Let’s take a quick quiz. Can you name the world’s largest taxi company? it owns no vehicles. The answer is Uber. Can you name the world’s most popular media company? It creates no content. The answer is Facebook. Can you name the world’s most valuable retailer? It has no inventory. The answer is Alibaba. Can you name the world’s largest accommodation provider? It owns no real estate. The answer is Airbnb.

Something interesting is happening in the commercial world where ownership of significant physical assets is no longer a perquisite to major business success. Traditionally, it was those who owned the means of production who ruled the business world. This is no longer the case. Even those who are responsible for transporting, storing and retailing goods are no longer the leaders of business. The internet, coupled with the smartphones and other mobile devices, is changing the way that customers access information and interact with businesses. Even more significantly, these changes are affecting who makes a profit and who fails in business.

So what is it that companies such as Uber, Facebook and Airbnb actually do to make a profit? In short, they are an interface between potential customers and businesses. The internet provides an unprecedented opportunity for businesses to provide dynamic and detailed information to customers, while providing a chance for customers to interact with each other. The smartphone and other mobile devices provide almost continuous communication and access for customers, coupled with GPS tracking, environmental scanning and an increasing range of information gathering systems. When these two seemingly limitless systems are paired, the company that provides an effective interface system which harnesses these systems while linking providers and customers can make a profit. For example, Uber provides privately owned cars in a premium way. Facebook provides information from friends who have visited the restaurant that you are considering. And Airbnb has empowered residents with spare accommodation to rent it to people who want unique, affordable accommodation options.

So how can companies develop strategies to harness this new environment where enhanced internet and mobile devices connect with customers to earn significant profit? Clearly, companies need to be aware of technological changes that alter the rules of competition. In addition, companies need to be aware of how customers may interact with these technologies and where the technologies may provide access to certain ‘slack’ resources, such as privately owned vehicles or vacant residential accommodation. It could be said, therefore, that these marketplace companies enable existing infrastructure to be used more efficiently.

Strategic management, however, is more than just being aware of how environmental trends interact with each other to provide new opportunities and a changed business landscape. For instance, not every company who is aware of these trends can turn the opportunity into profit. The company must be able to harness its own resources and in some cases change itself to turn opportunity into profit. This is the essence of strategic management, and this chapter will explore how you as a manager can be an effective part of the strategic management process.

QUESTION

Name and describe other companies that have been able to make a profit from new customer interface opportunities. Why do these companies make a profit while many others do not?