Businesses and Social Media – How it helps create new business models

Business Models in simplistic terms explains the way firms make money.  It is the set of processes and activities using which the firms create, capture and deliver value and hence it covers the entire value chain. Needless to say, a strong business model is a fundamental requirement for any business to sustain and consequently thrive in the market. Newer markets and changing scenario has led to dynamic and improved models over time. These models challenge the old one and lay foundation for the next incremental or big leap in the existing business model. Changing customer preferences due to more aware customer, political, social and technological drivers encapsulate some of the key reasons which have contributed significantly towards business models across industries. Though each driver has had its role in the overall scheme of things, Removal of Information asymmetry through content aggregation has been one of top drivers and has had critical implications for existing models. Content Aggregation acts as a pool of relevant information for the customers and hence provides them more options, convenience, ease and ability to compare. All of this leads to customer satisfaction which in turn leads to higher footfalls and more numbers for the service provider. This is in contrast to the earlier business models where in the traditional format was followed and even the service provider didn’t have enough information at times – from a customer’s perspective- barring information which could be put under competitive intelligence.  Moving on to the service provider side of things, We need to consider the theory of the missing link and how it is related to social media. The Missing Link is the activity or process which the new business model has done away with, but was an integral part of the earlier model. The Missing Link could also be seen as a major cost center in the earlier model. But how do you remove a cost center from the new model, without having adverse implication on the firm’s business operations. The Answer lies in Technology and Social Media. It has simply converted the physical into the virtual, reducing cost and improving performance at the same time. OLA CAB service in Mumbai (India) is an apt example as to how the social media converted this missing link into a competitive advantage. Traditional TAXI providers have a call center, where in the customers make a call and book the cab. Call Center Operations add to the cost and move the fares to north making it expensive for the customer. High fares restrict the market opportunity to a particular section leading to limited growth opportunities. OLA CAB founders saw an opportunity and decided to completely do away with the call center operations. A mobile app was developed, which the customers would download on their phones and book the cab from the cell phone itself. You are not supposed to make a call to book the cab and it in fact shows you real time availability of the available cabs. It has taken all the regular taxi providers on board and hence there is no investment in buying the vehicles as well. This new business model brought down the cost considerably and OLA was able to capture a significant percentage of market share based on low prices and easy availability of vehicles. Sites such as Facebook, You tube, twitter etc. were also bombarded with user feedback helping create the right buzz around the brand and reaching the target consumers effectively. It in fact had one of the highest social media voice share based on a recently conducted survey.Apart from removal of a cost center, social media has changed the dynamics of customer feedback as well. Customer Feedback for earlier models was a good to have and not a must. Firms like OLA vouch for the fact that business can be built upon customer feedback. Customer Feedback can be a part of the business model itself, driving revenue and another critical numbers for you. Hence feedback is not something to be collected at the end, but a real time activity providing you a feel of the market. To Put it in a nutshell, Social Media has empowered firms to challenge the conventional models and helped converting the missing link into a sustainable and competitive advantage.

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