Thank you for your post. I definitely agree with your point about the human capital issue. That said, several legislators are currently on the brink of rethinking their framework to actually “fit” the wider “uberization” wave we’re seeing (deliveries, private hires,…). For example, in France, Uber gained back the right to operate, on the ground that a specific labor regime “micro entrepreneurship” allows individuals to launch their own independent activity on a craftsmanship-like status. The same alternatives occurred in most of the very protective Western Europe, while Uber keeps expanding worldwide. My guess is Uber may have to adapt its model, but I don’t think it will have to drastically change it. Eventually, Uber is only a “matchmaker” between informed and willing parties ( a car owner and a passenger).
Curious to see how things will go!
Thank you for your enthusiast and enlightening note!
I wanted to bouce back on your post regarding Disney’s value proposition to “create happiness through magical experiences”. I can really and understand how this comes true in theme parks. I however wanted to go further: how do these 30% of revenues relate to the 70% remaining stakes? How do other Disney businesses (TV, movies,…) do related to the theme parks and contribute in looping a higher value creation? Besides, it seems that parks are not the main contributors of economic performance within the group, as revenue contribution is 1/3 lower than profit contribution. These figures raise the issue of how to relate a strong operating model, with a strong(er?) business model.
Thanks again for the post and comments! I learnt a lot!
Great Comments. I wanted to get back to you on membership, and on how this constitues a sustainable competitive advantage.
Costco’s membership provides a strong sense of community (as it allows customers to access Costco). I am not so sure membership at Amazon, or Walmart does the same. As such, the Membership remains to me not only a key asset to leverage on lower costs and higher customer value proposition, but also on a genuine customer community that may be leveraged online, in due time.
Another issue lies in ecommerce. Given the high cost of transportation (24% of item costs) and issues on fresh items, it is extremely hard (not to say impossible) to offer sustainably low prices on shipped fresh products, which protects Costco against a rival ecommerce rival on price, while also being promising should Costco opt for an Omnichannel strategy.
Finally, a main operating asset of Costco is its employees, its frontline employees. Neither Walmart not Amazon have invested as much on their frontline teams. Solid employee basis is another sustainable competitive advantage in retail, as empowered and involved employees actually steer and evolve the operating model of the firm toward customer needs.
Hi! Great post, very instructive, especially for the Leanatic that I am. I didn’t know Inditex had pushed the logic so far as to be so flexible. Your post has raised my curiosity further about the business model, in relation to the operating model.
Building such a state-of-the-art operating model is probably costly. How does Inditex afford such costs? Premium margins? Which in turns raises my question on how Inditex drives these high margins ==> Higher selling prices. How does Inditex propose a high enough customer value proposition besides fashionable items? How does it differenciate from peers (H&M, Gap, Primark…)? How does it create brand awareness?
Many thanks for the post, it really enlightened the operating model of Inditex!
Great note. I was really interested to read more about Ritz Carlton and learn about their models. Besides Mark’s points, I also wanted to understand more about the data usage. In the luxury field, players have been very careful about data – Cartier has refused to use big data to its clients – and I am curious to know how, besides room bookings and restaurations, Ritz Carlton has actually been using data. How also, has been customers’ reaction. Data privacy is a key concern.
Another question was more about the business model compared to peers: how does Ritz Carlton creates value? How does it translate into financial returns which in turn feed the model? What is Ritz Carlton’s distinctive advantage?
Great note and highlight on Ikea’s operating & business models! That is very telling. My question was about subproduction. It seems IKEA outsources part of its manufacturing to Chinese and Indian manufacturers for cost logics. How do you think Ikea can keep an edge, as it is being copied by some of its Chinese sub contractors?
Another question I have is about IKEA’s terrible customer service. Do you think that a wrong customer service may hamper Ikea’s s sales on the long run? Isn’t it part of the business model?
Thanks again for you note, really interesting!
Great note! Your document is articulated, to the point, and provides a rationale as to Hermes’ success. I am curious however, to understand more about innovation management at Hermes. The firm’s incredible success has stemmed, it seems from exponential international expansion. I am curious to know the number of customers Hermes attracts, and how it keeps growing / changing its SKUs (ties for instance have seen repeated decline sales over the past years….what’s the alternative?). I for example think of the brand Hermes created in China that seems to require some time to ramp up to expectations. Can Hermes’ DNA be replicated?
Another aspect I would be interested in is how Hermes fits its family ownership model, with its list company status and how this affects Hermes business model.
I was opened to these points as I did find your note to the point and extremely clear as to how Hermes generates value and how it has aligned its business and operating models. Bravo!