The big impact of pandemics is that they accelerate trends that are already underway. This was the message from Jay Samit in conversation last week with Kieren O’Connor and Costa Koizi of Growth Stream.
The job of business owners, he says, is to find problems that need solving in a way that no-one else solves them.
Jay has a reputation for thinking differently and a track record of success – mostly – in the businesses he set up and those he ran for others. He picks stories carefully to illustrate his ideas.
7 billion customers
The most exciting – or chilling – idea that he shared with us was: “With a phone, you are one click away from seven billion customers.”
Jay argues that if you solve a problem for five people, you make friends. If you solve a problem for a million people, you have a business. If you solve a problem for a billion people, you change the world.
While this may sound offhand, Jay’s point is about the advantages of scale. The ability to scale is why software businesses control so much of what we do today.
Being the first mover is not an advantage, Jay says. At Apple, Steve Jobs failed with personal computers. The opportunity that he saw was to make a better MP3 player.
While he had the best produce, his challenge was that the consumer electronics market was dominated by Sony. It responded in two ways. First, it tried to compete with the iPod by putting more money behind its mini-disc product. Second, it used its market power to pressure retailers into not stocking the iPod.
The market-leading retailer, Best Buy, complied because Sony accounted for 50 per cent of its sales. Jobs responded by investing in Apple Stores, which turned into another competitive advantage.
So what about the current demand for delivered groceries? Will it save local shops? Unlikely is Jay’s answer.
He tells a story about a start-up that developed robots which could pick weeds out of a crop field, eliminating the need for pesticides. Farmers looked at the idea and liked it. They looked at the price and said it was too expensive.
The start-up re-engineered their business so the price was the same as the price of using pesticides. But the farmers were hurting financially. They did not want to take the risk.
The start-up went back to their drawing board and worked out that people who wanted to eat food that was made without the use of pesticides were prepared to pay much more. So they changed their business model and said to the farmers: if you take our robots for free, we will pay you 60 per cent more for your crop. The farmers signed up.
Who captures the value?
You always have competition, says Jay. The first person that you educate when you do something new is your competition.
There are value creation and value capture. How do you protect and develop the value that you are creating?
Home delivery will be done by drones soon, he says. They will replace all the local delivery. It is Netflix versus Blockbuster. You have to look a little further out.
Get in touch if you want to review your strategic options.