Team Capital Guest Blog by Pablo Hernández Arroyo of Madrid headquartered intellectual property (IP) firm Elzaburu (www.elzaburu.es). Pablo leads the media and entertainment division for Elzaburu, recognised as the leading name in prosecution and contentious work. The firm recently topped a table ranking law firms according to revenue per lawyer.
The only thing that stays constant in business is change. This is even more true today as companies of every size and in every industry endeavour to navigate turbulent economic and fast-moving technological environments. Change is constant, but that doesn’t make it easy and today you are always trying to do more with less.
During these past months, thousands of taxi drivers from London to Rome and beyond took to the streets to voice their growing concerns over new disruptive business models, in this case Uber – through which you can get a taxi, private car or rideshare from your mobile phone. Traditional taxi drivers see it as a clear and growing threat to their business.
Disruption can be the stimulus companies need to innovate, but disruption doesn’t feel that way when it happens to you. In this vein, several local authorities have already taken regulatory steps to ban Uber-like applications, which enable people from the same city to connect and share short intra-city car rides. Fenebus (Spain’s largest association of bus operating companies) has launched a campaign to strike down Blablacar, an app that offers co-sharing car trips between cities.
Meanwhile, Neelie Kroes, Digital Agenda Commissioner at the European Union, is showing strong support for innovative and creative business models which shape modern entrepreneurial services and has firmly criticized protectionist reactions in aid of taxi cartels.
Such protest and fear is not limited to the transport sector. Hotel bosses around the globe have expressed their discontent with Airbnb, pioneers of the ‘Sharing Economy’ whereby you can rent out lodging – they now have more than 250,000 private accommodation options across all 197 UN-member countries.
Same for all industries
The Content Industry, particularly the music sector, was the first to feel the effect of the Internet. Content is now right at your fingertips, distribution costs have plummeted and consumer attitudes have changed. The days when Harrods had an exclusive floor devoted to selling records are well and truly behind us.
Innovation does not stop there. New ways of communicating are posing unprecedented challenges for lawmakers and society as a whole. Digital platforms enabling direct consumer interaction cannot be beaten on price and the internet is increasingly a revolution for mere transaction based businesses which compete solely on price.
Not so long ago it was unheard of to stay anywhere except within a trusted hotel. Today, instead of a hotel, more and more travellers are choosing to stay in short-term rentals they locate through online rental services. The depth of reviews of both hosts and accommodation posted on short-term hosting sites ensure you get what you want and will have a positive experience. The Internet has also successfully dealt with the expensive transaction costs of information, searching and negotiation (as explained by Nobel-Prize winner H. Coase) by slashing them, transforming each individual property owner into a hotel service provider.
Embrace a culture of change to exploit opportunity
Few business activities remain unaffected by the internet and the growing base of online consumer networks. A stubborn behaviour from traditional competitor companies and push to ban new innovative market entrants is not the way forward.
Your company culture can be a hindrance, or an enabler. It can inhibit growth and change. Or it can drive innovation and success. A landmark case study is the reaction of record labels to Napster, a pioneering peer-to-peer file sharing internet service. Napster was purchased by record labels as a way in which to respond to changing market needs, only to be later shut down in what looked like a clear disconnect and misunderstanding of changing consumer behaviour.
You cannot innovate and adapt to a changing environment without enhancing your value proposition and accepting the need to revise timeworn ideas. Talent is our foremost strength in order to face the future without fear. Our first task should be to assess the talent within the business, and align it with ever changing consumer demands.
If a company’s talent and service provision is now being replaced by the internet, adapting to the new economy will require firms to dig deeper: logistics expertise for distributing CDs became meaningless for record companies within a very short period of time.
On the other hand, if a company’s talent enables consumers to benefit from real value-added services, internet tools may prove a useful ally to introduce cost saving initiatives and productivity improvements. Why sell CDs if the core strength of record labels lies in their core competence to seek, discover and promote the very best content? Strategy in the face of a changing market environment calls for correctly assigning talent and sniffing out good opportunities.
The case of Uber is paradigmatic. After all the strikes and protests throughout Europe, it is worth noting that Uber services are in some instances more expensive than a traditional taxi. Clients are willing to pay that little bit extra if speed, quality, safety and convenience expectations are met.
Start by distinguishing your long-term goals from your short-term ones. People tend to have forgotten about mobile phone ringtones, but during two short years they generated almost as much cash as online music sales today.
The biggest challenge is how to implement a successful long term plan. Success in the new digital economy is not simply about setting up a website and having a communication policy in social media. Firms must innovate, lead a culture of change, whilst leveraging talent, technology and providing real value added services to consumers.
Regulators must find the balance between supporting emerging start-ups which are focused on providing better consumer choice – with ensuring that these new companies are subject to the same public costs as any other business. I-Tunes’s success is based on its truly innovative consumer experience, but it has not avoided paying royalties.