By Jeff Booth
Co-founder and CEO of BuildDirect
If we needed another example of how the old business models are failing, Aeropostale recently. They announced the closing of almost 200 stores in North America, part of a trend leaving empty big-box buildings and broken communities in its wake.
Meanwhile, Uber, a vanguard of the new sharing economy, recently revealed that they’re making it easier for third-party developers to build apps for their fast-growing car-calling service. They’re using data to restore power and choice to their stakeholders, in the process turning customers into marketers and suppliers into vital yet virtual cogs in their platform.
Here’s a quick look at how today’s companies are using data to get smarter, cut out the middle man and empower their stakeholders — all while earning unicorn-size valuations.
Crowdsourcing decisions: Leveraging customer data
Real-time landing page click data, peer reviews and other metrics are helping companies become far better decision-makers than any individual CEO could ever be.
Among the best-known examples of companies putting data to work is Apple’s iTunes platform. It doesn’t just show you products in the same category as others you’ve bought but offers intelligent suggestions for all kinds of content—music, movies and more—based on users who fit your profile. Closer to home, my company has incorporated the same technologies and applied them to much bigger and bulkier stuff: home improvement supplies. By tracking what people are clicking and what they’re putting in their cart, we can offer more intelligent buying advice.
Customers aren’t just telling you their preferences over ever-more sophisticated online platforms, they’re telling you what metrics are important to them. Listen to what the data is telling you and make the big plays (without taking a big risk) to make a big profit.
Ditching the middleman
Create a platform where you can take out the middleman. That’s exactly what Uber has done. Without owning a single taxi, they’ve become the world’s biggest cab company. Uber restored power and choice to the consumer.
Armed with new technology and better access to data, we can now hail rides directly from drivers, without having to be routed through the pinch point of traditional cab companies. But in contrast to old-school business models, Uber didn’t monopolize power as much as share it: minimizing their own role and relying on scale, rather than scarcity, to profit.
With this customer-centric model, companies are able to offer better pricing, convenience and selection than anyone else, without even dealing with physical inventory. When the customers win, you win.
Sharing data with suppliers
The unsung heroes in the business world are always the suppliers: the manufacturers and service providers who labor behind-the-scenes to actually make and deliver what consumers use.
Sharing data with suppliers is an easy win-win and all too often it’s overlooked. In Airbnb’s case, for instance, all hosts get access to a dashboard full of detailed information on how often their property is being clicked on and what prices are likely to yield the most bookings at specific times of year.
We’ve seen success with this, too. In the past we had collected detailed data from our website filtered through it ourselves and put in orders with suppliers based on what we thought we’d need in our warehouses . Not only was this labor-intensive, it was also an inexact science. So we decided to give our suppliers around the world a direct pipeline into this data — and allow them to use it to inform their production timeline. After we got out of the way, and connected suppliers directly with consumers, everyone benefitted.
Honoring their platform
Once you’re dominating the market with your online platform, it can be tempting to put the squeeze on customers and suppliers. But that strategy can be counter-productive.
Even the biggest heroes of the sharing economy can give in to this urge. For all its merits, Uber, for example, is taking progressively higher cuts from its drivers and the grumbling has already started. A new consortium of competitors are already swooping in to lure away frustrated drivers.
Ultimately, harnessing data effectively is about sharing information, not just collecting it, and using that insight to benefit customers and suppliers, not just your own bottom line. Companies that get that balance right may well own the future.