New economy needs new strategy

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.