Being an urban dweller for many years has brought its benefits. I am occasionally woken, however, around 4.30am by a milkman with customers nearby, followed by a newsagent, admittedly an hour or so later. During the day the neighbourhood resonates to the sound of Ocado, Tesco and Sainsbury’s vans scuttling around with deliveries late into the evening.
Some city dwellers are adopting new buying behaviours but many still do what they have always done. Newspaper boys date back to the 1830’s and milkmen to the 1860’s when the new railway network brought fresh milk direct from the farm. Loaded into churns, the milk was delivered from door to door on a three-wheeled milk pram. Astonishingly, today over 1.3m homes receive 500 million bottles of milk on their doorstep.
You’d think that the Swedish/Swiss company, Tetra Pak, would have cracked the UK milk market long ago. It is, after all, the world’s largest food packaging company operating in more than 170 countries with sales of €10.36 billion. There’s not much this company does not know about how to put products into cartons; it made 158 billion of them last year. And yet its CEO, Dennis Jönsson, is unable to persuade resistant British consumers to change from their predisposition to buying milk in pint-sized plastic bottles? He admits to having tried, but failed, to get them to switch to the smaller, continental-style cartons; describing it as the “impossible challenge”.
Persuading a customer to buy your product, “product adoption” or product diffusion as it is sometimes termed, could be considered the “impossible challenge” for many start-ups and SMEs wishing to grow. For start-ups, simply getting on the radar of the prospective customer is hard enough.
Businesses have grappled with similar organic growth strategies for one hundred years. Clearly we’re more sophisticated in our approach and have more tools at our disposal to help us innovate, analyse and assess options. But in essence there are still only products/services and customers, both of which are either existing or new. This neat 2 x 2 matrix may have subsets when customer segmentation and product extension are taken into account.
What has changed, however, are the tactics required to successfully deliver these organic growth strategies. With the advent of the internet and the convergence of multiple technologies in our Web 3.0 world, they’ve changed beyond all recognition.
One American purchasing study tracks the various forces that influence B2B buyer behaviour. The most recent study showed that buyers were no longer looking to their peers as the prime source of information in the procurement process. Now they turn to web sites first. This change is recorded as having happened in 2011; that’s last year!
It’s understanding this shift and responding effectively to it that has led a small electronics components distributor in the middle of America to become a global player. Digi-Key Corporation has been in existence for 40 years and for 30 of them played the role expected of a modest catalogue-based stockist. Today it is one of the fastest growing electronic distributors in the world; supplying 600,000 products from 470 manufacturers to 450,000 customers, from the unlikely location of Thief River Falls, Minnesota. The secret to its success, apart from the comprehensive product range (the world’s largest selection) and excellent customer service (99.9% same day shipment), is the significant investment made, over recent years, in ensuring they are visible on the internet to anyone who might wish to buy an electronic component.
Businesses need to address one further layer of complexity if they wish to succeed with the “impossible challenge of adoption”; the inertia and resistance to change within markets and organisations. This may come in the form of stakeholders with vested interests or simply those who choose the safer option of retaining the incumbent rather than risking a new supplier or product. In Tetra Pak’s case the issue is not the consumer, it’s the existing UK supply chain infrastructure which is set up to cater for a certain type of plastic packaging. My suspicion is that the average British consumer does not care how milk is packaged, so long as it’s not in a glass bottle!
The world has changed, not just in B2C but also in B2B!
a. Do you know what needs to be done in a web 3.0 environment to achieve your organic growth strategies? If you don’t, educate yourself, it may be the best investment you make this year.
b. Has your business invested in the necessary resources and expertise to deliver in this changed world? If you haven’t, you can pretty much guarantee that other players will. Someone’s lunch is going to be eaten, it could be yours!
c. Have you factored into your plans the inertia and resistance you might realistically expect with new products and new customers? There may be some customers, or market segments, best avoided!
Statistically very few companies grow to a significant size. Product adoption will be the impossible challenge for many…..but what about you and your business?