Transparency as a competitive advantage
Trust is very hard to earn and easy to lose. Trust is also fundamental to any commercial transaction. You don't buy something from someone you don't trust. The best way to earn a customer's trust is through transparency. Being transparent equals being trustworthy.
Compare these two hosting providers. Who do you trust? The one boasting about its performance (left), or the one actually showing its performance in real-time (right)?
Next to building trust, there are other advantages to sharing internal data. For one thing, it differentiates you from the competition. But it also forces your company to be better than the rest. Putting your performance data in the public eye is a very big incentive to keep pushing for better service levels.
Open up your data to capture more customers
Do you remember the brand of the underground garage you parked in last week? A parking operator we consulted with was struggling with that very question. How can it differentiate itself in a digital age? How can it attract more customers?
One way is to spend of a lot of money to attract more people to digital assets (website, social presence, mobile app, ...). But that's expensive: competition is high and effectiveness is low.
Why not turn it around? Don't ask customers to come to you, but go to where the customers are.
A parking operator's customers use platforms as Waze, Google Maps and in-car navigation. These platforms need data to service their customers. Why not provide these platforms with location, pricing and occupation data in real-time?
The data helps the platforms to serve their customers better. This in turn attracts more customers to the parking operator. The benefits are obvious:
- Suppose I'm looking for a place to park in a crowded city. Waze says underground parking A (ours) has 50 places left. There's a parking B (our competitor's), but Waze doesn't know anything it. Obviously, customers prefer the certainty of knowing there actually is parking space. They choose our parking.
- Even if our parking is more expensive, a majority of customers will still choose it, preferring certainty above price. (Bonus benefit: as a parking operator, it's easy to adjust pricing to find the sweet spot).
- Parking operators develop their business through municipality concessions. Municipalities will prefer to give concessions to parking operators that expose operational data. The data helps with policy-making and it increases the service level to citizens. (And yes, exposing the data means giving up some of the negotiating power. But given the choice, what would a municipality rather do? Unless the competitor seriously reduces its prices, the transparent operator gets the deal. Exposing data actually reduces the negotiating power of the competition more).
Opening up your internal data allows you to reach and attract more customers. It also brings other benefits such as improved competitive positioning.
Open up your services to capture more value
There is always more innovation going on outside your company than inside your company. Digitally-savvy companies give outside (digital) players access to internal company processes via APIs. This creates value for the ecosystem of businesses, partners and end-customers.
There are many models of generating and capturing value with APIs.
API business models, by John Musser (2013)
These models all share the same philosophy: by giving value to the network, the network gives you value back.
Take the example of Ticketmaster, an event ticket sales company. Typically, such a business tries to get as many people to the e-commerce website to buy tickets.
But since 2016, Ticketmaster has opened up its services to the outside world via API's. That same year, more than 10% of Ticketmaster's revenue was generated by third parties through its API.
With the insights Ticketmaster gained from outside innovation, it is developing new products. A fun example is one where fans can ask their Home Assistant for events nearby, buy a ticket and schedule an Uber to get there. (Using, you guessed it, other API's such as the Amazon Alexa/Google Home API and the Uber API).
This strategy not only increases revenue. Ticketmaster is becoming the default go-to platform for any kind of fan-engaging experience. Anyone who wants to build something that involves events and fans turns to Ticketmaster first.
Ticketmaster is becoming a powerful player in the digital ecosystem. By enabling third parties to bring value to end-customers, Ticketmaster is capturing more value itself.
Do you have what it takes?
It's a bit scary to open up to the outside world. It takes some guts to open up data and services to outsiders.
But whether you want it or not, your business is already part of a digital ecosystem. Your customers are, so you are too. You will need to actively participate if you want to capture more of the value out there.
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