to survive and make a profit is having a well-balanced price-quality. That is the “root” of a business. If this balance were to tip over, then it is obvious that the company wouldn’t be expected to survive much longer. Then for a business to prosper, what needs to be added are the “branches and the leaves”. This is where “Innovation”, “Uniqueness”, and “Transmission” come in. If implemented appropriately, it is without a doubt that the business would survive despite the tidal wave of changes.

Citations:[1] CNN news of the absurd episode 79 http://rss.cnn.com/~r/services/podcasting/absurd/rss/~3/A1ag4CvmVQ0/nota.episode.79.cnn.m4v

[2] Monkey Business http://www.youtube.com/watch?v=KeSQ5Rv7eH8[3] Will it blend series http://www.youtube.com/view_play_list?p=FA54A462FFAFAAB0&playnext=1&v=MC8Zvl-8ziA[4] http://www.informationweek.com/news/internet/showArticle.jhtml?articleID=202102372[5] Wal-Mart http://en.wikipedia.org/wiki/Wal_Mart[6] iPod Sales http://www.systemshootouts.org/ipod_sales.html[7] Unleashing the Inner Innovator http://www.sshapiro.com/pdfs/inner.pdf[8] Age and creativity http://creatingminds.org/articles/age.htm[9]New Coke http://en.wikipedia.org/wiki/New_coke

References:

1. Schumpeter, Joseph (1934) “The Theory of Economic Development” Harvard

University Press, Boston. 2. A.Aaker, David (1992) “Developing business strategies” John Wiley& Sons, Inc.

3. Prendergast, Mark (2000) “For God, Country and Coca-Cola: The Definitive

History of the Great American Soft Drink and the Company that Makes It” Basic books, USA

4. Brunn, Stanley D. (2006) “Wal-Mart world: the world's biggest corporation in the

global economy” Routledge, New York

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Find the Next Wave to Ride On - New Business Strategies in the Changing World

5. Fishman, Charles,(2006) “The Wal-Mart effect: How the world's most powerful

company really works-- and how it's transforming” The Penguin Press, New York

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Global Initiatives Symposium in Taiwan 2009

Brian Huang