Basic business rules still apply

1 Feb 2010

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There can be no doubt that existing and emerging technologies can play a major role in business growth, but they are complementary rather than a replacement for sound business strategy and practice, says Prof Damien McLoughlin who chairs the Digital Landscapes conference in March.

Prof Damien McLoughlin of UCD School of Business will be chairing the Digital Landscapes event on March 3, and he cautions against losing perspective when tackling the seemingly complex world of new technologies and trends.

“The whole digital area is exciting and entertaining, probably in equal measure, but I think what is really important is to keep the excitement and entertainment in perspective,” he says. “I think it is changing the business environment in a very fundamental way, but it’s not changing everything, its not changing how we use core tools in management.”

That said, the new digital world has presented business with some fundamental challenges as well as positive changes, he says. “One key area is that it is absolutely impossible now for brands not to engage with the idea of integrity, so we continue to see all sorts of brands – Dove, Lynx, Coca-Cola, Nike, take your pick – being held to account by consumers who are dialoguing with each other about those brands.

“The big challenge for businesses as a result is how to engage in that dialogue. I think there are two ways of doing it. Firstly you have to participate, and secondly you can’t participate in a discussion where you have no credibility. That means that where brands have had practices that are not appropriate, or things they hoped in the past people wouldn’t find out, then they can’t engage honestly in that dialogue.

“That is something we have known for a while, but I think it will become even more widespread,” says McLoughlin. “The best example for me is the Dove Campaign for Real Beauty. I think it was very courageous by Unilever to get involved in that. It’s a superb campaign, and it spoke to a certain segment of women in a very positive way. As a father of two daughters, I appreciated the ‘Talk to your daughter before the beauty industry does’ message.

“However, today if you go onto YouTube and search for the Campaign for Real Beauty, you’ll find Unilever’s commercials, but you’ll also find a response by a guy called Rye Clifton, pointing out that, while Dove has put out this message about real beauty, the very same company uses a very, very different portrayal of women in their promotion of Lynx (Clifton ends his videos with the tagline ‘Talk to your daughters before Unilever does’). There is a contradiction there and Unilever needs to do something about that.

“Take another example. Innocent sold a part of its business to Coca-Cola recently, and the first thing that happened in a very, very public way was that customers of Innocent – not the shareholders, not the financiers, not the distributors, but the people who buy the product – called the company to account on a company blog where the founders of the company participate in a very real kind of way. I think that’s a good thing, and I think that is the future.”

A positive thing for business, says McLoughlin, is that this new type of dialogue imposes the need to learn new skills. “I’m thinking here about members of senior management whose assistant prints out emails for them to read at home in the evening, who own two mobile phones and that’s it. It’s very difficult for a person like that to appreciate things like Twitter, Facebook and so on. So that’s something businesses are going to have to grasp.”

Segmentation is key

The good news for sound businesses, says McLoughlin, is that many of the basic rules of business still apply. “Segmentation, the absolute core of marketing, and hence the core of growth strategies for businesses, is still as important now as it ever was.

“One of the perceptions is that more information means more power to customers, which means prices falling, but I think as the online phenomenon progresses we are actually seeing something of the opposite.

“We have a whole series of social networking sites – Bebo, Facebook etc – but those companies are not particularly profitable. One of the problems is you can have a Facebook page with your family, your friends and your business contacts on it. But do you necessarily want to have the conversations you have with your family online to be the conversations that you have with your business contacts? That for me is a challenge.”

McLoughlin points instead to LinkedIn’s business model. “What LinkedIn offers is a social networking site for people who wish to be connected to useful business contacts. And guess who out of these sites is making money? It’s LinkedIn. The reason for that is its segmentation strategy – it speaks to a particular need, which is to connect people to other business contacts.”

Ultimately, consumers will engage in, and pay for, what they perceive to be of value, says McLoughlin. He points to the newspaper industry, which is struggling with the online model and how to monetise their content. “Yet you look at the Financial Times, which has little trouble getting people to pay €250 a year for an online subscription. It’s seen as a business expense for an important service. I don’t think in a month of Sundays people will pay that for a generalist daily newspaper. So you’re back to effective segmentation.”

It comes down to looking at the information consumers have, identifying specific needs, and charging accordingly, says McLoughlin. “People will pay for what provides value for them and that’s the same as it always was, whether it’s in the old economy or the new economy. Business should be reassured by that.”

By Ann O’Dea

This is an edited extract from a feature which appeared in UCD Business Connections magazine, spring/summer issue 2010

Photo: Prof Damien McLoughlin of UCD School of Business

 

Ann O’Dea is the CEO and co-founder of Silicon Republic and the founder of Inspirefest

editorial@siliconrepublic.com