We had a lively discussion at the Editorial Board meeting last October, as we planned the themes for 2020, in blissful ignorance of what this year would bring. We decided not to go theme by theme, as we normally do. Nor sector by sector as so many inclusive business innovations cut across sector silos. We wanted to focus on a key differentiator amongst our business audience - the customer segment that they serve.
By focusing on inclusive businesses that serve different segments - business, government and consumer - we also get to focus on one of the most difficult decisions and common mistakes: which segment to serve.
As we discussed the decision-making process about customer segments, Editorial Board members thought of it as a fundamental decision, to be taken or adapted early in the life of a business, not easily changed. Ironic then, that just as we go to print, many businesses are adapting to Covid-19 by selling to new segments. In particular, manufacturers that sell to business and consumers, are repurposing production to sell to Governments. This is just one of the many adaptation we are seeing already, with more change, and more coverage to come.
Despite the current fluidity and flux, there are fundamental differences in business strategy and challenges depending on whether businesses are selling directly to consumers (B2C), to businesses, (B2B), or to governments (B2G). Product design, marketing, distribution, scaling strategy, risk management, partnership development ... all will vary. Deciding which segment to target is one of the most fundamental early decisions, and we have seen several businesses have to challenge their starting assumptions. Perhaps sometimes those decisions could have been taken earlier, or the implications better recognised.
Making the right choice is critical. Access2Finance shares their lessons from working with the humanitarian (public sector) market, consumers, and business markets.
Many social entrepreneurs start with a small retail market, but find they do not have the branding and logistics to scale to a huge B2C market - so shift to B2B or B2G. But B2B is no pushover. LabourNet provide corporate training services to business clients. As founder Gayathri Vasuvedan reflects: 'the B2B customer is a very discerning customer. You must be very, very clear in the value that you provide to a B2B customer. Their sensitivity to lack of transparency in terms of what is the value of your product or service is very high. I think that's my biggest lesson in the last few years.'
Many inclusive businesses are of course B2B2C - selling to a business client that sells on to their customers. The inclusive businesses have to cater to the priorities of both the business client (long term value, and price) and the ultimate customer (gratification, product quality). In this edition Ignitia explain their B2B2C approach and how to keep both groups satisfied.
When Anders Anker-Ladefoged and Jacob Ravn wrote these lessons about choosing your best customers, they were probably not thinking of the Corona crisis: 'The challenge when entering the markets and approaching new customers is that the process to a high extent can be characterized by uncertainty; success depends on your ability to navigate in a constantly changing process that is characterized by a learning by doing process.' But that uncertainty is more true now than ever.
Covid-19 is turning plans upside down, with some businesses stretched to maximum to keep people fed and health services running, while others have seen customers vanish overnight and demand dry up. And it is leading businesses to switch their product lines and sales markets. As I write in the UK, we are seeing Dyson switch from selling hoovers to households, to producing hospital ventilators to sell to the Government. Unilever, the worlds biggest soap producer, is keeping its usual retailers stocked (on eased credit terms where necessary for the smallest), but adding distribution via global institutions, aid workers and charities. So for many inclusive businesses, this may be a time to reconsider which market segment is priority.
Businesses that historically sell to Governments are perhaps the lucky ones at times like this, with demand more likely to continue, or the procurement relationship at least already established. Zipline explain how their medical drone service supply health centres in Ghana and Rwanda. Their business was almost literally born to meet current needs, but the crisis exposes the overall lack of resilience of our health systems.
The Covid-19 emergency will test trust in business-to-business supply chains. There is much that larger more secure companies can do to support the SMEs in their value chain: sell stock on credit; pay SME suppliers on immediate terms, or even buy 'pay forward vouchers' for future supply, where demand has simply collapsed. If you are selling your goods and services to other businesses, look at how you can share risk and innovate so that skills, assets and trust are maintained.
Businesses selling direct to consumers will probably have the biggest array of challenges and innovations in the Corona lockdown. Can ICT help you sell to people stuck at home? Can your product or service be adapted for life during Covid19 Response? If your business is on the brink, how can loyal consumers help in ways that give them value too? How can you build consumers trust in your offer, particularly in the hygiene standards with which it is made and delivered? A McKinsey report posed a good question: 'How would you feel about entering a plane today, if you knew that every passenger, crew member, and maintenance worker in contact with the plane had tested negative for the virus?’ That question applies to many other sectors, particularly in the service economy. How will new consumer trust be built, including trust about hygiene, as well as trust that the companies that thrive stepped up during the Corona Response.
Whichever customer segment your business serves, the reflections from Emiliano Mroue on being a resilient business and adaptable leader during the Ebola pandemic will help to stay level-headed at this difficult time.