New economy needs new strategy

By Hermawan Kartajaya

JAKARTA (JP): The Internet has given rise to a new economy in mid-1990s which has since changed the nature of companies.

The way people run a company and deliver values to customers has changed. It demands a reinvention of strategy and the building of a sustainable value to ensure survival.

To be successful you have to digitalize your network, globalize your market and futurize your business. To digitalize your network you must efficiently use and build strong networking.

Networking is a process of "hubbing" and "webbing". Hubbing is when a number of companies or individuals interact with one another to form a hub. If this hub -- of course along with all the cluster of individuals or companies in it -- interacts with other hubs, we shall have webbing.

Hubbing and webbing must be implemented at an intra, extra or intercompany level. At an intracompany level, the process of hubbing and webbing will take place in a company through what is called an enterprise infostructure (ERP:enterprise resource planning, for example) which will enable all activities within the company to integrate.

At an extracompany level, hubbing and webbing will take place in relation to companies within a value network (customers, suppliers and partners) at both the supply side and demand network side. Through hubbing and webbing, the boundaries of a company will disappear and what we will have is the establishment of what is known as a "virtual organization" like those in Dell or Cisco.

At an intercompany level, the company will conduct hubbing and webbing with many other companies to form a "value cluster". In this value cluster, companies will interact with one another to carry out a value-creating activity virtually and in an "I-way" manner.

Globalizing your market means first and foremost you must undertake "-ING the market", namely making active the interaction with the market. In addition, you must also have a global orientation. This does not mean that you must expand into the offshore market. More fundamentally, you must have a global orientation in viewing commercial, competency and capital markets.

In determining your market, for example, you must not confine yourself to the domestic market, let alone beg for protection from the government.

Likewise, when you are recruiting employees or choosing shareholders, you cannot confine yourself to only domestic employees and shareholders. You must choose the best and world- class employees and shareholders, no matter where they are from.

What will be the consequence of considering not only the domestic market but also the global market as your potential market?

Of course, you must put yourself in the rank of the world's best practice; and this means that you must possess world-class quality and performance.

Finally, futurize your business. This means you must do two things. First, you must use the information technology to turn noise into data; data into information, information into knowledge, and finally, knowledge into wisdom. (Pine and Gilmore, 1999).

The better we are able to move toward wisdom, the more we can have value creation and this will generate rewards for the company. On the other hand, the closer we move toward noise, the more we practice value destruction and this will be a risk to the company.

Second, you must shift your business from only a commodity business to a product business; a product business to a service business; a service business to an experience business and finally you must move from an experience business to a transformation business.

The closer we move toward the transformation business, the more we practice customization. On the other hand, the more we move toward the commodity business, the more we practice commoditization.

The two efforts above are very closely linked because the first effort is the basic requirement and before the second effort can be made.

This means that to shift your business from only a business of commodities to one of products, you must be able to turn noise into data. To shift further from products to services you must be able to change data into information, and to move from the business of services to the business of experience you must be able to turn information into knowledge.

Eventually, to be able to move your business experience to the business of transformation -- as the main mission of your business is to transform customers -- you must be able to turn knowledge into wisdom.

What will be the effect of digitalization, globalization and futurization on the Nine Core Elements (as is known, the Nine Core Elements constitute the essence of my model of a Sustainable Marketing Enterprise)?

This effect can be summed up in a strategic triangle diagram as seen in the picture. As you know, the Nine Core Elements are divided into three parts, namely Strategy (segmentation, targeting, positioning); Tactic (differentiation, marketing mix, and selling); and Value (brand, process service).

Strategy is implemented to secure the mind-share, Tactic the market-share and Value the heart-share.

As for Tactic, you must begin to rely on "emotional" differentiation and individualized marketing mix-selling.

In the present era of experience economy, your differentiation must rely more on the emotional value rather than the functional value.

Remember the formula for a value: "total get" divided by "total give". "Total get" encompasses two components, namely functional benefit (Fb) and emotional benefit (Eb) while "total give" also encompasses two components, namely price (P) and other expenses (Oe). Emotional differentiation demands that you rely more on Eb rather than Fb in rendering a value proposition to customers.

And finally, as for Value, you must be able to build a "living" brand and an interactive service-process.

A living brand is a term for a brand capable of communicating and establishing a relationship with customers on a two-way basis so that the brand seems to be alive.

This living brand can be built only if the service you provide and the process you carry out are capable of building interactivity with customers.

A living brand has become highly essential today as the progress in information technology networking has enabled interactivity between a company and customers to run very well and it has now, therefore, become an increasingly more important basis for the competitive edge of a company.

The writer is a marketing expert.