The Silicon Valley Playbook

There is an interesting trend afoot in technology. Once dominated by startups and wannabes, Silicon Valley now boasts a who’s who of some of the world’s most valuable companies.

What is truly remarkable is that companies that once touted simple business models, such as Facebook’s online community or Amazon’s bookstore, have become complex and multifaceted end-to-end solutions.

Their competitive advantage is only expanding, as the breadth of their offering provides them extraordinary access to consumers and their data. Amazon is throwing around its weight in many ways, frustrating some suppliers who cannot maintain minimum acceptable pricing (MAP) or brand families in any cohesive manner.

Is your business model evolving?

Smaller companies, who must compete with, sell to or sell through these companies should be aware of tactics employed by the leaders within Silicon Valley:

Extreme personalization

Consumers are conditioned that they can buy a product any place at any time, just the way they want it. Apparel such as T-shirts used to be printed in mass. Today, silkscreen printers using digital technology can produce one shirt at a time, in your size and favorite print, and ship it to you the next day via a plethora of ecommerce apps. A slew of personal shopper websites such as Proper Cloth have emerged, providing the opportunity to buy one custom dress shirt at a time. Others like Trunk Club provide personal shopping services (as a bit of a clothes horse, this isn’t something I need).

Asset sharing

Made popular by Uber and Airbnb, asset sharing is spreading to B2B with companies like FlOOW2, which supports businesses sharing business equipment. In today’s hyper-competitive market, assets must be fully utilized. If your business is resource-constrained, look for ways to share resources with others.

Usage-based pricing

All the rage with vacation rental sites, usage-based pricing provides economies to customers who only pay for the services they use. Companies such as Zuora provide usage-based options for cloud computing and applications.

Education 

Offering consumer education (or expertise to B2B customers) establishes credibility. Today’s online publication tools have made do-it-yourself video and content management easy to administer. Entire business models based on education are proliferating (such as Khan Academy).

Collaborations and alliances

Cooperation across technologies has become omnipresent. Running a small business or startup can be a lonely place, and owners are seeking incubators and crowdsourcing opportunities in which to share best practices and resources. The U.S. Department of Commerce offers an Advanced Technology Program so small companies can share the risk of emerging technologies.

Seamless transactions

New services are expanding the methods by which companies can accept payment. Technologies like Dwolla (pay with your email) and Take a Payment (accept fees through your website) abound.

Recombining

One growth strategy small businesses might consider is “recombining”. Recombining occurs when a company combines  services that may have represented in 3-4 business models into one.  Amazon used to rely on third party logistics, and outside data centers, but now offer those as profit centers. Our client, Opus Agency, offers services that would individually be highly commoditized (such as those in an advertising agency, event production service, or event technology tradeshow strategist). Combined, it is a valuable end-to-end solution that protects it from price competition.

Speed

Amazon Prime has become the gold standard. eCommerce companies now must build supply chains that will deliver product throughout the Continental U.S. within 48 hours.

Radical pricing

Companies are seeking unusual pricing models. Our firm worked with a marketing analytics firm that took a fee based on results, in lieu of the typical fee for services that such a company might otherwise employ.

Every business model must constantly evolve to stay relevant. Be attentive to methods by which you can shift your service offering to provide your clients with more convenience and end-to-end solutions.