Do you have the right Business Strategy? Is it related to erecting a huge delivery systems? Or towards creating amazing content, unique products supplied by other channels?
FAANG companies got it right
Amazon is a Delivery business. The same are Google Search and Facebook. Mostly, they don’t have their own content, but they own strong pipe systems. The content is created by others, while these companies filter and deliver the right one for each customer. Their superpower is to curate products created by others. Call it “network effect” but in fact they are infrastructure monopolies.
Netflix is a Content business. It does have a pipe system, which is good, but the delivery part is a commodity. Their polished App is not going to protect Netflix against Disney. I am quite sure that Disney will also have a good delivery system. Both Netflix and Disney future will be linked to the quality of the product delivered by a commoditised pipe.
Apple and Microsoft own their products as well, protected by IPs and that’s their competitive advantage.
What about the traditional markets?
FMCG was generally a Content business, where the products were the key. Historically, the focus moved in time away from the product unicity. They lost the main reason that ensured the original company break-through, migrating to financial efficiency, a product design compromise.
There is just one efficient way to build a financially driven product, therefore all the products end up looking almost the same. They will be differentiated mostly through colours, names and Marketing placebos.
Eventually these companies start competing in delivery, which has short legs because they are not a distribution business. Coca Cola was the first to acknowledge that. They kept the brand and marketing asset (content), while the delivery was externalised to 3rd parties (the Bottlers).
Brick-and-mortar Retail is a Delivery business. Usually one company does not dominate the market and their offer is limited. Therefore, they did not reach the level of infrastructure monopolies and lacking scale, their pipe system became also a commodity.
To compete against each other, Retailers started in time to build their own products (private labels).
Business Strategy: Delivery or Content
Business Strategy: Delivery or Content.Bottom line.
The Business Strategy can be analysed in the Porter way. Content business should mostly focus on differentiation, specialisation. A Delivery business is mostly into low cost and scale. While there is no black and white, a company has to take one side.
- Apple is a great Content company, crafting amazing products. Owns some retail stores, but that’s a help, not the main reason people buy Apple products.
- Netflix has great shows, that’s why people pay the service. The App is great, and it helps, but the content is the one that attracts people.
- Amazon is a well-oiled supply chain machine. The website is fine, but the product range, their price and the delivery system are the one that makes people come back;
- Facebook and You Tube do not own the content they deliver. But the facilitation is good, each one finding through algorithms what people are searching for;
The issues appear when companies forget what they stand for. They get sucked in the vortex of financial efficiency. While enjoying higher profits in the first years, they lose the differentiation (in Content businesses) or do not upgrade or take care about their networks (in the Delivery businesses).
A blog that inspired this article: https://www.ben-evans.com/benedictevans/2019/7/31/Netflix?utm_source=Benedict%27s+Newsletter&utm_campaign=82fd79214f-Benedict%27s+Newsletter+300&utm_medium=email&utm_term=0_4999ca107f-82fd79214f-70413033&mc_cid=82fd79214f&mc_eid=7abef8df0b
Date: 8 Sept 2019
Blog Article: Business Strategy: Delivery or Content