Brian is a reliable partner of and trusted by numerous well-known strategy consultancies. Due to its day-to-day usage in consulting, which is known to be a fast-paced and highly demanding business environment, Brian proved to meet new upcoming client needs through constant improvement and further development. By gaining trust from these demanding clients through its qualities to reduce “commodity” tasks effectively and providence of top-notch assistance, Brian well-established itself in the market.

Who is Brian and what can he do

Brian is an AI-Powered, digital assistant for consultants and business professionals in all industry verticals aiding in simplifying their daily work. In general, Brian aims at reducing the overall time spent on “commodity” tasks such as translations transcriptions, data sanitation and research tasks including public and private company analysis, industry KPIs and Peer analysis. By reducing the time on “commodity” tasks, Brian allows business professionals to focus 100% on value adding work and processes.

Brian’s skill set is divided into four different categories, file handling, research, slide graphics and “more” skills, such as consulting methods providing more than 100 methods with detailed instructions as well as business models giving in-depth information about business models and industries. Brian’s skillset is described in detail in Figure 1: “Visualization of AskBrian’s skillset.”

What are Brian’s skills?

As visualized in Figure 1, Brian takes over a variety of operative which would otherwise be comparably time consuming.

Figure 1: Visualization of AskBrian’s skillset

File handling

Brian can convert files from PDF, PNG, and JPG into any Microsoft Office format (docx, xlsx, pptx). Besides this, he can translate the file to more than 100 languages, as Brian is connected to DeepL, which enables high quality translations.

Additionally, Brian offers transcription services, where video and audio recordings, even when spoken in different languages, are transcribed to MS Word.

When sharing documents with partners or customers, Brian can help to erase sensitive contents the document may contain. He can sanitize numbers, company logos, images of individuals, personal information, links and more.

Summarizing, the file handling abilities of Brian will save valuable time by reducing the overall amount of file handling tools and consequentially increase the focus time of the company’s employees.

Research

Brian can provide an analysis of over 12 million privately held companies from Germany, Switzerland, and the UK. This analysis contains information about the business, relations, and key financials. He looks up the profit and loss statement, assets and equity and liabilities in the report of the company.

In addition to that, he can also provide detailed analysis of more than 50,000 publicly traded companies by giving insights (business intelligence data), financial information on annual and quarterly basis (P&L, balance sheet, cash flow statement).

If further insights about peers are required, the peer analysis will provide 70+ KPIs benchmarked against up to 15 of its peers. As a result, one will receive the analysis which contains nine structured tables each for growth, operating efficiency, and financial stability and one customized table which can be designed according to the user’s personal needs. Additionally, the 100 most relevant competitors with individual data will be provided to the user.

Having data of 800 industries in 130 countries, Brian will create a list of top companies in the chosen industry containing the company names, industries, headquarter countries and market caps. Knowing 100 industries, Brian can provide an industry report covering operative efficiency, growth, capital efficiency, net working capital, multiples, capital structure, cost of capital and risk by analyzing 80 indicators in total, e.g., Gross Margin, EBITDA, Revenues Growth 5Y and WACC.

Brian’s research functions reduce the overall effort and consequentially the time spent on desk research tasks required for a market analysis and peer review. Hence, users can analyze their competitors as well as a variety of different suppliers and service providers and compare them to their competitors.

Slide Graphics

Brian’s capabilities include major support with slide design by providing a selection of thousands of icons. That makes it easy to find suitable ones on every occasion and related to any topic of choice.

In the occasion that pictures for slides are needed, Brain also provides useful assistance by offering royalty free photos on hundred thousands of topics. Copyright is no longer of any concern.

For a serious, consistent, and modern appearance in business presentations Brian offers to send you one of 49 topic related packages with 20 to 40 slides templates in the slide deck based on your preferences and desired topic.

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Additional useful tools include so-called consulting methods, which are not only designated to consultancies as the name might imply. Rather Brian provides you with over 125 methods designed to help you to overcome any business challenge your business might face. Of course, the necessary detailed instructions are provided to gain a deep understanding of the methods conducting appropriate measure as effectively as possible.

Brian further provides you with in-depth information about all business models and industries in case that a specific business model needs to be analysed or simply to get a broad overview of business models that potentially become relevant during a later step in a business model evaluation. In total Brian currently covers about 60 business models and 20 industries with a prospect of future additions.

In case that you need a good laugh Brain even provides you with some jokes.

What can Brian do for my company?

By using its existing functions, procurement managers can improve the quality of the company’s supply chain by comparing different providers for raw materials and services. Brian can accumulate all relevant information on existing suppliers and their 100 most important competitors. Peer to peer comparisons can also be prepared for the company’s competitors, its service providers such as the warehousing and third-party logistics providers as well as the freight forwarders. These peer-to-peer analysis of service providers and suppliers can aid in choosing new partners to work with. Brian can also help in updating the users on industry news, such as the introduction of new products by competitors.

Figure 2: Visualization of AskBrian’s potential

Why should you trust Brian?

Brian is a reliable partner of and trusted by numerous well-known strategy consultancies. Due to its day-to-day usage in consulting, which is known to be a fast-paced and highly demanding business environment, Brian proved to meet new upcoming client needs through constant improvement and further development. By gaining trust from these demanding clients through its qualities to reduce “commodity” tasks effectively and providence of top-notch assistance, Brian well-established itself in the market.

Brian further expands its client base by attracting interest and gaining trust of an ever-increasing number of well-known companies in industries beyond consulting. Summarizing, one can say that Brian has been able to show an impressive track record already and expects bright prospects.

What’s next?

In the occasion that Brian caught your attention, and you now plan to implement Brian as a reliable partner also in your company, FOSTEC & Company recommends one of two approaches to a successful software introduction and is pleased to lead you through the entire implementation process. The first option would be to implement Brian via the accelerated plug and play implementation process, where FOSTEC can act in a supporting role to finalize the project as quickly as possible. The second implementation would be to implement a custom solution stemming from Brian’s technology toolkit.

FOSTEC & Company’s approach to aiding in the implementation of a custom tool kit is based on several years of experience and gained expertise through various successful projects. The approach is visualized in Figure 3.

Figure 3: Visualization of FOSTEC & Company’s software introduction approach

Phase I: Script

The script ensures a smooth and structured software introduction by providing guidance through the entire process. The script basically is a site plan consisting of checklists, schedules and system overviews. It plans every step throughout the software introduction in great detail by formulating time limits and implementing a structured distribution of tasks. So called roll-backs, meaning back-doors into the old system in case of a worst case scenario, are initiated and smoke tests established to check the proper operation of the new system’s main functions.

Phase II: Software introduction

Two main introduction schemes can be followed in terms of introducing the new software introduction. Either the so-called “Big Bang” approach is chosen where the implementation is performed in a short timeframe and within the entire company. Favourable for this approach are established systems with agile data processing or if a data migration from the old system is not necessary.

Alternatively, the so-called interactive introduction can be selected, which is characterized by a gradual introduction per division resulting in less risks but higher planning activities and requires both systems to run in parallel.

Phase III: Training

Training is key to work appropriately and efficiently with the software tool following the approach that a system is only as good as its users. An established training strategy provides that a group of key-users are trained beforehand to ensure fast training of other personnel through the multiplication effects subsequently.

Phase IV: Data migration

Good planning is key to a smooth data migration. Planning activities include the procedure of developing a valid migration strategy, continuously testing, and improving the migration process. It is useful to switch the old system in a “read-only” mode some time before the data migration.

Phase V:

After the approval by the management, the software is installed on all devices preferably done on weekends to not interrupt the business flow. Simultaneously, the responsibility is handed over to the project team. During the pilot phase surveillance of data quality and performance is of fundamental importance.

To initiate your cooperation with Brian, we invite you to click the following link to receive a Free Trial – https://www.askbrian.ai/trial-form – or to schedule an appointment for a demonstration – https://www.askbrian.ai/demo.

Contact one of our experts

Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

Learn more

Markus Fost

Managing Partner
Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

Everydays: the first 5000 Days by Beeple (Mike Winkelmann) – sold for 69.3 million dollars at Christie’s

Non-fungible tokens, commonly referred to as NFTs, gained a lot of public attention throughout the past year. Artists began selling virtual art and investors were generating increasingly large ROIs (return on investment). The Artist Beeple (Mike Winkelmann) sold his piece “Everydays: the First 5000 Days” for 69.3 million dollars at Christie’s, while the auction started with an initial bid of 100 dollars. Despite gaining public attention only in 2021, NFTs have been around since summer 2015. Currently, the only popular use case of NFTs is the minting of virtual art. However, the technology offers a variety of use cases and will disrupt many industries in a comparably short period of time.

What are NFTs and what can they do?

NFTs originated from the continuous development of the Blockchain technology, affiliated business models and concepts. To fully grasp the bandwidth of possible applications offered by NFTs, one should acquire basic knowledge in Blockchain technology, the different existing tokens and their respective use case and limitations.

Before the first NFT was launched and started an international hype, there were three Blockchain-based tokens with different uses, concepts, and backgrounds. These three different types included payment tokens, utility tokens and security tokens. Relevant definitions and explanations will be provided in the following paragraphs.

While an in-depth explanation of the Blockchain technology can easily fill textbooks with far over 100 pages, rudimentary knowledge can be acquired through a less voluminous definition of the matter. Nathaniel Popper, a journalist for the New York Times, found a comparably simple but yet effective and correct explanation for what the Blockchain actually is. In its essence, the blockchain is a highly technical database, which has become the go to solution for storing digital information bundles in a secure way, more secure than previously possible. The name Blockchain can be taken literal, as all information integrated into the “database” is grouped into individual blocks and then chained together in to one so-called ledger. The Blockchain ledgers are public and consequentially known as the public ledger. Transactions stored on the public ledger are transparent to the public, which constitutes the main difference between the Blockchain and other digital databases. Transactions are saved on the Blockchain for eternity, they cannot be modified or deleted and can be reviewed from anywhere at any time by any user. Summarizing, the Blockchain is a database constituted by the public ledger, on which all transactions within the ecosystem will be saved as blocks, once it has been verified by the designated users or network participants.

The first token to be discussed in this section is the so-called payment token. A payment token is self-explanatory as it can be used as a simple means of payment and is interchangeable with any traditional fiat currency such as the USD or the Euro. The Payment Token does not fall into the category of a security as it is not an investment. The most famous examples of payment tokens are Bitcoin or Ethereum, the two most relevant cryptocurrencies established to this day.

The second token is the so-called utility token. Basically, a utility token gives the holder the right to receive a product or service from the issuing company. Utility tokens are a way of transferring participation rights (Genussrechte under German law). A classic example of a Utility Token offering is cloud storage space upon token redemption. There is no maximum amount of Utility Tokens that can be issued by a company. Therefore, the price of the tokens is regulated by the supply-demand curve (Mitra, 2019).

The third traditional token is the security token, also known as asset-backed token. This Token can be identified by carrying out the so-called Howey test. The Howey test provides the framework for deciding whether a particular asset qualifies as a security under the law, thus leading to a distinction between the different token types. According to the Howey test, a security exists if the asset represents an investment in a venture that is implemented by another person. It is important to note at this point that a token that is classified as a Security Token is legally treated as a security and therefore subject to the relevant regulations. Security tokens aim to generate profits from the work of others. Popular examples of this type of token are the real estate investments or investments in private equity and venture capital funds mentioned in other FOSTEC & Company blog posts (Mitra, 2019).

NFTs where originally developed in 2014 with the first non-fungible token being launched in summer 2015. Nonetheless, the general public began to grasp the full potential of NFTs during 2021. On a macro level, NFTs are part of the Ethereum blockchain (Bitcoin based NFTs existed in the past). NFTs are classified as non-fungible, as they are unique (a unique token on the Ethereum blockchain) and cannot be interchanged with one another. Even though the virtual file including the art incorporated within the NFT can be copied as many times as one likes, the NFT provides one aspect that cannot be copied: proof of ownership of the work (despite the creator still retaining copyrights and reproduction rights). Afterall, it is worth noting at this stage, that NFTs are not limited to art, but can be used to tokenize (or mint) any existing digital asset and record the ownership rights on the Blockchain. Further use cases lie in the connection of NFTs to objects in the real world. Nike is working on a campaign, and has already registered a patent, for a method to verify the authenticity of their sneakers using an NFT system. The project has been named “CryptoKicks”. The main potential for disruption lies within the connection of NFTs and real-world objects, events, and services – intertwining the real and the digital world seamlessly.

Most of the industries offering large digital transformation potentials for and through NFTs are part of a group of industries lacking behind in terms of digitalization. These industries include the real estate industry, the medical sector the event and ticketing industry and the food sector.

Digitalization of the real estate industry

The bureaucratic efforts arising in combination with real estate transactions generally impose time consuming manual work on the buyer, the seller, and a variety of governmental agencies. The digitalization of the real estate industry will reduce working times and transaction costs.

Non-fungible tokens can be expected to facilitate several manual processes in the coming years. NFTs will enable proof of ownership to be provided digitally. NFTs fall-back on smart contracts to facilitate the transfer of properties from one legal individual to another. Properties could be transferred without requiring a notary using smart contracts. Additionally, NFTs generally incorporate automatic payments which would allow the seller to stay in control of the property until the fully automatic reception of the whole payment amount. The public ledger of the Ethereum blockchain would also facilitate the work of the governmental officials introducing the change of ownership in the land registry (Grundbuch).

The public ledger would also allow for historical information on the property to be stored safely. This information would then be publicly available and impossible to modify. Consequentially, buyers as well as tenants would be able to gather the largest possible amount of information before deciding to move in or purchase the real estate.

Figure 1: NFT ecosystem and current market environment

Tokenization of medical records

Doctors and medical clinics are by law required to store personal information as well as medical records for ten years, records on certain treatments and information on x-rays must be stored for thirty years. The transfer of medical records from one treatment facility to another often leads to manual efforts for administrative clinic personnel as well as time delays.

NFTs could be used to safely store personal information of patients as well as their medical records well beyond the required ten-year holding period without compromising the confidentiality of the patients. Additionally, birth certificates could be stored as NFTs, which would ensure the preservation of the document (also enables government officials to identify homeless people more easily). Similar use cases would be applicable to store academic credentials as well as intellectual property and patents in a secure manner without the risk of fraud or modification of the documents and certificates.

Tracing of goods in the supply chain and post-sales

Many other industries, require high levels of transparency, in their supply chains, this goes especially for luxury goods. NFTs possess the required capabilities to provide producers with the possibility to track their sent goods across all levels of the supply chain.

Essentially, the NFT will work similar to an eternal tracking number. The company will create a digital representation of the asset on the Blockchain, which will then be used to safely store all information related to the product including its origin, transport information as well as previous owner and sales (the NFT can also include information on sales prices for transactions).

The programmer can also incorporate an automatic kickback or royalty to the producer or initial seller of the goods, which can lead to ongoing revenues of physical goods. Additionally, the NFT will serve as product authentication method and can store information on repairs, refurbishment, and restorations. The tracking of goods along the supply chain will also enable companies in the food sector to know the exact position of their goods.

Revolutionizing the event and ticketing industry

Real tickets could be tokenized and minted to be represented on the Ethereum Blockchain. This would have a variety of easily recognizable advantages such as the preservation of authenticity of tickets and the reduction of the tickets sold and traded on the black market. Nowadays, tickets are mostly non-transferable which requires re-sellers to distribute their tickets on the black market. Hence, the host or organizer will be unaware of the personal information of certain individuals which poses a significant security issue.

Additionally, the organizer can benefit from the reselling activities of ticket owners, as the code can include a kickback and royalty function for all additional transfers. Additionally, the tokenized tickets can be used to track the purchasing behaviour of guests during the event. This will enable the organizer to tailor digital marketing and retargeting activities to the individual ticket owners and ultimately generate additional perpetual revenues and generate further growth. Event tickets are often collected by individuals, either because they are particularly rare (Michael Jordan’s last professional game) or because of the design (artworks on tickets) or as memorabilia. NFTs as ticket replacement allow the storing and the re-selling of old tickets for an indefinite period.

While many of these industries have E-Commerce verticals, NFTs will add additional opportunities for E-Commerce activities in these industries. Part two of this blog series will investigate detailed E-Commerce opportunities and activities in more detail.

Contact one of our experts

Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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Markus Fost

Managing Partner
Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

E-Commerce is an evolving sales channel with everchanging trends and challenges. An emerging E-Commerce trend is Social Commerce – the integration of shopping into social media. Social Commerce conveniently allows customers to instantly buy products they see within social media. Generation Z is the youngest generation currently gaining importance for the retail industry and values sustainability, ethicality and brand authenticity when making purchasing decisions. Social Commerce offers a way for businesses to directly connect to consumers and therefore a new way of reaching the Generation Z, but companies must work from inside-out to convince Generation Z shoppers and adapt to their values before trying to utilize Social Commerce.

Current trends in E-Commerce

The retail and commerce industry constantly evolves and adapts to ongoing global trends. The last major shift happened with the introduction of the internet and keeps its relevance with and an increasing proportion of online retail. The resulting global E-Commerce industry already accounts for around 20% of the overall retail industry (Statista, 2021). Over the next years this number will increase even further. E-Commerce itself also develops and changes according to the needs and desires of consumers. As a result, a variety of trends evolve and influence the overall landscape of E-Commerce. These trends include optimization and adaptation of existing processes, like the introduction of One-Day-Delivery in a variety of industries or further automated logistic processes. Further trends include new ways of doing business, like the so called Direct-to-Consumer sales approach, referring to brands having own web shops and targeting their customers directly instead of using marketplaces like Amazon or online and offline retailers as intermediaries for their sales process. Another example is the introduction of Quick Commerce and the resulting delivery of groceries directly to customers, which would not have been imaginable years ago. Another E-Commerce trend is the emergence of the so-called Social Commerce – shopping integrated into social media which directly impacts the way how brands and consumers interact.

 

 

Figure 1: Overview of selected E-Commerce trends

Social Commerce and its drivers

While Social Commerce is a timely and relevant E-Commerce trend, depending on the definition, the story of Social Commerce began a long time ago with the introduction of products and service reviews or digital recommendations in form of sharable shopping lists. These features fit a more traditional definition of Social Commerce based on social interaction of different shoppers. With rising popularity of social media, the perception of social activities shifted and a new stream of sharing media with others evolved. Brands began to advertise their products by creating organic posts on various channels and attract customers to make purchases on their websites.

Over the last years, social media platforms combined the process of online purchases with content generation and launched implemented shop systems. These systems allow shoppers to directly purchase a product they like within the platform itself. Instagram offers one of the most successful social purchasing systems. Another example is Facebook Shops an implemented shop solution to support smaller businesses during the COVID-19 pandemic. Through Social Commerce brands of all types and sizes can create media and directly connect with their fans and consumers, who in return can directly purchase products they find appealing in the posts. Over its existence, Social Commerce has developed into a well-functioning sales channel and shows an especially high popularity among the younger age groups due to changes in shopping behavior.

Understanding what drives the Social Commerce development helps to prepare for the next steps. The key driver of Social Commerce is the increasing popularity of social media and an increasing userbase. The already popular use of social media to find inspiration has been further amplified by the COVID-19 pandemic which limited the possibilities for offline shopping and required a new way of exploring products. Social media gives customers the opportunity to explore products by having access to a variety of media and experiences shared by people online. Traditionally, a socially influenced purchase required an additional step of purchase option research. Social Commerce conveniently allows customers to instantly buy products they see within social media, simplifying the overall purchasing process. In general, a prominent level of connectivity and social media use benefit the receptivity of people for Social Commerce. Especially younger generations are used to being connected with each other via a variety of different apps and websites. One of the generations having this type of access is Generation Z.

Expectations and desires of the Generation Z

Generation Z is the youngest generation currently gaining importance for the retail industry. With first Generation Z members now entering the workforce, the generation starts to gain higher access to capital and therefore develops into one of the most important consumers groups. Those who are not yet working full-time are still influencing their parents’ shopping behavior and therefore directly impact other generations. As they are a young generation, Generation Z will remain a relevant target group for a long time. To prepare for the increasing importance of Generation Z as a customer group, it is important to understand who the generation is and what expectations and desires are prevalent withing this group.

Generally, Generation Z refers to all people being born between 1995 and 2010 (depending on the source 1998 to 2013). This timeframe makes Generation Z a generation of digital natives, people who do not know a time without digital products such as computers, smartphones or even the internet. As a result, technology is intuitive and digital availability and connectivity are part of their identity. This digital normality explains the comparably prominent level of social media usage. Generation Z shoppers do not only use social media to connect with friends and family but interact with brands and research desired products online before making purchasing decisions Overall, 61% of Generation Z shoppers actively follow brands on social media according to a study of SurveyMonkey in 2021. Furthermore, shoppers are inspired by the posts of friends or professional influencers leading to further interest in products or services. Therefore, it might seem like social media is the go-to marketing channel to reach Generation Z.

However, one cannot just create a social media presence and create content to reach this demanding customer group efficiently. According to a study by SurveyMonkey, Generation Z is demanding in several ways when shopping online. Brands need clear strategies when planning to sell to Generation Z and aligning their identity with the values of the potential customers. Generation Z values sustainability, ethicality and brand authenticity when making purchasing decisions. Therefore, brands should find a way to implement suitable business practices when targeting Generation Z customers. Moreover, it is of high importance to not only follow these values, but to directly communicate them to potential customers. To do so, companies need to adapt their communication and implement authentic content.

Another interesting characteristic of Generation Z shoppers shows when looking at the choice of purchase channels. While especially millennials choose to shop on big platforms like Amazon, Generation Z is willing to make an additional step towards supporting the manufacturers of a product they like and purchase directly from them. Thus, brands should not only focus on selling their products on marketplaces and with established third-party retailers but find ways to follow direct sales connections with their customers, for example by selling their products in own web shops.

Social Commerce and Generation Z expectations

Besides traditional web shops, Social Commerce offers another and timely way for businesses to directly connect to their consumers and therefore a new way of reaching Generation Z with targeted measures. First, well designed content and collaborations with the right influencers can lead to a high engagement rate among Generation Z shoppers, a majority of which are looking for inspiration on social media. Thus, Brands can use their social media presence to create a high demand for products and services. Second, the active maintenance of different social media channels enables companies to communicate their values to customers and demonstrate how and why they act sustainable, ethical, and authentic. Especially the authenticity of a business is easier to proof in frequent posts than on a static brand website, where even established quality and trust seals are recognized by less than 10% of users (Tidio, 2021). In theory, both these arguments could already be fulfilled following a traditional social media strategy. However, due to the new developments in Social Commerce, the produced content for a company’s social media presence can now function as a shopfront without the need for an intermediary like Amazon or any other retailer. Doing so, it utilizes the created content more efficiently and can help to increase conversion rates by minimizing the effort of purchase. Looking back at Generation Z’s shopping behavior, Social Commerce allows companies of all sizes to meet the wish to purchase goods from manufacturers directly. This combination makes Social Commerce an overall promising opportunity for brands of all sizes.

Figure 1: Social Commerce as a link between Generation Z and brands

While Social Commerce offers multiple benefits, it also has one major drawback. With a direct linkage between social media performance and sales performance, minor brand identity mistakes can directly influence the success of Social Commerce businesses. Again, creating a detailed and well-planned social media and Social Commerce strategy is key to prevent this kind of image mistakes and guarantee success.

Implications for brands

To sum up, the increasing importance of Generation Z shoppers for the overall commerce industry increases the importance for brands to introduce and adapt new products, services, or processes to target young shoppers. Further implementation and adaptation of Social Commerce could be a step towards the satisfaction of Generation Z needs by allowing a direct interaction with shoppers, eliminating intermediaries, and utilizing the benefits social marketing. However, Social Commerce itself is nothing more than a sales channel and therefore only functions in combination with a suitable brand identity. Generation Z values sustainability, ethicality, and authenticity. Therefore, companies must work from inside-out to convince Generation Z shoppers and adapt to their values before trying to utilize Social Commerce. To maintain a successful position in the future of E-Commerce and Social Commerce, companies need to actively develop their social media image and implement quality assurance for their social media pages. Overall, it is likely that over the next years Social Commerce will become more important as the importance of Generation Z is rising and even the younger Generation Alpha is on their way to gain relevance for the retail industry.

E-Commerce Distribution Strategy

Contact one of our experts

Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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Markus Fost

Managing Partner
Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

Markus Skoda, MBA supports companies in strategy development and operational implementation with a focus on E-Commerce and digitisation.

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Markus Skoda

Senior Consultant
Markus Skoda, MBA supports companies in strategy development and operational implementation with a focus on E-Commerce and digitisation.

Many enterprises face the so-called “Innovator’s Dilemma” at a certain point – a situation in which, even though they spot innovation potential, are unable to innovate in a way necessary to maintain their position. There are two main reasons to explain this dilemma – the need to generate revenue in a not yet developed market and decreasing innovation opportunities of existing products with a demanding customer base. As a result, new start-ups surpass established organizations by introducing innovative products and creating a new market for them. One example is the introduction of mobile banking by neo banks like N26 and the story of how the new bank gained seven million customers in less than ten years by creating a new demand for mobile banking. While disruptive technology and new market entrants are often considered a threat, the following chapters aim examining potential benefits and opportunities resulting from start-up innovation.

The innovator’s dilemma and its impact on corporate innovation

Innovation helps businesses to grow by increasing the product portfolio or optimizing existing processes to ultimately increase revenue and profits. Therefore, the ability to effectively innovate is often considered a key factor for long-term business success. However, innovation is not as easy as it seems and many limitations to innovation capabilities exist. One of these limitations is the Innovator’s Dilemma, which was introduced by Clayton M. Christensen in 1997 in his homonymous book “The Innovator’s Dilemma”.

Christensen claims that established firms reach a point at which they will not be able to keep up with external innovation of smaller companies (Christensen C. M., 1997). Two main reasons for the failure of corporate innovation and long-term market leadership can be identified. First, the marginal product performance increase changes over time (Figure 1). Setting up an innovative and potentially disruptive product is difficult and therefore the product performance curve begins with a flat curve. Once the product is developing, more and more improvements lead to a steep slope. In the end, however, the curve becomes flat again as the innovation of the product reaches its maximum and only little adaptations can be made. The overall curve therefore is s-shaped (Christensen C. , 1992). At the end, customers demand improvements of the existing products, which corporates are not able to deliver due to reaching the limits of innovation capabilities within their products. Second, the bigger a company is, the higher are the revenues it requires to maintain its position. Low revenue generating innovations are therefore often not considered on a long-term basis, as the required revenues thresholds are not met. Since most of the existing customer group might not be ready to adapt to the innovation, the market size is limited and cannot satisfy the corporate need for revenue.

Figure 1: General development of product performance over time (adapted)  (Christensen C. M., 1997)

Corporates cannot focus on the development of new technologies because a small customer base combined with low profitability does not match the revenue requirements resulting from the company size. In contrast to the established corporations, new and small start-ups are not limited by these revenue requirements and can therefore focus on a niche market and steadily build demand for a new product. At one point, customers might start to switch towards the innovative product due to decreasing perceived values of the existing product and potential of the innovation. Established organizations which could not focus on these innovations are ousted from the market. From this point, start-up innovation can be considered a threat to corporate success. However, some threats can also lead to opportunities. Many cases of disruptive business models and their impacts exist. One of these examples is the banking industry with new players like the German mobile Bank N26 or the British Revolut that entered the industry and introduced new ways of banking with the help of digitalization and modern technology. While the traditional view suggests that the success of these mobile banks is a pure threat to existing banks, we argue that corporations can use the created demand for innovation for their advantage by adapting to the technology based on the customer expectations that did not exist in the old product sphere.

Case study – N26 and mobile banking in Germany

As a more the 4000-year-old industry, banking has gone through major changes. One of the latest shifts happens towards a more mobile focused banking approach. Instead of managing capital in banking branches and with the help of clerks, people start to access their accounts with the help of mobile apps and mobile connection. The major development towards this mobile oriented banking industry might originate from small niche start-ups like N26, the most successful and popular mobile bank in Germany. In 2015, when N26 was founded within an ongoing trend of digitalization and an increasing rate of smartphone ownership in Germany (Statista, 2021), the basis for mobile banking had already existed for a while. However, banking users were hesitant to make a full switch towards new technology due to security doubts and their known habit to use bank branches and do banking with a clerk. Therefore, many banks decided against the further improvement of mobile banking besides some basic functions like account overviews. Some banks that assessed the demand for mobile banking gave up the ideas due to limited market size. Due to the nature of innovation, traditional banking had already reached a stagnating performance increase (Figure 2) and therefore further product innovation was limited.

In contrast to established banks, N26 as a newly created start-up was more flexible and not bound to minimum revenues within the mobile market. Therefore, the company could (as one of multiple FinTechs) develop the mobile banking market from a small scale onwards. By the time traditional banking had reached a flat slope in improving performance, mobile banks were in a steep upwards trend. Therefore, a new user base developed, and some initial customers of existing banks saw the opportunity in mobile banking. As a result, a first shift of users happened. The initial success of N26 might be one of the reasons more established banks introduced further digitalized and mobile banking focused services to maintain their customer base and utilize ongoing trends. N26 as a pioneer further increased its customer base and in early 2021, celebrated a userbase of over seven million, thereby maintaining its position as the European market leader. Due to the ongoing Covid-19 pandemic, the user base of mobile banking applications will further increase over the next months.

Figure 2: Mobile banking product performance over time

Risks and benefits of start-up innovation according to technology push and market pull

To better understand the impact and the potential risks and chances start-up innovation can have on established corporates, it is important to take a step back and take a broad view at the way markets work. One framework that is well suited to analyze the source and size of demand is the concept of technology push and market pull. The concept evolved in the field of marketing to determine which side of the market steers the demand for a specific product or product group.

Technology push

Over the course of time different new technologies are developed. However, corporations can decide whether they are willing to introduce these technologies to the market by creating innovative products or services or remaining withing their existing product offerings. Since the market is not aware of potential innovations, the demand for these products evolves from the introduction of the product. The whole process (Figure 3) of innovation and demand increase therefore begins with a new existing technology which pushes the industry towards innovation. As a result, the process is best described as technology push.

Figure 3: The technology push dynamic

Market pull

Another factor that can lead to innovation is the market pull. In contrast to the technology push were new technologies and the industry initiate innovative developments, in the market pull dynamic, customers are responsible for new product development. By creating demand for a product that does not exist or a solution to for an existing problem, the market compels the industry to create new products and services so satisfy the demand. The industry then uses new technologies to innovate and solve the customer demand.

Figure 4: The market pull dynamic

Start-up influenced market pull

While technology push and market pull are commonly frameworks in marketing, a further adaption of the dynamics by introducing an additional party into the system could be assumed – start-ups. In the traditional technology push/market pull framework, no differentiation between the innovating companies is made. However, looking at the dynamics through the Innovator’s Dilemma lens, it becomes apparent that huge differences exist regarding innovation capabilities and flexibility. Consequently, it makes sense to separate the existing industry from start-ups in this conceptualization.

To recall the previously mentioned facts:

  • Start-ups have a higher flexibility to innovate due to the Innovator’s Dilemma that limits corporates.
  • Technology push creates demand for a product by creation of innovation based on new technology development.
  • Market pull creates demand for a product by unsatisfied needs of customers and forces the industry to create new products.

Bringing the factors together allows a new view of the demand dynamic and thereby demonstrates the risks and potential chances for corporates (Figure 5). Since corporates are limited in their innovation capability by the innovator’s dilemma, start-ups are the ones that can more easily utilize new technologies to innovate into a market that does not yet exist. By doing so, the start-ups slowly create a market for their innovations and reach a point where the demand becomes so high that it influences the customer group and the demand of the established corporations. This is the crucial point for the corporations as from this point onwards innovation stands in direct competition to their products. Two scenarios evolve – one is a threat to the corporations while the other one offers a chance. The threat is that customers shift their demand fully to the innovation whereas corporations cannot supply the required products. This is the classical scenario mentioned by Christensen, in which successful corporations get surpassed by new start-ups due to the innovator’s dilemma (Christensen C. M., 1997). However, another possible scenario might arise. By forming demand for an innovative product, start-ups enable existing corporations to utilize technology themselves and follow the innovational path that was initiated by the start-ups. Thinking back, one of the reasons for the Innovator’s Dilemma, was the market size for innovations. By giving start-ups a head start towards the innovation corporations get the chance to enter not a new, but a pre-developed and therefore bigger market, which better suits their revenue generation needs.

Figure 5: Market Pull and the influence of start-up innovation

Coming back to the example of mobile banking in Germany and the launch of N26, it is now possible to set the framework into perspective (Figure 6). Traditional banks tend to have been locked in the Innovator’s Dilemma with a small niche market for mobile banking and a customer base demanding improvement in traditional banking. However, with the market entry of N26, the technology was utilized by a young and flexible start-up to create a niche product. The user base constantly evolved, popularizing the concept of mobile banking not only in the N26 customer group, but also in the traditional banking customer group. By doing so, a general demand for digitalized and mobile-based banking services evolved. Therefore, over the last years different established banks further digitalized their services and are now offering mobile banking services similar to N26 or other mobile banking focused banks.

Figure 6: Market Pull dynamic in mobile banking (Illustrated on N26)

From the perspective of the innovation limitations, the launch of N26 might have helped companies to overcome the Innovator’s Dilemma by creating a market for mobile banking, in which established banks could then follow more easily.

Conclusion and key takeaways

On first sight, start-up innovation might indeed help established corporations to overcome the innovator’s dilemma by giving them the chance to follow into the newly developed market once it becomes profitable enough. However, this view is very one dimensional as it does not consider other aspects of the innovation development.

First, critically reflecting on the development shows, that even though the established banks were able to follow the innovation different drawbacks occurred. N26 and other neo banks were able to create a userbase for themselves, thereby reducing the number of potential clients and the number of actual clients of the established banks. Further, the shift towards mobile banking does not create a new market but cannibalizes parts of the existing customer base. Second, the drawbacks are not always as narrow as in the mentioned case of mobile banking in Germany. As Christensen claims in his book, failure to adapt to the innovation by new players and the resulting demand, can lead to failure of the most successful and well-managed businesses. One example of this failure is KODAK, which was a world leader for analog photography but had to declare bankruptcy in 2012 after failing to adapt to the demand for digital cameras (Forbes, 2012). Third, to be able to utilize ongoing innovation and make the shift towards the new market, corporates need to prepare their organization for change, by monitoring ongoing industry trends and allowing company internal innovation. The last point is especially difficult to implement as it requires a careful equilibrium between risk of failure, chance of success and capital requirements.

Summed up, while in theory start-up innovation can help established corporations to overcome the Innovator’s Dilemma, in practice it is connected to high risks that need careful consideration in and case. It is therefore not possible to approve the made hypothesis.

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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

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Markus Fost

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Markus Fost, MBA, is an expert in e-commerce, online business models and digital transformation, with broad experience in the fields of strategy, organisation, corporate finance and operational restructuring.

Markus Skoda, MBA supports companies in strategy development and operational implementation with a focus on E-Commerce and digitisation.

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Markus Skoda

Senior Consultant
Markus Skoda, MBA supports companies in strategy development and operational implementation with a focus on E-Commerce and digitisation.

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