Relationship Formula for Small Businesses

If you want to go Fast, Go Alone. If you want to go Far, Go with Others.

I must admit that while I was writing my last blog on social media advertising as a crucial customer touch point, my mind was already filled with hundreds of questions on the premise of how various dimension of business relationships impacts upward improvement in revenue, profitability, stock prices, intellectual properties, brand, product utilisation, partner networks, markets, productivity, customer satisfaction, employee satisfaction, reputation and many other outcomes too granular to be mentioned.

What a grave mistake it would be to simply engage into action, accompanied with just a ‘gut feel’, before analysing these relationships, its layers and tiers; correlatives; strength; values or risks to your business? Instead, should we be calling our actions and channeling our investments based on the conditions of key relationships to the business? How does one relationship affect the other? For example, negative energy accumulating in the workforce can certainly impact customers and partners which are critical to growth; ruthless investor activism that pushes leadership into buy back programs and dividends during sales slump to quickly raise return of stocks will not only result in exhaustion of enterprise coffers, but will contribute greatly to income inequality in the workforce and the society in general.

There are countless number of ways to bring structure and automation to track most of these relationships, but a bubble diagram is perhaps sufficient to initiate study and map m utual values, which paves the way to mark priorities according to business goals. In fact, any investment on marketing, advertising and automation should take into consideration of such priorities and value creation activities. Making this a critical exercise especially for small businesses in rapid growth mode with small caps and trust me that this blog will not lead you to a CRM dialogue of any ‘X’ factor as a necessary point of resolution but may influence such conversations in the future.

A Case to Reflect

Long standing enterprises that has been around for over hundreds of years such as Colgate-Palmolive ( or Colgate rather), Coca-Cola, Citi, IBM and GE were some examples of businesses which survived the test of time mainly due to their founding executives ability to visualise, create, manage and control internal and external business relationships to generate an overall positive vibe that fuelled growth.

Coca-Cola for instance, was once sold for 5 cents a glass and started business in the late 19th century with just total of 7 or 8 serving a day through soda fountains. Today, this business has grown close to 1.9 billion serving per day and I need not explain the prices nor its brand prowess. The creator of this drink John Pemberton, a pharmacist and a war veteran was hoping to find an alternative or cure for morphine addiction, as many people suffered such an addiction back then due to the war, just like Pemberton. In fact, the first version of this drink was a coca-wine (alcohol and cocaine infused drink) like many other carbonated fountain drinks of the time (e.g from Spain and France). The non-alcoholic version was created only after the banning of such ingredients in fountain drinks (even though I strongly believe that the coca leaves are still a key ingredient ). At the time, Mr Pemberton also claimed that Coca-Cola cured many diseases, including morphine addiction, indigestion, nerve disorders, and headaches, though these aren't the reasons why we drink coca-cola today. How this business grew to what it is today? I would think finding the the secret recipe to an elixir that appealed to a global taste bud was the easiest part.

Pemberton, sold his business, prior to his death, to several businessmen including a young druggist, Asa Candler. Pemberton, also brought his sons to hold different property rights of the business. Candler, saw the potential of the drink and started building his downstream relationships following the soda fountain trails of restaurants, bars and other recreational outlets despite infighting among  the different stakeholders including a thorny relationship with one of Pemberton’s son. Candler also observed the increasing demand as a further opportunity to bring Coca-Cola directly to customers by bottling it with partners. Candler watched competition and imposters closely in order to understand how they try to clutter the market and introduced the unique design of the the bottle that is still in use today, to help customers choose the original product. Candler’s focus on relationships that created an advantage to his business soon overwhelmed and helped to severe toxicity from the equation and made more room for expansion.

A ‘Scribble’ is as good a Start as a ‘Doodle’

Sometimes finding the starting point is the hardest – and this is when a general mind map of all relationships that affect your business can come in handy. Scribble it or take it a notch further, just for the fun of it and doodle it (no one said business have to be boring or characterless).

Startups might find this exercise pretty straight forward if you are dealing with a single or range of interrelated products aimed at the same market category. A simple bubble diagram, indicating upstream, lateral and downstream relationships (see illustration 1 – Sample Key Relationship Analyses), along with markers to identify layers of connections is useful visual analyses which helps to get detail idea of your current relationship trends, returns, advantages, risks, value creation and investment activities. In small companies, this can be a revealing exercise that points you where much of your resources is being consumed and if the returns are worthwhile. Save the diagram, and you will see that the story it tells, will change as you revisit them every quarter. In fact, you may also observe changes in business relationships for the better or worst depending on incidents and actions that your business may have undertaken. This will also help the business from refraining or changing tactics where relationships are cold and value creation there would just be like running ghost trains.

Prioritise Relationships - Finding the Perfect Balance

But the idea to get into this exercise is not just to identify types of relationships and where bulk of your investments are being absorbed or even what improvement is being attempted in the past. It is, sort of a barometer to the validity of your current business models and identify which relationships deserves your utmost attention at this moment in line with growth agendas (which changes from time to time). Evidently, there are hundreds of relationship commitment hypothesis, studies and best practises contributed by researchers on how to form long standing buyer-seller relationship stratagems in a variety of businesses and non profit backdrops (e.g. Equality, Trust, Openness, Rationalism - Smith 1998; Overall Satisfaction - Garbarino & Johnson 1999; Cost of Relationship Discontinuation – Morgan and Hunt 1994; Flexibility - TA Scandura & MJ Lankau 1997), and much of these practices have been assimilated according to industry settings into best breed of technology solutions for easier and faster consumption by businesses. However, what’s missing though is the simplification process of these various commitment variables which is equally critical in growing startups and small businesses.

E.g An IT service provider whom developed a tool that could help enterprise customers migrate swiftly from one cloud to another can choose to sell the tool and relevant services directly to customers facing such business pain. But upon proving the successful adoption of the tool, they may also see the potential to sell through  partners and vendor marketplaces who may be in an ideal position to offer clients a transaction economics that the tool creator themselves are not able to deliver due to specialisation or other resource constriction. Hence, this becomes a question and point of decision between growing the partner network and the direct sales, or both. If so, what would be the ratio to be applied for ideal outcome.

Arms Length Transactions are not necessarily Evil

Many small businesses today are present online with complete automated systems. Clear content on products and terms of sale are self explanatory with online support for customers who may have additional requirements or questions. Apparel, groceries, movie tickets and other cyclical or standardised products (e.g cloud services) get sold without the need for a sales person to interact with each and every one of the customers. These customers don’t expect personal treatment, but just personalised services and products up to their expected quality of standards along with data protection and security assurance. Here, there is a necessity to capture and analyse customer data, purchase history and trends to make appropriate future updates or offers to woo the customers to return and form loyalty to the brand. Often the customers who fall in this category has a tendency to switch from one shop to another easily and as such understanding what is transaction economics to them is critical in deciding and architecting the right loyalty program, advertising media or partners to worky with. E.g. a wine shopper might also appreciate relevant wine accessories, gifting services or the right cold cuts and cheese to go with the wine, all in one place instead of having to visit 3 or 4 shops.

In other words, unlike popular believe, businesses can establish loyalty with arms length relationship by anchoring on the right value creation activities and fulfilling expectation voids left by competitors. As such, instead of running intensive loyalty campaigns for adhoc transactional clients, you might be better off, turning to methods of acquiring and maintaining them cost effectively apart from making continuous differentiation in your offerings. In addition, the freed sales resources can now be repositioned to work on other market segments that needs personal and advisory services to grow(e.g. B2B solutions).

Expect Toxicity and Difficult Relationships

In my years of observations (and personal experience), I am yet to find an enterprise or startup that is not faced with difficult or toxic relationships (futile search, but why not?). Mark Zukerberg and Eduardo Saverin of Facebook, the Ambani brothers of Reliance India, and the fallout between media mogul, Rupert Murdoch and Richard Li of the HK Satellite TV,  are just some high profile known examples to back this.

Partner disputes over shares, intellectual properties and other business rights; a toxic employee or manager de-energising your workforce; a channel partner or sales person taking your business hostage by claiming exclusivity to relationships; technical staff making unreasonable demands in return for critical business assets; or clients threatening to switch provider if you don't lower prices or insist to work with only certain individuals; fraud; and other acts of sabotage are all common difficult relationship situations that can sow dissension and clutter in the business. The absence of or loose governing policies, contracting, legal and other enterprise services in startups and small businesses tends to make this worst. Some organisations become critically effete and drained due to the distractions. Others, take a stance to stay on course with goals and thrive in success by addressing conflicts firmly while putting in place mechanisms to protect critical intellectual, material and relationship assets.

Rewarding Relationships are Manufactured by Minds

“Hear much, leave all that is doubtful alone, speak warily of everything else, and few will be offended. See much, leave all that is dangerous alone, deal warily with everything else, and thou wilt have little to rue. If thy words seldom give offence, and thy deeds leave little to rue, pay will follow.”, Confucius.

Point is, you could be in possession of a ground breaking idea, a disruptive technology patent, abundant materials, and a ready market to adopt your offerings. Though, without identifying and cultivating the right relationships, mutual interests, trust, needs and co-dependence, mobilising these resources could end in long time to return or worst, fails to return.

The effects of advances in multiple enterprise technology disciplines that is transpiring through cloud services for superior infrastructure and applications services; advance analytics; automation of business processes; along with the rise of mobile and sensor based devices today, are driving digital transformations of every imaginable industry. Enabling us with valuable data, that can complement the humble bubble diagram that we talked about earlier in the blog.  This present us opportunity to compare real figures of performance against relationships; recognise what we do and don’t know; where advantages exist; and where an upper hand’s support is critical to succeed.  This is where we bring our multi-dimensional intelligence into work – the best of social, emotional, intellectual, qualitative, empiric and quantitative capabilities to unearth best call of strategies and actions to hold strong the founding virtues of the business.

Small Businesses and Social Media Advertising - Is It Worth Your Attention ?

“The Intelligence of the Universe is Social”, Markus Aurelius

The word 'social' can simply be put as friendly gathering of individuals or groups to share and expand interest or values. It describes the intrinsic human nature to bond and operate together in a communal manner for recreative, religious, cultural, economic or political reasons. In fact, researchers such as Bruce T. Lahn and colleagues of Howard Hughes Medical Institution, believe that the evolution of  large brain in the human species occurred in two stages, mainly to facilitate the complex process of mastering human relations and languages to interact, communicate and collaborate effectively with large groups of people. Perhaps this explains as to why we continuously improve innovation in telephone, telegram, postal service, mobile, Internet and other advanced technologies than constantly bridges communication with one another. 

The word 'social media' was only officially entered as an adjective in etymology of words since 2008, unlike its other proxy terms 'social networking' (1984) and 'social network' (1971). Social media refers to online platforms that provides an avenue for users to create profiles of themselves, connect, interact and collaborate  with their social contacts via text, audio, video, live streaming and messaging exchange. Some of these platforms such as Facebook, Twitter, LinkedIn and Instagram are seamlessly integrated in our daily lives. 

“Coffee and a Smartphone for Breakfast”

Checking your Facebook status, along with other news feeds on smartphone every morning is a familiar image in most households today. All notification and messages are readily waiting for further perusal, as we click on the neatly arranged icons of various social media applications that we use to connect with others on our mobile devices. Our social, personal, professional and communal lives are increasingly integrated in our smartphones, benevolently unifying various social tasks to the best use of our time and resources. The non-believers who complain about the commotions that social media causes in their lives are really small in percentage, and perhaps suffer from a lower social intelligence required to manage the labyrinthine of the increasingly connected world. Though, this group is expected to follow the adoption of social media eventually. After all, you are in full control to manage your social media uses in similar ways that you manage interactions with other communication tools prior to the Internet.

“Understanding Social Media  – I Just Tweeted that I blogged”

As users use these platform at no cost, platform owners on the contrary generate income by serving ads to their users. The accuracy and relevance of these ads are improved tremendously by tapping on the insights extrapolated from the content generated and shared voluntarily by its users. For example, if a user posted about a book they read recently or liked a certain reading group, an advertisement of an upcoming book of similar category might be served to that particular user based on patterns isolated from correlation of data amassed from their profile, likes and posts. 

This targeted advertising approach practised by social media platforms, presented unprecedented growth opportunities for millions of small and medium sized businesses with a lot less capital. The promise of greater reach, relevant audience, expansion, lower operational overhead, hassle free promotion and quicker results, are just to good to be passed up. Plus advertising in other traditional mediums such TV and print is still formidable in cost for smaller ventures.

“User Generated Content Hardly Escapes Humanity“

However, if this approach is based on the insights pulled from user generated content as stated above, should we be concerned with the quality, validity, appropriateness, authenticity and legitimacy of the data that social media and thousands of digital marketing companies, tout to us, as the utopia of marketing? After all, we are products of social occurrences with the capability to be machiavellian in varying degrees to achieve a desired state. Should we question the reliability of data in social media? How often do social media users post misleadingly or include fake information? Evolutionists and social researchers (see Brynes and Whittens, 1998), state that we may be exposed to a high degree of noise data meant to mislead, emphasise one’s image or simply obtain something cunningly, although this human trait is ubiquitous and is not limited to social media. Does this mean we abandon promoting our business on social media altogether? 

“The Opportunity of Securing More Mileage for Less Bucks”

Illustration 1 - Sample Projection of Social Media Advertising 

Truth is, while we should continuously question social media platforms on the quality and authenticity of their data (the more frequently you question,  the higher the chances that they will improve it), data discrepancy does not affect your business, just the effectiveness of your marketing dollar. The 1.5% estimated average click through rate for some social media platforms such as Facebook or Twitter  is still a good start (see illustration 1), as long as business owners are aware of the data issues that their direct and indirect social media advertising providers are exposed too. Understanding the risk and limitations of these platforms can aid in better understanding of online advertising; fruitful conversations with service providers; suitable strategies and smarter investment of your chump change, resulting in real growth and higher sales conversion rates.   

“Visual Content is more than 40 times more likely to get Shared on Social Media than other types of Content. (Source: HubSpot)”

Inevitably, advertising on social media will only work if you have an adequate online presence. A website, online store, blog site, social media pages (e.g  Facebook, Instagram, Twitter, Pinterest), or just a combination of few at the least. Good news evidently is that, this isn’t an expensive affair and there are free tools to get started and sample some online strategies without much technical knowledge.  Content and a sharp messaging is nothing new nor exclusive to the online world. Good content drove businesses even before the invention of Internet and social media. Even though highly visual content with messaging that arouses the senses and engages the audiences, creates the best momentum.

“Many a Thing Small Has made Large by the Right Kind of Advertising”, Mark Twain

Success though, is not imminent as some eager ignorant marketeer would suggest. Most shops will have to plan and execute campaigns in phases to identify and learn what works best for their businesses with a clear idea of what call to action needs to be driven in each campaign stage e.g. like page, buy a product, submit email address, download app and etc.  As such receiving lukewarm response or non-response from the audience in the first few runs should be considered normal and should be budgeted as an opportunity cost to successfully reap growth benefits of social media advertising. What is important though is to constantly assess and improve your strategies in addressing shortcomings e.g conversion hindered by sluggish system despite high traffic to site; refinement of key words; unclear call to action upon click through and etc.The essence of advertising has always been the same. The narration and telling of a timeless, magnanimous story and how your product supposedly will affect your customers in the most intimate way possible. This story telling opportunity however was for a long time limited to businesses with funds to burn. Social media platforms have flipped this playing field by allowing just any business to participate with the lowest entry cost ever imagined. One thing is definite. Not taking this chance will surely be a mistake. 

The Fuss about Ad Block - or is it just the Ad Industry Panicking !

It's been quite a while since I wrote anything here and hope to put something every week from now on. So kindly bear with me.

This week, I am all over the online ad business and how the industry is reacting to ad blocking. I am disgusted about this whole ad block business where some sites are starting to charge the users a fee for content or block access to their sites altogether if you used ad blocker app to filter out adds. Currently ad block app usage is catching on but perhaps only 25% of Internet users are probably using it. However, that is enough to hurt the online advertising industry to make such big fuss even though big names such as Google, Twitter and etc are denying any Impact to their business. Well, why not, just have to shuff it down somebody's throat, and money is made. After all the real loosers are the advertisers and the Internet users.

Is the online advertising really helping to grow businesses ?
For years, online media have been painting the story that they are actually helping brands and advertisers to grow the sales of their products or services. That's what I thought too initially; but truth is that all the clicks and views generated very little interest in what was being advertised or presented to the viewers. Worst they annoyed viewers. This is probably why the ad serving market was not keen to charge its customer based on real leads or business opportunities. Instead, this market and its players continuously eluded advertisers to pay based on views or clicks; while viewers are served forcefully with ads they don't actually care for. Sometimes the ads are just delivered randomly that there is no real relevance to the viewer in fact.

Clearly these medias don't seem to have the intelligence to deliver ads to the right audience in many cases, as per their claims or even isolate questionable advitisers from the dark net. E.g. From astrology scam; dating scam; work from home scam to escort services is freely contributing to this industry which supposedly a reputable network of business/es based on advance, secure and sophisticated technology foundation. Again, they are eluding us here.

Are the ads delivered to its rightful audience and are they effective instrument for growing your business?
Anyway, let's keep our focus on the ad blocks. Would online media start to punish its patrons if the ad block apps does not hurt their business? Is it also not a sign that all these while their viewers had no interest what so ever in the ads that was being served to them?  If tables were to turn and advertisers demand that publishers only charge for real leads and not ads served, there is a chance many of the publishers will close shop. Because they really never did help their customers to grow the business in anyway. Publishers took the short cut by just providing access to their audience or patrons but not really sell anything for their customers.

If I am media, I will start to take a step back to fix things and that is to ensure value delivery to both the advertiser and patrons alike. The advertiser is looking to grow their business and the patrons are looking for a smooth experience with your site. If match can be made to the needs of both, you are a winner.

Don't get eaten by the new fish in your own pond....
Perhaps there is also a key lesson to be learned here from the offline media. The online media have to learn to present ads that are not intrusive plus catchy enough to intrigue anyone's attention. The advise to big players, don't underestimate your patrons vulnerability - they might be willing to stay away from your sites rather than being bombarded with annoying ads. Every situation or challenge opens up opportunity to a new player that someone might figure out a new business model that keeps both advertisers and viewers happy while that can mean disaster for the current players who will have to then play catch up. On the other hand, advertisers should create ads that speaks to their audience so that it's not turned away. In brief, this industry has to start fixing the holes; embrace ad blocking where neccesary and stop force serving ads that annoys people. Because sooner or later someone is going to differentiate themselves in this pond by just doing the above mentioned to deliver the right values. So buck up or be prepared to leave the pond.


NOTES

* PageFair and Adobe cites that , there are now 198 million ad blocker users, up from 21 million in 2010.

* AdBlock Plus claims to average 2.3 million downloads a week and  the estimates are that that ad blocking would have  cost publishers USD 22 billion in revenue in 2015.

Happy weekend  everyone!

Indonesia Online in the wake of 21st Century

The Indonesian archipelago is well known to us for its thousands of scenic islands, majestic waters and paddy fields. The country is the 27th export nation in the world with rich natural resources such as timber, oil, coal, rubber and bauxite. This heterogeneous nation believed to have over 300 ethnic groups and 700 spoken dialects, have been pushing and prodding since the 1998 financial crisis for change, economic development and higher standards of living. This probably explains why many of the elected government leaders short lived their stay after disposition of Suharto in 1998.

The real economic shift probably started in year 2004 with consumer spending growing over 50% since then. Today only 11.7% of the population live under poverty line (1 to 2 USD per day), whereas the middleclass and urban elites are growing, although much of the middleclass is still clustering near the poverty lines. Growth is not consistent throughout the country but at least there is a ripple effect of wealth distribution to all levels in some form or the other, that more and more Indonesians are now able to spend on goods other than basic necessities such as apparels, clothing and gadgets.

There were several reasons for this rapid economic growth in the last 10 years alone. One of them is the emergence of cheaper and effective means of communication and information dissemination, namely the Internet and mobile devices which is an indicator tracked by analyst firms such as Mckinsey and World Bank.

Internet and Mobile Phone - A Basic Household Necessity

Indonesia has some 74 million Internet users hitherto and is expected to touch around 83.6 million by end of 2014, according to reports by research company statista. 30% of Internet users get access using fixed line and the rest via mobile data services using mobile phones or handheld devices.  The speed for fixed line ranges from 2.2 to 4 Mbps whereas mobile data services are ranging from 10 to 20 Mbps as 4G adoption takes stage to facilitate a data hungry nation. How significant are Indonesian Internet users to the South East Asia online market and other key markets such as China and India? Indonesia has more Internet users than any single country in South East Asia or even highly penetrated countries such as Thailand, Malaysia and Singapore put together. The current Internet penetration rate has barely touched 30% of the total population.

Growth trends are highly promising as users see their access to Internet as a mean to improve their standards of living and a necessity rather than just a status device to boost self esteem. Internet and gadgets are both gateway and tool, a much needed investment in every household to stay in touch with family and friends; keep up with news and trends; access financial services; trade opportunities; education services; health services; find jobs or business opportunities, and etc.

Mobile penetration is at 120% at the moment. The lower Smartphone prices and cheaper data packages offered by operators in the recent years is driving adoption with Smartphones including Blackberry representing perhaps 15 to 18% of devices. The cost of Smartphone is under USD 200 and as low as USD 51, makes it affordable for many classes.  This results in consumers skipping the fixed line services altogether and jumping directly to mobile data services just like how fix line phone was dropped for mobile phones in the late 80s and 90s.

Social Media for Change and Progress

Indonesians are one of the most active social media users in the world. Their popular social media platforms are Facebook, Twitter and Instagram.  What are they doing with it? They are expressing themselves to keep the check and balance on current issues that affects them. They share images, videos, text and information related to politics, government, entertainment, economy, products, services and simply life in Indonesia. They are most likely to post a feedback online on services, products or experience good and bad. They voice views; approval and disapproval of motions; garner support for a worthy cause; and drive change economic, social and political from their very seats as citizens.

That is a lot of crowd power and there is no mistake why the Indonesian politicians, celebrities and even businesses pay a special attention to social media in Indonesia. For example the current President Joko Widodo or ‘Jokowi’ won the election due to his social media savvy campaign reaching voters from every corner of vast Indonesia governed through 300 district governments.

The Indonesian archipelago is connected via social media to propagate change and development. Like any other medium of communication social media too has its cons, as a small minority of outlaws and left wings use it to spur animosity, hate and resentment which can halt development and progress, but the Indonesians are rebutting this too via social media as the case of the recent effort of Indonesian authorities to draw out ISIL pitchman ‘Bahrumsyah’. Widespread news on ISIL alerted people living faraway from city areas on the ill intended group where villagers have stopped such groups from gathering in their mosques or recruiting unsuspecting youngsters for unlawful causes.

Government’s Response to ‘Indonesia Online’

The Open Government Indonesia (OGI) was officially established in 2012 but the notion of an open, citizen focused government with high accountability for its actions exist since 1998, when political and economic reform agenda was high at a point when the nation was hit hard by financial crisis. The overall poor mobilization of critical resources, economic opportunities, and national peace along with widespread corruption impacted millions of people and lead to the frustration of the Indonesian people degrading confidence in the government vehicles then.  

The Indonesian government probably started its journey onto the online medium since the victory of Jokowi as Jakarta’s governor in 2012. He campaigned creatively to communicate with followers via a combination of social media platforms such as Twitter, Facebook, Youtube and others which resulted in Indonesians voting for a candidate based on merits as a public servant rather than pedigree and connections, clearly setting a new tone to the future of the country. In the same year Indonesia was ranked as the number one twitter nation with some 15 tweets a minute.

OGI is the government’s response to the Indonesian people’s call for transparency, improvement and development. This is a humungous effort, still flawed in many ways, due to the execution intricacies involved in paving through a developing country with less mature government structures, legal settings and policies to support it. Nevertheless, where there is a will, there is a way. The Indonesian government has started their conscientious journey and is now figuring the online medium towards building a culture of excellence in government reach. More public information is made available for public poking, more data is made available for crowd analysis (including election documents) and innovation is spurring through a variety of channel government and non-government. The pace of the adoption is still sluggish, but this is new for Indonesia and much of South East Asia, where access to even the most public of government information is hard to come by. Indonesia is on the lead and is embracing this new sentiment preparing for a future with active public intervention in government operation.

Business Response to ‘Indonesia Online’

The growth of the internet industry in Indonesia like many other South East Asian and emerging countries was kind of an ancillary development while trying to capitalize on the population’s collective behavior to stay connected with recent news, information, income opportunities and current events of the country while steering towards a better life.

Underdeveloped or developing nations such as Indonesia picks on this trend as fast, if not faster than the developed nations for very different reasons. The later adopts Internet for sophistication and convenience; the former adopts the Internet as a platform to stay connected and propagate sentiments personal, social, economic and politics cost effectively. OTT (Over the Top) solutions such as Skype, Facebook, Google search, instant messaging, and emails build on cloud computing architecture cost nothing to users apart from the access and data subscription fee as OTT players generate income from businesses merely through advertising and traffic routing. The Internet is an alternative to voice and SMS services for many Indonesians since the early millennium.

Realigning and Reinventing Revenue Generating Services

The Indonesian Telecom and mobile operators apprehended the repercussions of this trend to their business at a very early stage, as they observed dwindling profitability in the steam of SMS and voice revenue loss, intensified with increased infrastructure/network upgrade and expansion cost.

Today, the top three telecommunication service operators in Indonesia; Telkomsel, XL Axiata and Indosat generate at least 20% of their revenue from mobile data services. There are around 320 million mobile subscribers and 130 million mobile enabled data subscribers with the three monopolizing almost 87% of mobile data subscriber market share in Indonesia. This doesn’t mean voice and SMS services has phased out completely, but merely a new revenue opportunity, in this case data services has been identified and embraced as a significant contributor to the revenue portfolio. In addition, new use cases are invented for stopping revenue leaks from traditional services such as SMS and voice. For instance, the use of SMS in security validation in financial transaction, marketing and promotion of product offers.

Optimizing Operation and Customer Reach

Traditional industries such as financial services, health, education, real estate, retail, transportation, publications media and others, all recognizes Internet as a new channel to broaden their reach to target audience and an opportunity to further optimize operation by cutting back on brick and mortar outlets and traditional content distribution cost while improving campaigns and customer experience with their brands. Many still are going through transformation and ciphering the Internet as an effective customer engagement channel but some services are already apparent. For example online banking and payment services (BNI, BII, CIMB and etc) , education (Sibejoo), health (tanyadok) , classifieds, C2C marketplaces and real estate.

New Business Opportunities

While the traditional industries transform, there were many ground up internet businesses appeared to quickly capture opportunities to provide bridging services to overcome shortcomings and limitations of conventionally run businesses or simply deliver new value to consumers. Mobile money, e-wallets such as ‘Indosat’s Dompetku’ became a financial solution for a largely unbanked population; ticketing portal such as ‘tiket.com’ helped sale of seats for entertainment events; travel portals provided price comparisons for hotels and air ticket, gaming and the list continues. The retail scene too has permutated with online stores for apparels, clothing, electronics and groceries rises displacing traditional brick and mortar outlets driving traditional retailers such as PT Mitra Adiperkasa, to embark on organization wide business transformation while adding online channels into their marketing mix for their branded stores such as Planetsports, Zara and Marcs and Spencer.

The B2C retail market is assessed to be around 1.9 billion USD in 2014 and translates to just 0.7% of the total retail market (134 Billion USD). The market is expected to grow at 40 to 50% in average while the Internet Users grow at 20% rate. At 5% conversion this market is 6.7 billion USD and 10% conversion 13.7 billion USD that is larger than Singapore, Thailand and Malaysia put together.  So there is still room for many more players to appear despite some early penetration from brands such as Lazada, Zalora, Luxola, Rakuten, Alibaba and etc. There is still time for a prominent player to surface and a fair shake is possible to take the market reigns with critical value, is wide open for players domestic and foreign.

 Looking forward to a full blown Internet Industry – The New Order

It is a long painstaking road, but some journey has been covered and hard lessons have been learned by private and public sectors alike. This is a nation with a 122% mobile penetration (Smartphone penetration at 23%) and with less than 25% of people with bank account. The trend is clear that Internet plays a much critical role in an individual’s life socially and economically. It is also no surprise that access to Internet has a close tie to economic opportunities available to an individual. Therefore infrastructure investment is crucial to improve Internet service levels and data services in par with ASEAN standards of 15Mbps and beyond. This will fuel economic activities, incubate new income opportunities and create new jobs to replace those lost in other industries phasing out with time such as agriculture and some manufacturing lines.

Linchpin service providers such as the financial services institutions have a critical role to play in rethinking services suitable for a nation of growing middleclass through collaboration or deployment of micro business models. This will bring efficiencies to online transactions by eliminating cost and risk associated with disconnected processes or cash collection and distributions. Domestic logistics networks owned by national post and other delivery/courier service businesses can very cleverly use this new industry to their advantage and ace deliveries to domestic routes while establishing co-alliance with global logistics firms for end to end service. And there is at least 2 jobs created for every job lost when the Internet industry is concerned. It is a matter of adaptation and seeing through the transformation so that no one is left behind.

The most significant new order in this changeover however, is the fact that there is a new critical stakeholder in shaping brands of any kind and they can exercise their power in the click of a button. Indonesian consumers are an integral constituent in any marketing or campaign mix today and their power is undeniable. The challenge is, how to use this wildcard effectively to build a positive image that reaps value for all market participants. Hence a new journey and passage begins.