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The Integrated Service Pivot – beyond the bottom line.

Posted by Flux on 

5 November 2019

What’s trending now?
The Integrated Service Pivot.

Companies are reassessing their business models. Again. Technological disruption has forced many companies to change their business models, and sometimes the pivot has been into the most unexpected areas. For example, Fuji Film pivoted into cosmetics.

While a technologically induced pivot has almost become the norm, there’s a new undercurrent forcing companies into a different kind of pivot, one that at face value, does not make business sense. These new, service-orientated pivots splinter core business models and in some cases, appear to cannibalise the business model itself.

Take the clothing brands now signing up with Rent-the-Runway . These brands have acknowledged that the concept of “transient ownership” (that you don’t necessarily have to own something in order to use or experience it) is growing in popularity exponentially. Rent-the-Runway, established 10 years ago, now has a database of 10 million customers, all of whom are happy to rent items of clothing instead of owning them. The retail brands, like automotive brands, are now taking the sharing economy seriously, and have reconciled themselves with the mantra, “If you can’t beat them, join them”, and have opted to allow their stock to be rented, as well as sold. Five years ago, it would have been unheard of for a retailer to even consider renting out its inventory.

In the same vein, companies in the rapidly-evolving digital mobility space (which includes ride sharing companies like Uber and urban navigation services like Citymapper) are re-thinking their business models. Instead of focusing solely on the bottom line, they are viewing mobility holistically, and putting the needs of the commuter first.

In a remarkable pivot, Uber is planning to reposition itself as a one-stop shop for all modes of transport. It will incorporate public transport systems into its app, including bus and rail routes, schedules and ticket purchasing. This will allow customers to get from A to B by whatever means necessary, even if it means not using Uber services for part of the journey. Providing a customer with the most efficient commute, while seemingly upending its own business model, can be viewed as a new form of purpose-driven business.

Why it’s important
For some time now, Flux has been tracking not only the rise of Morality Marketing, but also the evolution of purpose-driven business models. In both cases, focusing on enhancing customer loyalty and brand reputation, rather than simply keeping shareholders happy, is the preferred goal. The bottom line is still important, but it is a very different means of growing that bottom line, one that resonates with consumers seeking a transformative relationship with a brand, rather than just a transactional one.

What’s the butterfly effect?
Much like the growing realisation in corporate business structures that rigid silos are not conducive to innovation and agility, so too are companies realising that they need to explore the entire sector they operate in (viewed holistically through their customers’ eyes), rather than just one aspect of it. It boils down to solving a problem and providing solutions, as opposed to simply selling a product.

While this could result in a fragmentation of services (which is expensive and usually resource draining) the eventual outcome is entrenched brand loyalty and trust in the service provider. It’s a matter of long-term goals versus short-term gains, and a healthy bottom line at the end of the day.

The pioneers
“Newer-kids-on-the block” companies like Uber, Airbnb and TripAdvisor are taking the lead in the provision of holistic services in their fields, leaving the traditional players scrambling to keep up. Airbnb quickly pivoted from a new type of hospitality offering to a broader travel service which not only provides local experiences (food, art, architecture) but also more niche offerings for the luxury and business travellers. The company’s recent acquisition of the Hotel Tonight booking platform is an indication that it has set its sights beyond disrupting the traditional hospitality industry. It now plans to control more parts of it, providing customers with the best of both worlds.

The global hot spots?
It depends on the service offering. In the urban mobility space, the traction will take place in cities where the integration of a good public transport system can be married seamlessly with digital mobility services. The same goes for eCommerce, on-demand services. The more services that can be integrated for the customer, the better. In the hospitality industry, the world is your oyster.

By Dion Chang

About Dion

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Image credit: Goh Rhy Yan

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