I echo Kiernan’s pessimism around Barnes and Noble successfully creating a third place for its customers. However, I do like your recommendation about trying to create experiences for the community because I do believe there exists a niche customer base that values and appreciate the ability to walk through a store and pick up a new book (like me). Two additional considerations: I would recommend that B&N consider reducing the size of their retail stores, which are currently averaging at 26,000 square feet. One of the reasons they’ve had to maintain such large spaces is to manage inventory, so I would love to see them better leverage technology to manage and predict what inventory they should hold. If B&N was able to engage in the discovery process of books, they could stock in-store inventory accordingly. Additionally, if B&N is able to identify their target base online, perhaps they could monitor social media to see what topics and books are trending for this population and then participate in the conversation by driving traffic to their physical stores with a promotional event.
Regarding Nook, I wonder if one of the reasons B&N couldn’t successfully capture market share was because producing and selling hardware didn’t align with their operating model. I think the problem with Nook as a product goes beyond its functionality and becoming “open” to the ecosystem. Fundamentally, B&N is not equipped to manufacture an electronic hardware device that requires continuous innovation. What can they do now from an internal organizational perspective to help salvage Nook so that they don’t lose their loyalists?
Do you believe Airbnb’s expansion into “Trips” will be successful? While it seems like a natural segue to veritcally integrate into the travel services industry, it’s important to remember that it does require a different operating model and set of operating experiences than Airbnb initially started with. As you mentioned, Airbnb began as an online marketplace for peer-to-peer rentals, which means they fundamentally started as a internet software company. Their competitive advantage was the network effect due to their first mover advantage in this sharing economy. But as they move into additional service offerings, I would be interested to see how labor staffing change with these Trips. My assumption would be that it requires additional headcount, driving away at the high margins of an internet software company. I wonder if there’s a way to continue to grow revenue and CLV without having to change its operational model. For instance, if Airbnb created another marketplace on its platform to allow “hosts” to serve as authentic local tour guides, this could represent another high margin business while enhancing the overall customer experience.
I completely agree that Netflix has remained agile and flexible to preempt and respond to technological changes. To your point on Netflix’s success with producing content in-house, that’s also another great example of how Netflix successfully leveraged technology to their advantage. Based on all the data they had been collecting on viewer preferences, they were able to predict receptivity and popularity of “House of Cards.” With data from 27 million subscribers in the US, Netflix knew a large population was interested in three things (Mr. Fincher’s work as a director, films that featured Kevin Spacey, and the British version of “House of Cards”) and found the intersecting point with “House of Cards.” It really is quite remarkable how Netflix has been able to collect such a large database of information on its subscribers and run enough predictive analytics to turn it into one of the most profitable TV shows.
One question I had for you was regarding the app customization. Do you mean customization around the UX/UI or the content? While users in general like personalization, I would argue that from a user experience perspective, having a standard work flow could actually work in Netflix’s favor in setting expectations. Netflix should continue to integrate technology into their culture so that they continuously improve their predictive algorithms for content recommendation.
While I agree that removing the middlemen like Uber from the equation would greatly improve Ford’s margins once they successfully launch a self-driving fleet, my concern (ignoring the network effect concerns) is around how they would manage the economics of replacing new cars. Today, individual drivers decide when they want to purchase a new car (despite Ford’s marketing efforts to convince drivers to purchase more frequently). When Ford is in control of that decision, will there be a conflict of interest to keep cars on the road as long as possible?
Your last paragraph around what the experience should be like once self-driving cars become reality poses a really interesting challenge. Personally, I’m skeptical than an existing auto-manufacturers like Ford can shift their business models away from selling cars to selling experiences. From an operational perspective, I would love to learn more about how they have internally changed their organizational structures to prioritize these new initiatives around IoT services. How can they balance these long-term initiatives while still being sustainable in the short term? It requires fundamentally different core competencies, and if Ford wants to do both (manage their own fleet and the experience), perhaps the easiest answer is to enter the space via acquisition.
I agree, Coke has done a great job in trying to reduce their carbon footprint and promote sustainability. In a recent Forbes article called “Coke’s Planet-Friendly Vending Machines,” it stated that by Coca-Cola replace HFC coolers and vending machines with environmentally friendly refrigerants, 120,000 machines were able to reduce 630k tons of carbon dioxide emission over 10 years. While it probably cost Coca-Cola a substantial investment to commit to using cold-drink equipment that are HFC-free, I’m glad to see they are walking the talk for their commitment to environmental sustainability policies.
However, I would caution against Coke becoming more vertically integrated because it comes with a lot of inherent financial and operating risks. Perhaps they could become more disciplined with their supplier and vendor selection process because at the end of the day, Coke is still a business and vertically integrating would drastically change their operating model and margin structure, which may or may not be profitable.
(P.S. Love your post’s title!)
This is absolutely fascinating! I never thought about the environmental implications of increasing demand for data (beyond the additional electricity consumed to continuously power all of our gadgets). You raised a really good point around Google indirectly financing clean energy projects by committing to a long-term purchasing contract. I would like to see more companies, not just in tech, follow suit because it positions large companies who have sufficient capital to be the leaders of change and promoting a virtuous cycle of sustainability.
Given Google’s influential role in so many aspects of our lives, I wonder if Google has a corporate responsibility to work with the government to help implement their findings into industries. If DeepMind AI can reduce energy consumption by 40% in data centers, should the government get involved in regulating usage of AI or leave it to free markets to decide?
One thing your post made me think about is whether or not for-profit companies like Google can really say they’re prioritizing environmental sustainability. If we look at Google / Alphabet’s initiatives outside of just improving data center energy consumption, they clearly have a lot of projects, such as self-driving cars and electric planes, that are promoting environmental sustainability in the long-term. However, do you think they are working on these projects because Alphabet truly believes that these technological innovations will help reduce long-term human impact on the earth or is it just a way for them to generate revenue? Wouldn’t it make more sense if they collaborated with competitors and organizations instead of competed to be first-to-market?
I love this idea of racing to the top! It’s also pretty incredible to think about how much clean water is used by the food and beverage industry if a 25.8% reduction in water use per unit of production generated $19M in savings. With this commitment to reducing GHG emission and water waste, I’m curious to know how Pepsico is identifying and sourcing these improved technologies or solutions. If they are conducting R&D in-house, is there a way they could share these innovations with other companies without losing the competitive advantage of being both cost-efficient and developing goodwill with consumers?
One thing I’m curious about is if, and how, Pepsico is working with regulators to minimize the impact of environmentally-driven policies. For instance, last year, San Francisco banned the sale of plastic water bottles on government property. Has this policy noticeably impacted sales (as the manufacturer of Aquafina)? If not, is Pepsico adapting their operating model to pre-empt future regulations that could threaten their business model?
I think it’s great how H&M has been proactive about internally reducing energy and emissions. However, I wonder if that’s enough. Two areas I would love to learn more about is how H&M can help sustainability efforts more broadly and engage the end consumer in becoming more environmentally-conscious. You highlighted how susceptible H&M is to the price fluctuations of raw materials such as cotton increasing by 150%, but is H&M doing anything to work with its suppliers to help minimize future volatility? According to H&M’s Conscious Actions Sustainability Report, 74% of GHGs are produced after H&M sells it to the end consumer. How can H&M influence consumer behavior to help reduce the impact once their products leave the stores (e.g., encourage consumers to use less water when they wash, reuse and recycle clothes)? A key consideration with trying to influence consumer behavior is that it could end up reduce their overall spend at H&M if they reuse / wear clothes longer. How can H&M align their climate smart values with their fundamental business model?
I found Levis’ strategy of engaging their end-consumers’ to help them reduce water usage was really creative and leveraging one of their core competencies – marketing. This helps define their brand as environmentally friendly and empowers consumers to feel like they are doing their part, while not impacting their existing operating or business model. By asking consumers to be more mindful when washing their jeans, Levis accrues no additional cost besides the initial market. But I agree, I don’t believe that alone is enough, making both production innovation and enforcing sustainability standards on suppliers will be key. However, I wonder if product innovation with recyclable materials would have an impact on their operating model. Would Levis have to develop a new R&D team? Or would Levis become dependent and rely on external partners for expertise?
I am glad to see that Mars’ has established a three-fold strategy to become more sustainable, especially as they work with other stakeholders, like the government, to research and leverage technology to optimize production yields. The direct reduction of their carbon footprint is a highly visible sustainability effort that benefits the broader ecosystem.
I would be curious to know if Mars’ initiatives to develop more resilient cocoa strains as a competitive advantage means that they will vertically integrate upstream to be able to exclusively capture the production and cost benefits. If they are just introducing new strains to suppliers, the suppliers could use the new cocoa plants for other customers as well. Obviously, this would benefit the planet the most if production yields increased across the board, but it would not be consistent with Mars’ business model of creating a competitive advantage based on minimizing input costs. Additionally, I am concerned with the potential option/suggestion to use data to identify more ideal climates for cocoa sourcing. This would not actually help reduce the impact of climate change but simply just help Mars’ derisk their supply chain. Their operating model would only be aligned with their business model of maximizing revenue, rather than in combination with their sustainability goals.