Using a White Cup for Crowdsourcing: a Starbucks Initiative


As one of the leading players in coffee& snacks retail industry, Starbucks is a well- known brand all over the world today. Holding a market share of 39.8% among all coffee chains in US and 25% in the UK, the firm is the main target of competition for many rivals (Statista, 2016).  For instance, Dunkin Brands, the closest competitor of Starbucks in the US market, has a share of around 25% and many other rivals such as Costa Coffee and Tim Horton’s are closely following Starbucks in terms of share and quality (Geereddy, 2014). Within the North American coffee retail market, the players usually distinguish themselves with specialty and quality of their coffees. This is also what Starbucks had been doing by offering differentiated products such as various flavors of Brazilian, Ethiopian and Arabic coffees in their stores. High- quality service within stores had also been an area of competition among these big players for a long time until very recently. Every specialty coffee retailer in the market is characterized by having trained staff and an efficient way of serving in stores.

The event that changed the course of this game was a campaign by Starbucks in 2014. After seeing that the conventional ways of competing are not effective enough in 21st century, the firm tried and found a gap for improvement in the value they provide to their customers. Considering that coffee consumption was highest among younger generations with increasing trends in previous years (MordorIntelligence, 2018), Starbucks aimed to improve their relations with these customer segments and also benefit from their involvement with the campaign. In order to differentiate their new environment friendly cup, Starbucks decided to benefit from the wisdom of crowds and initiated a crowdsourcing campaign in US and Canada. The firm asked its customers to paint their traditional white cups with any design they want and share its picture with the #WhiteCupContest hashtag (Starbucks, 2014). The business problem in this case was Starbucks’ need for a strategy to contact its customers and run an environment friendly campaign. So, their problem was clear and structured, which enabled them to use crowdsourcing as a means of solving this (Tsekouras, 2019).

To address this problem, Starbucks announced that the winner of this contest would receive a gift card worth $300 and their design would be mass produced and sold at Starbucks stores throughout North America. Starbucks also benefitted from the terms technical and social marginality and how they interact in this project. As described by (Tsekouras, 2019), technical marginality is a solver’s self-assessed technical expertise distance from the problem field, whereas social marginality is a solver’s distance from the social group that is prevalent in the relevant field. Any customer who were confident with a decent level of drawing technique could attend the contest, so the contest only required a basic level of technical marginality. Being common people instead of designers or painters provided them a room for creativity due to high social marginality. With the combination of a basic technical and high social marginalities, the contest provided ideal circumstances for attendants in terms of creativity in crowdsourcing (Tsekouras, 2019). Knowing that most of Starbucks customers already painted their cups for fun during their store visits (Starbucks, 2014), this initiative helped the firm to positively reinforce those in store experiences.

By asking their customers to come up with a design for their white cup, Starbucks actually outsourced the task of designing the cups on their own. Since those cups were to be produced in a way that enabled up to 30 uses, their design was an important part of the initiative. People would of course prefer to use a cup for 30 times when they like its design if not for environmental reasons. Calling for creative and fun designs helped Starbucks to target young adults which represented the early adopters of specialty coffee in terms of age. People at those age usually start adopting their coffee habits, mostly with limited experience on the topic. These age groups represent “the chasm” which is the state of a customer in their journey when they are at the early stage of adopting a product. And according to (Tsekouras, 2019), customers from the chasm is a good source for new ideas to businesses that aim to conduct crowdsourcing. Even if Starbucks was not aware of this, the choice of target customers was correct for the aim of this business idea.

Bottom line: Was this an efficient idea?

As a result of this campaign, more than 4000 cup designs were shared and a 21 years old student from the University of Pittsburgh won the $300 prize. Her design was then printed on the mass produced and reusable white cups Starbucks started to manufacture the following year. The campaign has helped Starbucks to advertise their sustainability efforts with the reusable cup. Afterall, the managers were so happy with the results, they launched the campaign again in 2015 for their store employees (Starbucks, 2015). Considering the efficiency of the idea, these results should not be a surprise. For instance, the idea provided joint profitability by granting customers product utility through giving them the chance to design their daily cups in their own way, and also giving the chance to be the one whose design is used throughout US and Canada. Participating customers received the opportunity to raise their design ideas and receive $300 on top of the feeling of success. On the other end, Starbucks benefitted from advertising their sustainability efforts to the whole North American market and also fostering customer relations by listening what they had to say.

Moreover, the idea was feasible in terms of required allocations; since it did not require any internal arrangements except using their social media accounts for advertising the campaign. They were going to produce and sell reusable cups anyways, so crowdsourcing the design of the cup was actually one less expense entry from the business proposal. Starbucks also did not have any environmental bindings or expenses that would hinder the application of this idea. In fact, they have supported the feasibility of their relationships with environment- concerned social groups with the White Cup Contest. This initiative of Starbucks can be an example for many other retailers which try to incorporate their customers in certain phases of product development.

Sources:

Geereddy, N. (2014). Strategic Analysis Of Starbucks Corporation. [online] Available at: https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf [Accessed 28 Feb. 2019].

Mordorintelligence (2018). Coffee Market Analysis, Share, Size, Value | Outlook (2018-2023). [online] Mordorintelligence.com. Available at: https://www.mordorintelligence.com/industry-reports/coffee-market [Accessed 28 Feb. 2019].

Starbucks (2015). Starbucks. [online] Stories.starbucks.com. Available at: https://stories.starbucks.com/stories/2015/starbucks-white-cup-contest-exclusively-for-partners/ [Accessed 28 Feb. 2019].

Starbucks (2014). [online] Stories.starbucks.com. Available at: https://stories.starbucks.com/stories/2014/starbucks-invites-you-to-decorate-its-iconic-white-cup/ [Accessed 28 Feb. 2019].

Statista (2016). Market share of major U.S. coffee chains, 2016 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/250166/market-share-of-major-us-coffee-shops/ [Accessed 28 Feb. 2019].

Tsekouras, D. (2019). CCDC Lecture 3.

Discrimination Towards Minority Founders: Is Crowdfunding The Solution?


A Brief Talk about Crowdfunding

Recently, crowdfunding has become one of the most well-known methods for a business owner to get his or her project funded through public contribution. Although, like any other fundraising methods, there are positive and negative sides to crowdfunding. The advantages and disadvantages of using crowdfunding platforms can be divided in two perspectives: firm-level and contributor-level (Tsekouras, 2019).

From a firm’s perspective, utilising crowdfunding platforms can be attractive for several reasons. Crowdfunding enables companies to collect funding in a short period of time. The companies can also tap into a larger pool of potential contributors. The community features offered by crowdfunding platforms (either through social media or its own social networks) help founders with constructive feedbacks for projects and online word of mouth. The tradeoff, though, would be the element of transparency that can disclose not only information about the company, but also personal information about the project creators (through social media). There is also the risk of damaged reputation should the project not meet the public’s expectations.

From a contributor’s perspective, crowdfunding platforms allow people access to exclusive products that better match their tastes more. The community aspect of the system also gives potential contributors a “place to belong”; enabling them to provide feedbacks and improve the projects. However, there are risks for an individual to support projects through crowdfunding. There have been cases of fraud in the past (Rio, 2017). There is also the risk of underperformance by the companies that do not deliver within the expected time frame.

The Minority Problem

Taking a closer look into the matter, with the intention to dig deeper regarding the potential of crowdfunding platforms, Younkin and Kuppuswamy (2016) conducted a research given the fact that there are problems of underrepresentation of minority founders in venture investment markets. This situation is relevant, knowing there is indeed discrimination in entrepreneurship against minorities. There are many examples of this. A research by Freeland and Keister (2014) mentioned that it is more difficult for minority founders to receive credit and another research conducted in 2011 saw that minorities must pay higher interest rates (Pope & Sydnor, 2011). Younkin and Kuppuswamy, relating the problem to several prior studies, explain the possible involvement of several types of discrimination as to why discrimination is prevalent even in the business sector:

1.       Statistical Discrimination: People devalue minorities because they expect that they are less likely to complete projects.

2.       Taste-based Discrimination: Preference to support or reject people of certain races/ethnicities, even if it is not economically efficient to do so.

3.       Implicit Bias Theory: Discrimination is described as subconscious acts reflecting cultural beliefs.

The research then recognises crowdfunding as a possible solution for this minority-founder problem. Crowdfunding, in this case, has several roles: (1) an alternate solution when traditional financial institutions show bias, (2) shifts the focus of funding decision away to the broader population, and (3) facilitates projects that are overlooked by “traditional” experts but valued by the wider population. However, to directly see the impact of crowdfunding on minority founders, Younkin and Kuppuswamy tested whether reward-based crowdfunding platforms like Kickstarter really improve the performance of projects run by black founders. They also attempt to identify which forms of discrimination are involved and ways to mitigate these biases.

Methodology & Results

In their study, the Younkin and Kuppuswamy (2016) combined an analysis of crowdfunding projects with an experimental design. In the former, they had collected a sample 7,617 Kickstarter projects launched between January 2012 and March 2014. Results of their statistical analysis showed that black founders were less likely to succeed as they received both fewer and smaller contributions. Moreover, black founders were not less capable in delivering their project than nonblack counterparts, thus suggesting that discrimination was present.

Subsequently, three experimental tests were conducted to identify the types of discrimination at play for which participants were recruited through Amazon’s Mechanical Turk Service. In the first one, the researchers tested for both types of conscious discrimination by asking participants questions about an example project and its founder. Moreover, subjects were randomly placed into one of four possible conditions with differing salience of founder race. Image 1 illustrates what participants saw during the test. After analysing their data, the researchers found that taste-based bias was driving discrimination.

Image 1. Project Page Example

The goal of the second experimental test was to distinguish between unconscious and conscious bias. This was done by testing whether funders altered their perception of project quality between white and black founder using project quality signals such as “Staff Pick”. Similarly to last time, participants were randomly placed into various conditions with differing degrees of quality signals. Results showed that discrimination was unconscious (i.e. implicit bias), thus invalidating taste-based bias as a driver of discrimination.

In the final experiment, the researchers wanted to test the efficacy of 3 intervention methods in mitigating bias. In particular, they looked at (Younkin and Kuppuswamy, 2016):

  • Debiasing Intervention; involves counteracting stereotypes about how a group acts
  • Group Success Intervention; involves counteracting stereotypes about how a group performs
  • Whitewashing Intervention; involves eliminating any indication of race

The usefulness of each method was once again tested by placing subjects into 9 different conditions. Ultimately, the results of this test reveal that both group success and whitewashing are effective at mitigating discrimination towards black founders.

Strengths

The main strength of this study is its pioneering efforts of studying which forms of discrimination are responsible for the underrepresentation of minorities in entrepreneurship. In particular, the subjective evaluation of investment risk and the capabilities of a founder make it rather difficult to study entrepreneurial settings. As a result, researchers turned towards audit or correspondence studies to assess biases. However, the authors tackled this issue by developing a novel research approach that involves the combination of observational and experimental data.

Managerial Implications

While crowdfunding does not by itself mitigate biases towards black founders, the study lists three methods to mitigate discrimination on the platform (Younkin and Kuppuswamy, 2016). The first two are examples of group success intervention, while the final one is an example of whitewashing intervention. First of all, the authors recommend displaying overt support, such as “Staff Pick”, towards African-American founders. They also advocate showing a list of successful founders on the platform, which includes black founder. Last but not least, they recommend reducing visibility of race on the crowdfunding platform’s project pages.


References

Freeland, R. E., & Keister, L. A. (2014). How Does Race and Ethnicity Affect Persistence in Immature Ventures? Journal of Small Business Management, 54(1), 210-228. doi:10.1111/jsbm.12138

Pope, D. G., & Sydnor, J. R. (2011). Implementing Anti-Discrimination Policies in Statistical Profiling Models. American Economic Journal: Economic Policy, 3(3), 206-231. doi:10.1257/pol.3.3.206

Rio, C. (2017, April 10). 6 Stupid Crowdfunding Scams That Should Have Been Obvious. Retrieved February 27, 2019, from http://www.cracked.com/blog/6-incredibly-obvious-crowdfunding-scams-people-fell-for/

Tsekouras, D. (2019). CCDC.

Younkin, P., & Kuppuswamy, V. (2016). Is the Crowd Colorblind? Founder race and performance in crowdfunding. Academy of Management Proceedings, 2016(1), 11665. doi:10.5465/ambpp.2016.11665abstract

Being “Controversial” Can Be Good for Crowdfunding Projects


A Brief Talk about Crowdfunding

Crowdfunding has become more and more of a common way for business founders to get their projects funded directly by wide population. The emergence of big crowdfunding platforms like Kickstarter and Indiegogo enabled project founders to “engage directly” with their potential customers. At the same time, people were finally able to invest in projects that they actually like. Through crowdfunding platforms, they can find projects from 3D printers to a block of soap that smells exactly like meat (yes, they made it from animal fat. I myself remembered backing a project called “Exploding Kittens” years ago simply for fun (I loved the name) and it ended up becoming one of my favorite games of all time.

Fun memories aside, the existence of crowdfunding platforms is a breakthrough for companies, big and small alike. There are several advantages and disadvantages of utilizing crowdfunding platform for businesses:

Pros:

  • It can be an easy and fast way to raise finance
  • It is a fast method to see potential customers’ reactions, and positive reactions usually result in free marketing (through social media, for example)

Cons:

  • It can be costly if not done right: donation incentives and marketing initiatives often need sound strategy
  • It is difficult to alter the business offerings, since public already has expectations of what the project will be (less flexibility)

Into the “Gray” Side of Crowdfunding

With the market development of this while crowdfunding concept, the “freedom” that crowdfunding platforms provide to individuals as a potential project founder might not always result in what our society’s “social norms” deem as ideal. There are many cases already in which people use the donations from crowdfunding platforms to do illegal activities. The most common form of this is scams: “founders” promise a great project and “run away” after reaching donation target of thousands of dollars. This is commonplace, and there are legal remedies already; but a more interesting case is when a founder raises money for a controversial project rather than an illegal one.

Controversial crowdfunding projects in most cases don’t actually break the law and are not outright illegal. Sometimes, they are just “teasing the boundary line” or not in accordance with acknowledged social values.

Sugarbook: When “Controversial” Meets “Attractive”

A simple example to illustrate a controversial project is to look at the newly established social networking platform Sugarbook. The startup built an app and website on the premise that a decent percentage of online dating puts importance of “having money” before considering moving on to more serious commitment in a relationship. Put simply, the app serves as the bridge to enable “sugar daddies” to meet young women.

The controversial nature of the business’ premise alone was able to attract attention from many places, wanted and unwanted. On one side, there is social unrest: many public officials stated that this app will be “watched” as many fear that this kind of apps tend to attract elements related to keywords like “prostitution”, “exploitation” and “women safety”. But, on the other hand, the attention this business got gained it lucrative funding and customers. The Sugarbook app states that it already has around 10,000 members already in New Zealand. Many other similar sugar dating apps also reflect the popularity of controversial businesses that somehow found their market.

The Business Perspective of Controversial Projects

The example of Sugarbook might provide us some business perspectives on a question that at the moment is perhaps boggling our mind: how does that even work? The first question that might appear is perhaps: “Is the business model any different?”. The answer is yes and no. For projects that gain their funding through crowdfunding platforms, the business model is still the same and separate. Crowdfunding platforms approve projects and get fee from project founders, then “display” the projects for people to see and invest. In our example case earlier, Sugarbook in itself doesn’t have much different business model to other dating and social networking app like Tinder: individuals can join to access networks of other like-minded individuals, and there is usually a premium service version that get the company more fees.

There are several explanations on why controversial-concept businesses work well knowing there are social or even legal consequences that can hinder the business from profitability, or even, sustainability. The first reason would be the attractiveness of being “controversial”. The word “controversial” is often associated with being “different”. And recent social movements encourage the notion that being different is attractive. This association thought-train is what enables controversial anything, including business projects, to gain more attention and traction in shorter time than “normal and boring” ones. Another reason that is still related to the first reason is the prevalence of social media in the spread of information on internet. Facebook, for example, has been reported by many sources that it is prone to spread of fake and controversial contents. With similar reasons that say “controversial” can mean “different” and “attractive”, social media plays a strong role in getting these types of businesses public attention.

Lesson Learned for Future Crowdfunding Project Founders

What we can learn from this is that while crowdfunding might seem to be an easy way out for our project’s financial needs, it isn’t always the case. The competition is already crowded; project founders still need to execute strategies to differentiate from others. Controversial businesses like Sugarbook teaches us that even with a controversial business premise that is seemingly harmful for business sustainability still manages to find its market (and investment to keep it going) and come out the winner of the situation (at least for now). Taking all these seemingly-trivial factors, like in this case, having a different and attractive marketing initiatives, into considerations is important to thrive, when everything is out in the open especially with crowdfunding platform system.

Who knows, maybe even you can be the next sensational founder of the $55,000 Potato Salad project in Kickstarter.

Written by: Theo Cavin Yudianto (495880)

Sources:

https://money.cnn.com/interactive/media/the-macedonia-story/

https://www.theverge.com/2014/10/1/6880201/potato-stock-kickstarter-potato-salad-zack-danger-brown

https://www.techinasia.com/sugar-daddy-app-sugarbook-funding-for-expansion

https://www.msn.com/en-my/news/national/malaysian-sugar-baby-dating-service-opening-down-under/ar-BBTZAeM?li=AAAHftF

https://lawpath.com.au/blog/pros-cons-crowdfunding-business


Augmented Reality Finally Becoming Reality?


Though it has been under development since the 1950’s, Augmented Reality (AR) is only now becoming practically applicable (PwC, 2016). In the last decade, AR has been in the centre of attention among academics, resulting in numerous studies analysing the (dis)advantages derived from the many possible AR applications. AR offers an enhanced perception to help people to experience the environment in new and enriched ways that will benefit in the fields such as education, health, design, and retail (van Krevelen et al., 2007).

While different definitions of AR still exist, it’s objective is clear; enhancing the user’s perception of and interaction with the real world. The business opportunities of this novel technology seem promising, as people can look at operations from a combined view of digital and physical operations while externalizing the burden of the task (PwC, 2016). Since AR is one of the novel technologies that could support new business activities and generate new business opportunities, it is of great value to investigate AR’s business potential. AR is a technology that could revolutionize the way companies do business and consumers buy products (Azuma, 1997). Specifically, AR has the potential to reshape the world of retail with its’ influence on the shopping experience of consumers. Major benefits of AR in the retail industry are that users can virtually visualize the products they would like to purchase, explore virtual showrooms, and create a more appealing shopping experience (Guven et al., 2009). But how exactly does AR affect the retail user experience? Will it eventually result in higher user satisfaction or will the limitations of the technology outweigh the opportunities?

According to Poushneh et al. (2017), AR-enriched applications empower users to better perform their tasks and appreciate the functionality of the product more. This is because AR-enriched applications are more entertaining and it enables consumers to have endless interaction with virtual information (Poushneh et al., 2017). Not only does AR produce higher user satisfaction, but also higher user willingness to pay (Poushneh et al., 2017). However, these benefits of AR will only become available when the technology application is practical, easy to use, easy to learn, organized, symmetric, attractive, and pleasant, in order for it to provide relevant information to the users (Poushneh et al., 2017). If companies fail to do this, it could actually negatively affect the user experience after all.  Therefore, developing such applications is not feasible for every company. As can be seen from the figure below, only 3 percent of the retailers has already implemented a well-working AR application (Business Insider, 2019). Companies that have already implemented such applications in their business model are therefore considers the first movers, of which IKEA is one.

(Business Insider, 2019)

Business model

IKEA is a Swedish multinational group that designs and sells (ready-to-assemble) furniture kitchen appliances, and other useful home accessories. Launched in 2017, the IKEA Place app helps customers to visualize how over 2.000 furniture items would look like in their homes (IKEA, 2019).

(IKEA, 2019)

Currently available on the app are large furniture such as sofas, armchairs and storage units (IKEA, 2019). Other products are still in development to become available in the app. The main objective for IKEA according to Michael Valdsgaard, leader of digital transformation at IKEA, is to allow shoppers to make more reliable buying decisions. According to Michael, most people postpone a purchase because they are not entirely sure that the colour is going to match or fit the room (IKEA, 2019). With this app, he hopes that this insecurity to purchase gets replaced with entertainment and security. It saves the customer a lot of time and consideration before placing a purchase. Furthermore, IKEA (2019) automatically scales products based on a room’s dimensions and claims that is able to do so with up to 98 percent accuracy (IKEA, 2019). Even allowing customers to see the texture of a fabric and the interplay of lift and shadows on a specific location.

Efficiency & Limitations

As mentioned before, AR-applications must be practical, easy to use, easy to learn, organized, symmetric, attractive, and pleasant, in order for it to provide relevant information to the users (Poushneh et al., 2017). Looking at the IKEA Place app, it seems to fulfil all these criteria. With easy to follow guidelines that help people to use the app while offering 98 percent accuracy, the app is able to provide additional value to the shopping experience of the users.

From a joint profitability perspective, the IKEA Place app offers both additional value to IKEA as well as to its customers. IKEA is able to help the customer in their shopping journey in order to make it more enjoyable. Furthermore, it also helps the customer to make more correct purchasing decisions and thereby reducing the number of products being returned, lowering costs, and increasing customer satisfaction. With IKEA’s large customer base, the company is able to grab a large share of the online home furnishings market, boosting its sales and giving an advantage over its competition (Business Insider, 2019). On the other hand, app users are able to enjoy a 3D-visualization of potential furniture, reducing uncertainty and the time needed to make a purchase decision, since there is less hesitation regarding the colour, size, fabric, and overall fit.

From a feasibility point of view, the company is not facing any legal or political issues. Rather, IKEA’s biggest challenge would be the social aspect. While IKEA claims to offer 98 percent accuracy to the app users, there is a chance that the app might not visualize a piece of furniture correctly to the user. For example, when the user tries out a sofa in his/her living room and the app shows that the product should fit, however, once it arrives it results to be too big. The customer has then wasted time, money and effort while relying on the advice given from the company. In such a case, will the customer bear the costs or will IKEA be held responsible?

(IKEA, 2019)

Another drawback of the IKEA Place app could be linked to consumers’ cognitive limitations discussed during session two (Tsekouras, 2019). When customers are offered many options, they find it difficult to search through all of them. There is a fear of regretting the ‘wrong choice’. This could also be the case with IKEA, since the app allows the customers to compare thousands of products and have them visualize it in their room, making it hard t consider all relevant attributes when choosing between alternatives.

References

Azuma, R. T. (1997). A survey of augmented reality. Presence: Teleoperators & Virtual Environments6(4), 355-385.

Guven, S., Oda, O., Podlaseck, M., Stavropoulos, H., Kolluri, S., & Pingali, G. (2009, March). Social mobile augmented reality for retail. In 2009 IEEE International Conference on Pervasive Computing and Communications (pp. 1-3). IEEE.

IKEA (2019). A better Reality. Retrieved from Https://highlights.ikea.com/2017/ikea-place/.

Poushneh, A., & Vasquez-Parraga, A. Z. (2017). Discernible impact of augmented reality on retail customer’s experience, satisfaction and willingness to buy. Journal of Retailing and Consumer Services34, 229-234.

PwC. (2016). Augmented reality: the road ahead for augmented reality. Retrieved from

Tsekouras, D. (2019). Session 2: Consumers’ Cognitive Limitations. Erasmus University.

Van Krevelen, D., & Poelman, R. (2007). Augmented reality: Technologies, applications, and limitations. Vrije Univ. Amsterdam, Dep. Comput. Sci.

Nexar – Business case


Making the road safer by using the crowd

Nexar was founded in 2016 by Eran Shir and Bruno Fernandez-Ruiz, two former employees of Yahoo (Tilly, 2016). To develop this application, they have raised 44,5 milion dollars in three founding rounds. The company provides a mobile application that turns your mobile phone in a dashcam that is connected in a vehicle-to-vehicle network (MacVie, 2018). The main focus of the application is making car driving safer and this can be seen as a real need as almost 1,3 million people worldwide die of car accidents (Kouwenhoven, 2018). 

How does it work

All Nexars users are connected in the Open Vehicle Network. By using AI dashcam functionalities Nexars application is able to record the surroundings and identify for example traffic signs, road signs, other drivers, pedestrians, etc. By analyzing this information with algorithms insights can be provided about traffic patterns and infrastructure. All this data is of course anonymized and other parties can subscribe for usage of this data (Nexar, 2019). Nexar also launched ‘City Stream’ in 2017 which by enough users can optimize driving routes, identifying driving infrastructure and finding available parking spots which all together makes a city and driving safer (Nexar, 2019). The Nexar application can therefore be seen as a two-sided platform at on the one hand the drivers that use the application and on the other hand 

Value for multiple parties 

The main focus of the application is to make driving safer by communicating real-time warnings about dangers to prevent accidents (MacVie, 2018). Moreover, when an accident happens Nexar provides her drivers with a detailed collision report including video and images about the accident. Not only for insurance can these recordings be useful, but also for example when somebody cannot communicate what happened to due to injuries. Besides these advantages for individual users it also provides valuable insights for city planners and managers to use for roadway maintenance and infrastructure- and traffic management. Especially, areas that are prone to incidents are important to be identified, so these areas can be redesigned and further accidents can be prevented. Furthermore, third party developers of ridesharing applications can take advantage of this real-time data to improve their applications. Besides the value of all the parties making cities safer benefits all citizen (Nexar, 2019). 

Crowdsourcing 

Besides these application Nexar also makes use of crowdsourcing for finding solutions for problems they face in which people can become co-creators. They have organized for example a competition to find a solution that the Nexar app can recognize the traffic light state in images (Brailovsky, 2017). Another challenge was detecting cars on diverse datasets around the world (Nexar, 2019). These crowdsourcing competitions could also form a new business model for them, as many of these challenges are interesting for companies that are developing autonomous driving as well. Besides the advantages for the company itself it challenges people to find solutions and motivates them to participate in these challenges. In the first challenge the participants were provided with a training and test data set and had two months to come up with a solution. The participant that won the competition got 5000 dollar (Brailovsky, 2017) and moreover the top 5 participants were invited to present their ideas and also invited for an interview that could lead in a job offer at Nexar’s Deep-Learning Team. So not only money was used as an incentive, but also acknowledgement plays a role in the success of the competitions. Also there is a leaderboard to motivate people to participate and the challenges are mentioned on the website of Nexar, so everybody can see who the winners of the challenges are. At this moment there is no competition, but people can subscribe to receive an email when a new competition starts (Nexar, 2019). 

Challenges for Nexar

Challenges that Nexar faces can be that also more accidents occur, because of the use of mobiles in the car. It could be said that instead of warning the drivers for dangerous events it can evoke dangerous situations as the drivers are paying more attention to the application then to the road, this also is an issue with the Uber drivers. Another challenge could be the many other applications that provide optimal routes, parking spot availability and information about traffic jams. Also it is a challenge to have enough users to collect enough data and create valuable insights. This also has to do with network effects, as there should be enough users to attract more users, but also to attract application developers and other parties that like to invest or buy the data. 

Future implications

At this moment Nexar has a very good working business model, but they could develop this business model further. By for example connecting their network to emergency services, so when an accident happens these services are immediately warned. Also their route could be optimized using Nexar traffic data. Another option to develop their smart city solution further is to expand it to public transport. By also collecting data of this area a complete picture of the traffic flows can be provided to city planners and managers, but also people can be provided with advice which transports is the best choice to a specific location. As I mentioned before it would be very valuable to become more of a crowdsourcing platform also for competitions like the two, they have organized before. Especially, for this area and thinking about autonomous driving there are a lot of challenges that we are still facing. Another area of interest could be working together with insurances companies, as with the recordings drivers can prove that they always drive the right speed and follow the traffic rules. All with all in my opinion there are enough possibilities to expand this application.

References:

Brailovsky, D. (2019). Recognizing Traffic Lights With Deep Learning – freeCodeCamp.org. Retrieved from https://medium.freecodecamp.org/recognizing-traffic-lights-with-deep-learning-23dae23287cc

Kouwenhoven, E. (2019). Wereldwijd sterven 1,3 miljoen mensen in het verkeer. Retrieved from https://www.ad.nl/auto/wereldwijd-sterven-jaarlijks-1-3-miljoen-mensen-in-het-verkeer~a9a15e46/

Macvie, C. (2019). 5 Cool Crowdsourcing Platforms You Should Check Out. Retrieved from https://www.fulcrumapp.com/blog/crowdsourcing-apps/

The Nexar Challenge. (2019). Retrieved from https://www.getnexar.com/challenges

Tilly, A. (2019). This App Turns Your iPhone Into A Dash Cam With Machine Vision. Retrieved from https://www.forbes.com/sites/aarontilley/2016/02/12/this-app-turns-your-iphone-into-a-dash-cam-with-machine-vision/#5d2206a41912

Activist Choice Homophily and the Crowdfunding of Female Founders


An infamous adage states “Birds of a feather flock together”. This implies that individuals favor other individuals that are similar to them. This not only applies to one’s personal life, but also to his professional one. As such, with this logic in the workplace people should try to help and promote others that share identical traits to them.  However, is that truly the case? Cohen, Broschak & Haveman, (1998) conclude that when women are numerous in higher-level position, promotion for other women is less likely. The researchers argue that the women managers do not feel the need to push for the advancement of their women subordinates. What motivates such a behavior?

Greenberg & Mollick (2017) chose to investigate this question by further researching homophily and more specifically its underlying mechanisms. The authors defined homophily as the “tendency of individuals to associate with others based on shared characteristics”. While homophily had previously been researched, the underlying causes behind the phenomenon were still unclear. The researchers distinguished between two kinds of homophily: induced and choice homophily. On the one hand, induced homophily is a result of homogenous networks that perpetuate themselves. Thus, the offered opportunities of interaction, such as schools for instance, are homogeneous and led similar individuals to associate with one another (Kossinets & Watts, 2009). Greenberg & Mollick (2017) were interested in researching choice homophily, which according to Kossinets & Watts, (2009) is more related to individual preferences and choices we make as a result. However, Greenberg & Mollick (2017) argue that choice homophily can in fact be further divided into two different constructs that would explain the conflicting results in previous research concerning homophily.

  • Interpersonal choice homophily operates on a personal level and implies that the affinity for similar people is linked to our notion of self-love.
  • Activist choice homophily operates on a group level and implies a certain solidarity facing shared structural barriers that arise from a common social group identity, and a desire to overcome such obstacles.

In order to focus on choice homophily, the researchers decided to conduct their studies in the context of crowdfunding. Indeed, induced homophily is reduced in two ways in this environment. Firstly, there is no formal gate keepers, unlike in venture capitals, and anyone can support a project thus making the opportunities for interaction heterogeneous. Secondly, Internet does not limit the environment in which people interact, which gives them broader choices in terms of who they wish to support.

Various elements motivate individuals to fund projects, such as a philanthropic behavior for donation-based crowdfunding. Nevertheless, it is important for individuals to be aware of their unconscious biases in order to make choices that they truly support. Why did I choose to fund this person’s project? Was it solely based on the project itself or did his gender impact my decision?

To find evidence for their newly defined activist choice homophily, Greenberg & Mollick (2017) conducted two tests. The first one was a laboratory experiment. 399 students at two private universities in the Northeastern US participated. A technology project that had been successfully funded in Kickstarter was chosen, as it is an area in which women are underrepresented and therefore portrays a group-level disadvantage appropriate to test for activist choice homophily. Furthermore, measures were taken to mimic real life circumstances. As such, key crowdfunding aspects such as a description, that are also antecedents for success, were added. The only two manipulated elements were the name and the picture of the founder as they portrayed his gender. The design of the experiment was a 2 (founder gender) × 2 (participant gender) design. That entails that half of the women participants were perceived the founder as the same gender as them and the other half saw him as a male. The same conditions applied for male participants. Several measures were taken to avoid possible cofounds when manipulating the picture and name. Different components measured the both types of choice homophily as well as one’s support for a funder. For instance, respondents were asked how much of $1 they were willing to donate to assess the latter.

A field experiment was then conducted with data on 1,250 Kickstarter projects from 5 categories:

  • Two predominantly male (gaming and technology)
  • Two predominately female (fashion and children’s books)
  • One more balanced between both genders (film)

Restrictions were imposed on the sample, such as eliminating projects that sought less than $5,000. Control variables were defined to assess whether key Kickstarter aspects, such as whether a project was featured, biased the results. Robustness checks were also done to check the scales.

The main results of this study are the following.

  • Results from both the laboratory and field experiments were consistent in showing that women were more likely to fund other women’s projects, as interpersonal choice homophily would suggest (results for men were inconclusive).
  • Female founders in technology are more likely to reach their goal, as they face disadvantage because of their gender which is consistent with activist choice homophily

All in all, this research not only explored a subject that had not been properly researched (aka the underlying mechanisms of homophily), it did so in a very thorough manner. Thus, the results found in the laboratory experiments were confronted to those collected later in the field experiment. This approach guaranteed that the conclusions found were of high external validity and thus were applicable in real life. Moreover, control variables were used to make sure activist choice homophily was responsible for the effect that was observed on donations and funding decisions. In addition, robustness checks were conducted to test the scales.

In conclusion, this paper is not only relevant for consumers to better understand the unconscious motives behind their choice. It also concerns managers. Indeed, implications of this research go beyond a crowdfunding context. Even though the interaction that induced homophily would have with activist choice homophily is tough to assess, the latter also has a role to play in more traditional funding processes, such as a venture capital and even in a workplace in general. As such, to fight against women underrepresentation in technology, the solution has been to increase the proportion of women in related entrepreneurships and venture capitals. Nevertheless, with the concept of activist choice homophily, it appears that activism has an important role to play as well in breaking the constraints women face in such a field. As such, efforts in representation of women should be continued. However, it should be complemented with initiatives to increase identification, mutual support and activism for the individuals of unrepresented groups.

“One for all, all for one!” (Dumas, 2018)

  • Cohen, L., Broschak, J., & Haveman, H. (1998). And Then There were More? The Effect of Organizational Sex Composition on the Hiring and Promotion of Managers. American Sociological Review, 63(5), 711. doi: 10.2307/2657335
  • Dumas, A. (2018). Three Musketeers, The. La Vergne: Dreamscape Media.
  • Greenberg, J., & Mollick, E. (2017). Activist Choice Homophily and the Crowdfunding of Female Founders. Administrative Science Quarterly, 62(2), 341-374. doi: 10.1177/0001839216678847
  • Kossinets, G., & Watts, D. (2009). Origins of Homophily in an Evolving Social Network. American Journal Of Sociology, 115(2), 405-450. doi: 10.1086/599247

The Future of Parenting


Owlet’s Smart Sock

As a parent, the ‘’health management’’ of your children is a time-consuming and stressful occupation. Especially due to the fact that infants cannot express themselves verbally, which often confuses parents. This is where digitalization could lend a helping hand. New possibilities are helping parents to understand the needs of their infants. One of these possibilities is the Smart Sock. Kurt Workman is the CEO of a baby-care company named Owlet.  When starting a family, he had some concerns about the health of his future children due to a inherited heart condition of his wife. This resulted in the creation of the Smart Sock.

Owlet is a company that provides parents with help through a so-called Smart Sock. The company was founded in 2013, which was also the year that the co-founders began to work on in-home infant pulse oximeters. Their mission is as follows: ‘’ Better care for babies in the home, empowering parents with the right information at the right time’’ (Owlet, 2019).

The smart sock allows parents to track the heart rate and oxygen level of their infant, even while the baby is asleep. The levels are sent in real-time to the parents’ phone, which then allows them to gather insights about their baby’s wellness. If the smart sock identifies a drop in the heart rate or the oxygen level outside of a pre-set range, it will notify the parents which allows them to react in the way that is needed. The smart sock comes with a base station, which will glow green to reassure the parents that their infant is doing fine. Not only will this help the parents understand the needs of their babies, but it will also allow them to experience less anxiety and improved sleep. (Owlet, 2019).

The Market

The Smart Sock of the baby-care company is active in the smart textile market. By sensing and reacting to stimuli in its environment, wearable smart textile allows the wearer to experience increased functionality (Vagott et al., 2018). The increase in the miniaturization of devices and the past advancements in technology have driven the market growth. Moreover, there is a high demand in consumer electronics, which positively impacts the market (Grand View Research, n.d.).

Business Model

As the aforementioned, the key activity of Owlet’s Smart Sock is to provide parents with access to better tools to care for their infant in their own home. By using smart sensors and pulse oximetry, the Smart Sock offers a better picture of the wellness of a baby. The sock collects the necessary data in order to provide parents with insights about their infant. In addition, this will also enhance the quality of life of the parents, as the product will reduce anxiety and improve their sleep. Moreover, it will also make them more knowledgeable about the baby’s health, as it can be difficult to understand the signals that baby’s express. (Canal, 2018).

Currently, parents can buy the Smart Sock for £269.00 on Owlet’s online web shop and in retail stores such as Target and Walmart (Owlet, 2019).  The Smart Sock is suitable for infants up to eighteen months and is targeted towards anxious millennial parents. Owlet started selling their Smart Socks in 2015, which turned out to be a great success, as the company booked $2 million in revenue by the end of the year. After some years and some adjustments to the products, Owlet managed to close 2017 with $19 million in revenue. During 2017, the company has also raised $25 million in funding, which they used to expand internationally. (Sportelli, 2017).

By using different channels, such as online web shops, retail shops and social media, Owlet is able to sell their products to tech-savvy parents. The Smart Sock comes with 3 fabric socks (sizes 0-18 months), a Smart Sock sensor and a base station. Furthermore, it also includes charging cords, a power plug converter and a power adapter. The results of the Smart Sock are sent to the base station, which then will transmit the data to an application that allows parents to have insights about their baby’s health. (Owlet, 2019). Owlet also provides their customers with a 45-day Peace of Mind Guarantee, which allows the customer to return the Smart Sock within 45 days of purchase. This will increase the likelihood that a doubting customer would purchase the product, as they will not have much to lose when they do not like the product after their purchase. (Owlet, 2019).   

The Smart Sock is attractive because it creates value for the parents by reducing the anxiety that they experience when taking their new-born to their own home, realizing they left the safe hospital environment. The Smart Sock alarms parents when it senses that something is wrong, which gives them a peace of mind.

The Challenges

Even though the Smart Sock sounds like a revolutionary product to many anxious parents, there were still some negative reviews. One of the challenges that Owlet experienced at the beginning, was to convince parents to spend so much money on a single product. Moreover, there were also some reports of frequent false alarms, which worried parents even more. In addition, there were also some cases in which parents claimed that the sensor created some burn marks. However, Owlet took these reviews seriously and made some adjustments to their product. (Sportelli, 2017).

Besides the negative reviews, there were also some concerns with regards to privacy. Smart wearables are gathering consumer data and transmitting it over Wi-Fi, Bluetooth and the Internet. (Friel, 2017). According to consumers, the data has intimate details about their infant’s health. This could raise some concerns, as the data might be sold to other companies, such as insurance firms. According to Dr Leaver, Curtin University associate professor, this is not a stretch to imagine, given the history of similar products such as the Fitbit. (Friel, 2017).

References

Canal, E. (2018). This Company Makes Wearable Devices for Babies So Their Parents Can Sleep Better. Available at: https://www.inc.com/emily-canal/best-industries-2019-owlet.html

Friel, A. L. (2017). Babies and Baby-making, or Not… Privacy and Security Lessons for the Internet of Things. Available at: https://www.dataprivacymonitor.com/internet-of-things/babies-and-baby-making-or-not-privacy-and-security-lessons-for-the-internet-of-things/

Grand View Research. (n.d.). Sensor Market Analysis, Market Size, Application Analysis, Regional Outlook, Competitive Strategies And Forecasts, 2014 To 2020. Available at: https://www.grandviewresearch.com/industry-analysis/sensor-market

Owlet. (2019). Why Parents Love the Smart Sock. Available at: https://owletbabycare.co.uk/

Sportelli, N. (2017). Owlet’s Smart Sock Makes Millions Selling Parents Peace Of Mind — But Doctors Are Unconvinced. Forbes. Available at: https://www.forbes.com/sites/nataliesportelli/2017/10/03/owlets-infant-health-monitor-is-winning-over-millennial-parents-doctors-are-another-matter/#2b059a976469

Turner, R. (2017). Owlet Smart Sock prompts warning for parents, fears over babies’ sensitive health data. Available at: https://www.abc.net.au/news/2017-09-12/owlet-smart-sock-prompts-warning-for-parents-privacy-concerns/8893104

Vaggot, J., Parachuru, R. (2018). An Overview of Recent Developments in the Field of Wearable Smart Textiles. Journal of Textile Science & Engineering.  Available at: https://www.omicsonline.org/open-access/an-overview-of-recent-developments-in-the-field-of-wearable-smart-textiles-2165-8064-1000368.pdf

Viralspace: an on-demand user-generated-content marketplace


What is Viralspace?

Viralspace is created by three master’s students of Stanford, Hiro Tien, Ashwini Pokle and Apoorva Dornadula and is an on-demand user-generated-content marketplace. Viralspace is founded in 2018 when Hiro and Apoorva, who were interns at Google at that time, teamed up with Ashwini, a former amazon software engineer to found Viralspace. Viralspace provides a platform where people can create content for brands. Brands are able to crowdsource brand-aligned content from people that post pictures or videos containing products of that specific brand on social media. The founders of Viralspace think this will be a more effective way for content creators to collaborate with brands, without spamming their followers. (The Stanford Daily, 2019).

How it works for creators

At the moment, Viralspace is a web application where users can create an account and then post content that features the brand. On the platform, brands post photography and videography contest, called challenges.  These challenges created by the brands are brand-sponsored competitions where customers can submit their content. On the homepage of Viralspace, the challenges can be found along with their descriptions and rewards. Right now, for example, the #whyilovecoupa challenge is running. Coupa Café is a coffee and dining company that has also opened several locations at Stanford University. Customers are asked to upload a photo or video of them with their favourite Coupa Café product and explain in the caption why they love Coupa Café. These challenges are live during a certain period and at the end of each challenge, the submission with the most votes earns the People’s Choice Award, which typically ranges from $50-100. People can share links to their post on social media so they can get more votes with the help of their friends and followers (The Stanford Daily, 2019).

#challenges on Viralspace platform

How it works for brands

Brands can contact Viralspace and tell them their marketing needs and what they’re looking for: photos of people with their product or inspiring video storytelling for example. Then, Viralspace will create the custom challenge and get creators submit content at the end of the certain time period the winners will be chosen. Right now, those top three submissions are chosen by Viralspace and the companies themselves. But in the future, they hope to eventually develop an algorithm that is able to select the winning creators and submissions. In this way, companies can acquire the winning content to use on their social media and post authentic user-generated content. The benefit for companies is the fact that they are able to crowdsource advertising material at relatively low costs. And on the other hand, the platform creates value for customers by reward them for creating and uploading content. In an interview Dornadula said that she differentiates Viralspace from potential competitors because Viralspace is not ‘selling audience or taking advantage of audience’. But Viralspace is focussing on content creation and the virality of social media posts. According to the Kleiner Perkins Internet Trends Report (2018), user-generated content fetches an engagement that is seven times as high as that of brand-generated content. This in combination with the fact that companies are able to crowdsource advertising material at a relatively low costs, makes it attractive for companies to use Viralspace.

Business model

At the moment, Viralspace is still a beta version and in development. Viralspace joined an accelerator program early January and received $150.000 in funding from a venture capital firm named Village Global. The team is currently working with their advisor Chris Yeh from Village Global to construct a business model. But it is sure that Viralspace will be a two-sided platform where on one side of the platform the content creators are and on the other side the brands. Right now, they are considering charging brands for a Viralspace subscription while keeping user accounts free of charge. In this way it would be more attractive for content creators to join the platform, since it will be free and they can make money or win prizes. As with all platforms, it will be more valuable for companies when more content creators join, the so-called same-side and cross-side network effects of a platform (Van Alstyne et al., 2016). And since the platform makes it possible for companies to generate advertisement material at a low cost, it will still be attractive despite the charges that Viralspace will ask to the companies.

Future plans

In an interview with the Stanford Daily, Tien said that all the features they will be building will be in the cause of creating network effects so the platform will be more attractive for both content creators as companies by adding more value. An example he mentioned is the launch of an in-app voting system where users of Viralspace can vote for other submissions and earn a ‘People’s Choice award’. Their vision is to fix the social networking experience between brands, creators and consumers because they think it’s fundamentally broken at the moment (The Stanford Daily, 2019).

In my opinion, the idea of Viralspace is really interesting since so many people post pictures featuring brands on social media nowadays and it would be even more fun when we can make money with it. Since user-generated content is proven to generate higher engagement and is more trust-worthy this could be very interesting for brands and companies as well and maybe it could be the new advertising model of the future…


References

Meeker, M. (2019). Internet Trends Report 2018. [online] Kleiner Perkins. Available at: https://www.kleinerperkins.com/perspectives/internet-trends-report-2018/ [Accessed 24 Feb. 2019].

Tsai, A. (2019). Viralspace: Crowdsourcing virality. [online] The Stanford Daily. Available at: https://www.stanforddaily.com/2019/02/22/viralspace-crowdsourcing-virality/ [Accessed 24 Feb. 2019].

Van Alstyne, M. W., Parker, G. G., & Choudary, S.P. 2016. Pipelines, platforms and the new rules of strategy. Harvard Business Review, 94(4), 54-62

Viralspace.ai. (2019). [online] Available at: https://www.viralspace.ai/how/ [Accessed 24 Feb. 2019].

The Entertainment Experience – User Generated Movie


Paul Verhoeven, a famous Dutch film director had an idea to make a movie in cooperation with the crowd. He launched this project in a very mysterious way with a tweet (translated to English): @VerhoevensTweets. ‘You have to go with your time anyway? Stravinsky started composing music when he was 70 years old. (Schumacher, 2011). Paul Verhoeven was already 73 years old when he decided to try a completely new concept in film making.

His project was called ‘The Entertainment Experience’ and it was the first Emmy award winning, multi-platform concept creating a user generated movie (Entertainmentexperience.com, n.d.). This new way of film making was like this: Paul Verhoeven and his team wrote the first script out of 8 parts of the movie and the other 7 parts of the movie have to be written, shot and produced by the competing teams. The first step is that the scripts are handed in, after which the best script is selected by the public through a voting system. Following this step is that the production teams have to make the movie part that corresponds with the winning script.

All the movie parts are then shown to the public, where everyone can vote for their favourite team and production. The production team that receives the most votes is then selected for that specific part, all of these parts then add up to a complete movie of about 30 minutes. This is a crowdsourcing project because they let the public make the movie parts and let the public decide which part is then added to the movie. A disadvantage of this strategy could be that the team with the largest network will win, because they ask their friends and family to vote for them of course. The quality of the part might be of lesser importance then. Another disadvantage of this strategy is that people might not even take the time to look at all the created parts from all of the teams, I remember watching just the parts that were produced by a friend of mine and afterwards I would give them my vote immediately.

In total there were about 35.000 people participating in this concept, most of them were voters and a smaller group were ‘members’. In total they created almost 300 scripts, 54 films 206 soundfiles, 31 posters and 28 games (Magned, n.d.).

The Entertainment Experience is a platform where participating teams have to show a broad spectrum of skills. Firstly they have to write the script for the 7 following parts, they then have to direct and shoot the movie part, after which they have to do the soundcomposing and editing (Entertainmentexperience.com, n.d.). Furthermore, they have to show their skills regarding 360-interaction and entertainment in general. The concept creates a total of 2 movies. One that is written by the contestants and another one that was written and directed by Paul Verhoeven and his team.

The fact that this movie actually won an Emmy award, is proof that the concept works. The Chinese copied the idea in 2014, but afterwards I couldn’t find any other cases that used the same crowdsourcing business model. The reason for this is not very obvious, but I think that it is quite hard to get many people together that want to commit to making a movie, without actually being sure that they are getting paid for their work. Another reason could be that the project took 39 weeks to complete, which might be a very high barrier for people to commit to such a long project. Moreover, another disadvantage is that as a producer of this film that you’re not sure about the quality of the people competing. If there are not many people competing that are good hobbyists or semi-professionals it might be very hard to achieve a certain quality standard for movies. However there are also advantages in creating a movie with this concept.

A major advantage is that it doesn’t cost as much resources to produce a movie as traditional movies have, because the competing teams have to gather their own resources for the production of the parts. Another advantage is that their might be some hidden pearls in the public, that are actually really talented hobbyists that are capable of producing outstanding work and they might continue to pursue their career after the entertainment experience in movie production. Additionally, this movie is what the people actually wanted, because everyone has been involved in the process of making the movie. This ensures that the production is in line with demand of the market, however it might not be completely true, because 35.000 people don’t represent the entire movie market, but in my opinion this number comes pretty close. A drawback in making a movie in the traditional way is that the producers don’t know whether the public will like their movie or not, this user generated movie concept solves this challenge partly in my opinion.

In conclusion, I believe that this business model is capable of producing a good movie, however it requires a lot of commitment from all of the participants throughout the entire duration of the project. I think that this is the reason why it hasn’t been done anymore after the project from Paul Verhoeven and the project in China, even though the first concept yielded a very good result with the Emmy award in Cannes.

References

Entertainment Experience – Are You Ready? Retrieved from https://www.entertainmentexperience.com/#About

Entertainment Experience | FCCE / Ziggo. Retrieved from https://www.magneds.com/cases/entertainmentexperience

Schumacher, E. (2011). Verhoeven werkt aan mysterieus filmproject – Filmkrant. Retrieved from https://filmkrant.nl/nieuws/verhoeven-werkt-aan-mysterieus-filmproject/


Procter & Gamble Corporation: value co-creation through open innovation


This blogpost provides information about the Connect+Develop platform created by Procter & Gamble (P&G). The blogpost by 441485DG (linked below) has also touched upon this subject, however, this post is a more up-to-date and in-depth analysis of how P&G  has been successful in value co-creation through their online platform website.

P&G is one of the largest consumer goods manufacturers, distributors and advertisers worldwide, with more than 65 products and a global reach of 180 countries (Procter & Gamble, 2006).

A short history

P&G was established in 1837 by William Procter and James Gamble, a candle maker and soap maker, respectively (Procter & Gamble, 2006). The company became successful soon: in the 19th century, P&G had several contracts to supply soap and candles to the Union Army during the American Civil War (Procter & Gamble, 2006). In 1930, P&G acquired Thomas Hedley Co, a company based in the UK, which was also the beginning of P&G’s international expansion. After this, P&G made several acquisitions, expanding to a number of different business divisions (Procter & Gamble, 2006). Furthermore, P&G launched a successful range of personal health, grooming, beauty and home care brands (Procter & Gamble, 2006).

However, during the 1990s, the company encountered a reduction in sales growth (Agafitei & Avasilcai, 2015). This was mainly due to their closed business model, where there was no communication with outside partners about the development of novel products (Agafitei & Avasilcai, 2015). Moreover, the company considered its technology a secret, and licensing was rarely done (Agafitei & Avasilcai, 2015). Because of the rise in global competition and the increase in R&D costs, the company decided to switch to a business model with more proactivity (Ozkan, 2015).

Business idea

In order to switch to a more proactive business model, P&G considered co-creation and open innovation. Co-creation occurs when a company brings different people (and parties) together to cooperatively produce a mutually desired outcome (Agafitei & Avasilcai, 2015). With co-creation, the key focus is on the interests of all stakeholders, creating value by continually improving experiences of all stakeholders. The advantage is that co-creation increases engagement with all stakeholders, and that it continuously builds on new interactions and experiences, leading to increased creativity, productivity, lower risks and costs.

According to Lawer (2017), open innovation is a standalone form of co-creation, because it is more distributed and because companies give more control to parties joining the platform. More specifically, open innovation is a way for firms to use the strengths and ideas of people outside their company, in order to improve products or internal processes of the firm (Ozkan, 2015).

Business model

In order to become more proactive, the company launched the Connect+Develop platform in 2001 (Procter & Gamble, 2019). This is an open innovation platform where the company engages with the most innovative minds to deliver on P&G’s opportunities (Procter & Gamble, 2019). The main idea behind Connect+Develop is to create an opportunity for people outside the company to improve current products, and to create innovative ideas for P&G (Agafitei & Avasilcai, 2015). Moreover, outside parties are also able to contribute by solving tricky problems within the company (Ozkan, 2015). In order to simplify and increase engagement with outside parties, P&G launched a Connect+Develop website in 2013 (Ozkan, 2015). The platform can be accessed via https://www.pgconnectdevelop.com/. The website directly links outside parties to the top needs of the company, and P&G management and evaluators directly to user submissions. More specifically, the “current needs” button shows all different needs for different categories. This way, the evaluation process becomes faster, increasing overall efficiency of the platform (Ozkan, 2015). For example, when a user clicks on the current need category “beauty and grooming innovations”, it shows an explanation of the category, and it shows that there are no current needs for it. However, every user is still able to submit his/her innovative idea by clicking on “click here to submit your innovation” (see figure 1).


Figure 1: Current needs – beauty and grooming innovations category

Furthermore, there are several criteria that a user should consider before he/she is able to submit his/her idea, which is also explicitly shown on their website (see figure 2). P&G also states which type of solutions they are not interested in, which can also be found on the “submission criteria” page.


Figure 2: Submit your innovation – submission criteria

Through this online platform, P&G receives a great number of open innovation submissions. These proposals need to be managed and reviewed. In order for this process to work efficiently, the online platform helps P&G by collecting additional data the company needs. Then, the submissions are reviewed by a specific team within Connect+Develop. Approved submissions are then distributed to their relevant business departments for further review (Ozkan, 2015).

Efficiency of the model

Looking at it from a joint profitability perspective, the model works. According to Huston & Sakkab (2006), more than 35% of the company’s new products have elements of the open innovation submissions. Moreover, the success rate of P&G’s innovation has more than doubled and the costs of innovation have reduced (Huston & Sakkab, 2006). Lastly, since 2000, P&G’s stock price had doubled as well (Huston & Sakkab, 2006). From the customer perspective, the Connect+Develop platform has also been beneficial. By co-creating and using the open innovation platform, customers are able to define products they will eventually want to purchase, and they do not have to wait for firms to decide the key elements of a product (Agafitei & Avasilcai, 2015).

Considering the feasibility aspect, the model is a bit less efficient. According to Veer et al. (2015), process coordination costs and implementation costs are high for an open innovation platform. Furthermore, open innovation requires adapting the culture of the company, as there might be a feeling of loss of knowledge control among employees (Veer et al., 2013). Lastly, from a legal point of view, an effect of open innovation might be intellectual property spillovers (Veer et al., 2013). Because of these costs and risks, open innovation requires a lot of research and planning prior to its implementation, which might not be feasible for smaller companies or startups for example (compared to P&G).

All in all, P&G has been able to create an effective value co-creating, open innovation platform. By becoming more customer-centric, the company has increased its number of new products, and doubled its stock price. However, the risks of open innovation should be taken into account before implementing it.

Reference list

Article 441485DG: https://consumervaluecreation.com/2016/03/11/procter-gamble-from-rd-to-connectdevelop-platform/

Agafitei, G. and Avasilcai, S. (2015). A case study on open innovation on Procter & Gamble. Part II: Co-creation and digital involvement. IOP Conference Series: Materials Science and Engineering, 95.

Huston, L., and Sakkab, N. (2006). Connect and develop: inside Procter & Gamble’s new model for Innovation. Harvard Business Review. Retrieved from https://hbr.org/2006/03/connect-and-develop-inside-procter-gambles-new-model-for-innovation

Lawer, C. (2017). Eight Styles of Customer Value Co-Creation. Retrieved from https://www.umiohealth.com/media/2309/eight-styles-of-customer-value-co-creation.pdf

Ozkan, N. N. 2015. An example of open innovation: P&G. Procedia—Social and Behavioral Sciences 195:1496–502

Procter & Gamble. (2006). A company history. Retrieved from https://www.pg.com/translations/history_pdf/english_history.pdf

Procter & Gamble. (2019). What is connect and develop? Retrieved from https://www.pgconnectdevelop.com/what-is-connect-develop/

Veer, T., Lorenz, A., and Blind, K. (2013). How Open Is Too Open? The “Dark Side” of Openness along the Innovation Value Chain. Paper Presented at the 35th DRUID Celebration Conference, Barcelona, Spain, June 17–19.

Name: Berna Hizli
Student number: 408455

The solution for any bad-hair day


The problem? Hair, hair and hair

With friends you can share almost anything: secrets, food and even your favorite lipstick, a daily product that cannot be really shared is shampoo. Every individual has a different hair type, which means that a one-size-fits-all hair care product no longer meets the needs of an individual customer (Chen, 2019). Today, the average drugstore has more than 600 hair products on their shelves. This true sea of shampoos, conditioners, gels and hair masks should imply that we’ve started to love our hair even more and that there is something in stock for everyone, right?  Well this is not really the case, the fact that there is plenty of choice does not immediately mean that the perfect hair product to match your hair is in there.

Is there really a solution for everyone?

Is not everything more beautiful when it is actually made for you? Personalization, it is a principle that is often applied in the clothing and food industry. However, when talking about a personalized product, the hair industry is often left out (Spire,2019). There are several hair products that can be used for obvious hair types which is not applicable for each individual with an exceptional hair type. Every hair is different, which implies that each individual is in need of a specific hair-care option. Your red soft curls probably need a completely different treatment than someone who has wavy dyed blonde hair. In addition to the hair type, the hair products that are currently on the shelves are not concerned about external factors such as the environment and stress levels that may have a major impact on the hair. The company Prose, founded in 2017, has started to change this and produces a personalized hair care brand that fits your hair perfectly. Prose wants to drastically change the hair industry by using a survey to design a hair arrangement made especially for the user. We have seen this type of personalization in everything but shampoo. While brands such as Ouai claim to also  and offer comparable hair care services, Prose claims to stand out from the competition by providing one the most thorough consultation services on the industry. The outcome? A personalized shampoo, conditioner and mask, each made from a combination of 76 possible ingredients (Olsen & Teich, 2019).

Prose’s products

How does it work?

The composition of each hair is unique because of its simplicity or DNA, adding factors such as geographical location, lifestyle and styling patterns can make things a little more complicated. Prose takes all of this into consideration when designing their customized products (Prose,2019).

To arrive at the personalized product, you need to answer a series of questions online so Prose understands the hair needs, environment and lifestyle of the consumer. Prose’s hair quiz is an in-depth study resulting in 85 data points and asks questions about everything to be provided with as much information as possible (Prose,2019). Questions are asked about for example: what products the consumer usually styles the hair with, what diet is followed and even questions are asked about stress levels (Booz,2019). It focuses on the current hair situation to create the solution that is most suitable for the hair.

Based on the hair quiz, the company knows which ingredients should be included in the adapted formula. The answers to the questions create a unique product which makes the hair care personal, what given the multitude of hair types and needs, is necessary. Once finished the quiz, the consumers can choose which tailored products they want to buy.

Question in the quiz (Chen,2019)

Will the personalized hair product be efficient?

Prose sells three products: shampoo, conditioner and a hair mask. The prices of the first two aforementioned hair products have a price between the range of 25 and 38 dollar (Prose,2019). While the hair masks costs between 38 and 58 dollars. Consumers can expect to pay at least the double of what they were used to pay for hair products at a drugstore (Chen,2019). The high price can make consumers decide to buy mainstream and affordable hair products. However, when purchasing a Prose product, the consumer signs up for personalization and the online specific questionnaire makes it clear that the individual needs are being targeted and this is accompanied by a relatively higher price. In addition to determine the success, it must also be taken into account that the personalized hair products are not always successful products at the beginning since the first quiz does not always lead to the perfect formula (Booz,2019). This could become very expensive if the consumers continue to change their formula which may cause the consumer to decide not to make a purchase anymore. The organization itself believes that Prose’s high-quality and better-for-your-hair formulations make the higher costs trivial. As a consumer you don’t need to bounce back and forth anymore to find your perfect shampoo or conditioner, with Prose you have a product customized to your own needs.

Chen, C. (2019). This personalized hair-care startup makes shampoo and conditioner for your specific hair needs and goals — and it actually works. [online] Business Insider Nederland. Available at: https://www.businessinsider.nl/prose-personalized-shampoo-conditioner-review-2019-1/?international=true&r=US [Accessed 24 Feb. 2019].

Booz, N. (2019). Is It Worth It: Personalized Shampoo and Conditioner. [online] GenTwenty. Available at: https://gentwenty.com/function-of-beauty-personalized-shampoo-and-conditioner/ [Accessed 24 Feb. 2019].

Olsen, C. Teich, J. (2019). This company made us our own custom shampoos—here’s what happened, If you’ve got hair trouble, Prose wants to talk. Available at: https://www.reviewed.com/home-outdoors/features/prose-custom-hair-care-review [Accessed 24 Feb. 2019].

Spire, E. (2019). How much do consumers care about personalised goods?. [online] Medium. Available at: https://medium.com/@emilie_7567/how-much-do-consumers-care-about-personalised-goods-a325eff73434 [Accessed 24 Feb. 2019].

Prose.com. (2019). Fresh & Personalized Hair care – Prose. [online] Available at: https://prose.com [Accessed 24 Feb. 2019].

How Instagram Bloggers Have Taken Over the Fitness Industry


The “ideal” body type for women has changed over the years drastically. It can seem as if the ideal standards of beauty must be historically universal, paradoxically the contrary is true! The perfect woman’s body goes from what we would now call morbidly obese, in the Paleolithic era, to a start over a serious obsession with body image and weight from the 20s on to the Supermodel era in the 80s, to the heroin chic and Twiggy look of the 90s. (Petty, 2018) Nowadays, we would like to think that there is no ideal for a quintessential body as the concept of body positivity is gaining more and more reasonable acceptance. Never the less, we can see a massive increase of people wanting to be and look healthy and athletic.

Booming Business

The fitness industry momentarily is booming. This sector has been growing 3 to 4% annually in the last 10 years and this business direction will not slow down anytime soon (Mitgley, 2018). According to Forbes (2018), the chances are high that the expansion will only accelerate in the upcoming years.

. This growth is cause by virtue of the idea of “a healthy body equals a happy life”, therefore more people work out and fitness is becoming trendy. Or perhaps to be more accurate, the idea of fitness is in: a rising amount of the western population is heading to the gym, or at least paying for a membership. This development puts the fitness industry in a pretty sweet spot: The western population, which is quite unhealthy and overweight, is looking for ways to get in shape. And to be more precise: to get in shape fast, as we as women would like to have an overnight pill, and an easy remedy for weight loss and toning up.

The hottest job in town

This idea of the perfect body is fueled up by diverse social media influencers on social media, principally Instagram. Let’s be completely honest: Being an influencer is probably the hottest and most coveted job in 2019, and simultaneously it is also a job that did not exist five years ago. So who are these people? At the core, an influencer can be your next-door neighbor, without a true stand out special talent, this makes the person you see online more “relatable”. As a subscriber, you can develop a deep connection with the influencer, as their life is more within reach. Therefore, fitness Influencers have become some of the most powerful across social media. Because “if the girl on Instagram can do it, why should not I be able to do it too?”

Fitness influencers as Tammy Hembrow, Kayla Itsiness, Anastasia Mironova, and the sisters Karena and Katrina, are transforming the way people look at fitness and at the same time become social media celebrities and earn money from their “influencer jobs”. How do they do that last part?, you might ask. Fitness programs and building a strong community. (Dibiase, 2018)

Instagram fitness programs are becoming increasingly popular as they claim to have a quick fix for our weight and looks problems: you can choose yourself, depending on the influencer if you want to transform your body in 30 days, 2 months or 12 weeks, they can plan it all out, and you can even choose how much attention you will get from that one social media celebrity you trust the most! Contingent upon how much you as the follower pay for your plan (varying from 10 euros per month to over 100 euros), the fitness program can be highly individualized or quite simple.

Why does it work?

The fitness programs are incredibly popular, due to the high following and therefore trustfulness of the influencers. Additionally, you can communicate with someone who in your eyes has a “celebrity status” and still responds to YOU!, a “normal person”. More over this way of getting fit is more affordable to people budgets, compared to hiring a personal trainer, and also is a smaller and easier step for people who are new to the fitness world and may be shy, to start working out. The influencers grow by the word of mouth and recommendations of their followers and fitness guide users. One of the biggest social media phenomena, Kayla Itsiness with her 12-week Bikini Body Guide, calls her followers the “Kayla Army”. This step is a psychological trick, which creates a sense of belonging with the subscribers of the Instagram channel. More over, since the establishment of stories, people who participate in the fitness programs or are very active on the influencers page, can receive shout outs as a reward. This participation reward system fuels up people’s enthusiasm, as they feel valued by their idol and flattered, and therefore try even harder to achieve the same feeling. Besides that, influencers use their follower community to improve their programs, as they ask for feedback and tips. An additional plus point of working together with enthusiastic and concerned people, is that they will supply the influencer with free advertisement and recommendation tool, by simply showing their results on their own personal page and in real life.

Some fitness influencers create competitions, where people who have attained the best results, by either losing the most weight or looking leaner and more athletic, are rewarded with prices that are announced beforehand. Therefore you, as a fitness program user, not only receive your dream body by participating, but also have the chance to win materialistic or monetary prices. This approach triggers people’s eagerness to be more engaged as well.

Can it backfire?

AN increasing amount of people are now concerned that the fitness gurus from Instagram are not qualified to design the food and workout programs and are therefore harming their follower’s health. (Praderio, 2018) Therefore the reputation of certain influencers can be harmed by unfavorable well-being incidents Moreover, the question remains: how long will Instagram be still a popular and highly used app? We have already seen the trend of Facebook fade away in the last few years.

Sources

Dibiase, L. (2018). The Evolution of Instagram & YouTube Fitness Influencers, Unamo Blog. Retrieved from https://unamo.com/blog/guest-posts/fitness-influencers

Midgley, B. (2018). The Six Reasons The Fitness Industry Is Booming. Retrieved from https://www.forbes.com/sites/benmidgley/2018/09/26/the-six-reasons-the-fitness-industry-is-booming/#34a746e2506d

Petty, A. (2018). How women’s ‘perfect’ body changed through history. Retrieved from https://www.thelist.com/44261/womens-perfect-body-types-changed-throughout-history/?utm_campaign=clip

Praderio, C. (2018). THE DARK SIDE OF INSTAGRAM: When fitness culture goes wrong. Retrieved from https://www.thisisinsider.com/the-dark-side-of-instagram-fitness-culture-2017-6

How will the future of flagship stores look like? An inspiration from Nike House of Innovation


You’ve probably heard “retail apocalypse”. Brick-and-mortar retail is in trouble, even those retail giants are closing hundreds of stores every year. It cannot be denied that the digital revolution has changed the retail industry sharply and this change will still going on. As Michael Forhez who is Oracle senior director of retail and consumer goods said, “I can either shop on my own couch or I can shop at the retailer’s shelf—and I’m going to need a powerful reason to get off my couch”. That is the biggest challenge ahead of the entire retail industry (Currey, 2019).  

Source: Euromonitor

So, how to survive in the e-commerce era? How should the future of flagship stores look like? Nike and Ministry of Supply could probably give some inspirations. 

Nike House of Innovation

Nike House of Innovation sits in Soho shopping corridor of New York City, is a six-floor flagship store includes:

  • a mini basketball court; 
  • a treadmill in front of screens simulating different outdoor runs; 
  • a small, enclosed soccer area; 
  • a customization shoe bar where shoppers can personalize a pair of Nike Air Force 1s;
  • dedicated coaches on staff who can put customers through drills to test out sneakers (Bain, 2017).

The first floor is an area where you can customize your own shoes by choosing a sneaker style and/or changing your shoes’ laces. With an appointment, a more comprehensive personalization of the shoes is available. Furthermore, to match the customized shoes, the first floor also equipped with well-trained designers that can help you design the customized clothing if you request. 

The mini basketball court and the soccer area are covered with cameras that enable to capture motion from 360 degrees. Moreover, in order to recommend the most suitable running shoes, cameras are installed next to the treadmill to record and analyze the customer’s gait during running. It also allows customers to access the footage and share on their social media by logging into their online Nike account. 

The Nike app is the link between offline and online shopping. For fully enjoying the benefit of in-store services, you need to download the Nike app first to your phone. Through the app, 

  • you are able to ask the store staff to add more items to the fitting room online and you will receive a notification once items are ready. 
  • you are able to purchase the items online without waiting in the line at the counter. Kiosks also sit on each floor where you can drop off hangers and pick up a bag.
  • if you are a member of Nike’s loyalty program NikePlus, you are able to reserve and pick up items from the in-store locker by your phone. Moreover, the store allows you to customize your shoes and clothing online and pick up items from the in-store locker (Bain, 2016).

Ministry of Supply

Some companies are seeking for other ways to attract customers visit their flagship store. For instance, Ministry of Supply, it installed a 3D knitting machine at its flagship store in Boston City. While some companies have used it in factories, it is the first time that the 3D knitting machine installed in a flagship store. On the iPads, you can see how products could be personalized. So far, customers enable to customize the shape, the colour and decorations of a sweater. Then, the 3D machine will start to make it. After a 90-minute wait, a customized sweater will be ready for you (Ministry of Supply, n.d.).

The Omnichannel business model and the role of new flagship stores

According to four business models as above, in order to achieve the sustained profitability in the digital era, it is a trend for business leaders of the retail industry to shift their traditional brick-and-mortar business model to the omnichannel business model (Weill & Woerner, 2015). Omnichannel businesses provide customers access to their products across multiple channels, including physical channels, like shopping in a brick-and-mortar store, and digital channels, like shopping online from either a laptop or mobile devices. 

The core of omnichannel businesses is achieving a seamless shopping experience, which requires the company to possess the complete knowledge of customers under the value chain business design. Therefore, there is a strong claim to “owning” the customer relationship, where is also the challenge comes from. For omnichannel businesses, challenges are from two aspects. On the one hand, the challenge is how to attract more target or potential customers. On the other hand, the challenge is to seek more and more knowledge of the existing end customers and their goals to reduce the likelihood of customer churn.

For omnichannel businesses, personalization and customization are the keys. Nike house of innovation, a 6 floors brick-and-mortar store in Fifth Avenue is a costly investment with a high risk of failure since the e-commerce sales are growing so rapidly. But the most forward-looking companies, like Nike, they realise that physical stores are still essential for their brands, once physical stores can provide more personalized and customized services that e-commerce cannot or not yet. 

These new high-tech and high-concept flagship stores, unlike the traditional physical stores, they emphasize more on enhancing one-to-one connections with customers and customizing products by using up-to-date technologies. Retailers and customers no longer just a simple sale and purchase relationship, these new flagship stores turn the retail into an experience that provides an attractive reason for customers to visit their stores. In other words, they as a supplement to enrich the customer experience of shopping and as a bridge to blur the boundaries between online and offline shopping. Are you willing to leave your couch and gain a wonderful customer experience in a new high-tech and high-concept flagship store?

Reference

Bain, M. (2017). A fantastical new world of high-tech, high-concept stores is here. [online] Available at: https://qz.com/956745/retail-experiments-from-farfetch-nike-and-amazon-offer-visions-of-the-store-of-the-future/[Accessed 23 February 2019].

Bain, M. (2016).Nike’s new store in New York is like Legoland for people who love sports. [online] Availableat: https://qz.com/836671/nikes-new-store-in-new-york-has-a-basketball-court-where-you-can-test-drive-their-shoes/[Accessed 23 February 2019].

Currey, L. (2019). Advanced Technology Key to These Retailers’ Success, Survival. [online] Available at: https://www.forbes.com/sites/oracle/2019/02/22/advanced-technology-key-to-these-retailers-success-survival/#315f2d506ec1[Accessed 23 February 2019].

Minister of Supply (n.d.) Introducing Our 3D Print-Knit Shop. . [online] Available at: https://ministryofsupply.com/blogs/tested/introducing-our-3d-print-knit-shop[Accessed 23 February 2019].

Weill, P., & Woerner, S. L. (2015). Thriving in an increasingly digital ecosystem. MIT Sloan Management Review, 56(4), 27. 


Personalized pricing: is it fair or not?


A review of the article “Personalized pricing and pricing fairness” by Timothy J. Richards, Jura Liaukonyte & Nadia A. Streletskaya (2016)

The development of high granular price appearance algorithms and the large amount of customer data that can be collected through online purchases, led to the increasing use of personalized pricing (Weisstein et al., 2013). In a transparent environment, personalized pricing may cause a feeling of distrust, unfairness and fears of price-gouging. These feelings can arise when customers notice that they pay a higher price for a product or service than others do. In the end, this feeling of betrayal could lead to reduced purchase intentions of customers. Therefore, it is of high importance for organizations to arrange their pricing system in a correct way, so that it does not affect customers’ purchase intentions in a negative way. The paper of Richards, Liaukonyte & Streletskaya (2016) investigates how interpersonal price differences could lead to customers’ perceptions of unfairness. Subsequently, the paper gives a mitigation strategy for companies to reduce the negative effects on sales because of personalized pricing.

During the course Customer-Centric Digital Commerce, we have discussed the phenomenon personalized pricing with the example of airline tickets and a bottle of Coca-Cola. Why do we feel betrayed if there would be interpersonal pricing differences for a bottle of Coca-Cola, but do we accept these differences when it comes to airplane tickets? This has to do with the product type and setting, but also with the customers’ price fairness perceptions. According to Richards et al. (2016)  the price perceptions of customers are mainly derived through social norms and transactional utility, which means that customers are more satisfied if they paid less than their reference price. A customer’s reference price is often based on what other people paid. Customer’s price fairness perception can be determined by comparing the customer’s reference price with the actual price. Perception of price unfairness is in this study shaped by self-interested inequity aversion, which entails that people are less likely to purchase when they value prices as unfair and people are more likely to purchase if prices are more fair or price inequity is in their favour. Based on these concepts, the article raises the following main hypotheses for the study:

  • “There is self-centered inequity aversion in which agents experience negative marginal utility whether others pay less than themselves, or they pay less than others.” (Richards, Liaukonyte & Streletskaya, 2016: p143)
  • “When we allow buyers to negotiate the final price, however, we expect to find fairness perceptions improve to the point where much larger differences in realized prices are acceptable, and discriminatory pricing equilibria are generally stable.” (Richards, Liaukonyte & Streletskaya, 2016: p139)

Methodology

The researchers have tested the hypotheses by an experiment in a lab setting with a survey among 278 students from a large Eastern US university. The students are randomly assigned between two treatment groups, the price-posted treatment or the price-discovery treatment. Before the treatment, the risk preferences of the students are measured by a multiple choice exercise. In the exercise, students are asked to choose between two lotteries (A or B) whereby lottery A is more safe in terms of risk compared to lottery B. This exercise is done, because the researchers expect that people’s risk seeking or risk avoiding behaviour can be an important factor in determining price inequity aversion. After this exercise, the experiment continues with the treatment procedure. First, the students had to practise with making purchase decisions though the board game Monopoly. Hereafter, the real experiment started, which consisted of multiple rounds where students were confronted with different price distributions for the same T-shirt.  In the price-posted treatment group, students had to accept or reject the T-shirt price without the chance to negotiate. In the price-discovery treatment group, the participants had the option to negotiate on the price by submitting their own bid, besides the option of accepting or rejecting the price just as in the price-posted treatment. In both groups, the students were asked to rate the fairness of the prices on a five-point Likert scale. By this way the researchers were able to measure the impact of inequity on purchase intentions.

Results

One of the most important results that were found by the researchers through the experiment, is about how fairness perceptions influence purchase behaviour. From the participants that rated the prices as unfair or slightly unfair, only 4.9% chose to buy the T-shirt. While from the participants that assessed the prices as fair or generally fair, more than 73% decided to buy the T-shirt. These results show that the feeling of inequity is expected to have an important effect on customer’s purchase behaviour. Another interesting finding is that the price-discovery treatment has a significant effect on the purchase intentions of customers. This means that customers are more likely to purchase consumer goods when they can participate in price determination through negotiation. Furthermore, the research indicates that in a transparent setting more risk averse people are more likely to purchase products even when there is inequity against them.

Main strength of the paper

In my opinion, a big strength of the article is that it brings some novel managerial implications to improve companies’ pricing strategy. The researchers found that customers are much more likely to buy a product when they can participate in the price formation. Companies can use this insight by including customers in the price determination to increase the sales of the company. Furthermore the paper indicates that customers are less likely to purchase products when they perceive the price as unfair. Companies should therefore ensure that customers feel like the prices are fair. Although these insights are very meaningful for companies, the paper does not give very concrete instructions of how companies should include consumers in the price formation process or how companies could ensure that their prices will be perceives as fair. Nevertheless, this paper brings some new, valuable insights in the personalized pricing issue and provides a foundation for future research.

References

Richards, T. J., Liaukonyte, J. & Streletskaya, N. A. (2016). Personalized pricing and price fairness. International Journal of Industrial Organization44, 138-153.

Weisstein, F.L., Monroe, K.B. & Kukar-Kinney, M. (2013). Effects of price framing on consumers’ perceptions of online dynamic pricing practices. J. Acad. Mark. Sci., 41 (5), 501–514.

Pepper: the robot that will revolutionize the retail market


The market

It is not a secret that the retail market has stepped into the ‘data science world’. Today, one of the main goals of retailers is to constantly find innovative ways to get useful insights of their customers through their goldmine of unstructured and structured data (Marr, 2015). One of the implications of these insights are personalized products. According to Mobasher, Cooley & Srivastava (2000), personalization is (any) action that tailors experience to a particular individual. In other words, the data is used to match the products as good as possible to the needs of every individual customer. The process of personalization goes as follows: first, retailers collect data about their customers and try to learn about their customers’ preferences and tastes. Second, they try to develop products or services that match these preferences and tastes. Finally, they evaluate the effectiveness of these personalized offerings, in order to optimize the personalization process (Tsekouras, 2019).

The business model and its opportunities

Since it becomes more generic for retailers to use data that they have about their customers, they have to differentiate themselves from their competitors in some other way than solely using data to obtain useful insights. Here, a new opportunity arises because of emerging technologies. In the present, retailers want to create superior customer experience (Verhoef, Lemon, Parasuraman, Roggeveen, Tsiros & Schlesinger, 2009). A superior customer experience could be delivered through accurate, personalized recommendations because customers like recommendations for the reason that it eases their selection process (Tsekouras, 2019). Next to personalized recommendations, a good in-store experience increases the customer experience (Phibbs, 2019). If you combine these two ways to deliver a superior customer experience, a new addition to a retailers’ business model arises, which could be turned into a competitive advantage. We’re talking about in-store artificial intelligence robots (AI robots).

Opportunities that come along with AI robots

The first opportunity is that the ‘real’ personnel of a retailer is able to do more high-level tasks. This is possible since the robots can replace them in general, repetitive interactions with customers (Ankeny, 2017).

Besides this, retailers find it hard to convert their goldmine of data into useful insights. Actually, the conversion rate from data to useful insights lies between 2- and 3% overall (Donaldson, 2018). By implementing AI robots, all the data is automatically processed through algorithms. This means that the robots are able to make the customer experience far more intimate, targeted and effective, while they are simultaneously improving over time (Donaldson, 2018).

Next to the data being processed better, the robots are able to collect more data, since all the ‘conversations’ with customers are stored into a database. Traditionally, conversations between employees and robots are not ‘recorded’ or anything. Justine Santa Cruz is the VP of partnerships at Satisfi labs, which is a company that makes AI robots. She states that by adding the robots in-store, retailers can learn about what their customers are actually thinking during the whole decision-making process.

One final opportunity is the fact that customers are curious and willing to use new sorts of technologies. Santa Cruz (2019) says that there are no generational challenges that have to be addressed, regarding the willingness to interact with the new robots. Apparently, as is observed in real-life situations, everybody wants to communicate with the robot (Nittle, 2017).

To strengthen these opportunities, a real-life example of the current applications of these kinds of robots is addressed in the next paragraph. This way, the business model becomes more tangible and the efficiency and value of this addition to a retailer’s business model will become clear.

Current applications of the business model and its value

Mall of America has adjusted its business model in a way that they implemented AI robots in their physical stores, called Pepper. Pepper is a robot that can guide customers to specific locations through the mall, talk to the customers about (personalized) promotions and deals and is able to connect customers to other employees. The process of people that interact with Pepper is described by Brandli (2018). But to address this process clearly, I created a figure that illustrates this process, which is presented below.

One stage that might need clarification is the ‘Pepper is unable to help with the customer’s query’. It might be that the AI-robot will not be able to respond to certain specific questions that the robot has not seen before. When this is the case, Pepper is able to connect the customer with a real person that works in the mall. This way, the customer is still being helped at his expectations (Brandli, 2018).

The implementation of Pepper in Mall of America could have resulted in negative feedback, but this has not been the case since its trial (Kumar, 2018). The Ave, a retailer who implemented the robots as well, published their tangible results. They give credits to Pepper for driving a 98% increase in the interactions with customers, a 20% increase in foot traffic and a 3x revenue jump (Ankeny, 2017). In addition, Nestlé implemented Pepper in its Nescafé stores. This resulted in their sales increasing double digits. Concluding, the results up until today are real (Ankeny, 2017).

Potential drawbacks

First, I would like to mention the additional costs for retailers that have to be incurred if you want to implement the AI-robots. If you want to add Pepper to your stores, you will have to pay up $1700 up front, $134/month for maintenance and $89/month for insurance (both for a minimum of 36 months). This means that your costs for Pepper in 3 years will be at least $9.728. This could be a large investment for retailers since they still need to staff other employees (Faw, 2016).

Next to the additional costs, Pepper is a robot that will cost some peoples’ jobs according to some. McCormick (2016) argues that cognitive technology, including artificial intelligence, will replace 7% of U.S. jobs by 2025. However, the tasks are replaced, not the jobs. The robots are not meant to replace employees, but rather assist them in simple tasks. So actually, the robots are a blessing for the employees, since they are able to work on more meaningful tasks that are not repetitive in nature (Donaldson, 2018).

Reference list

Ankeny, J. (2017). How robots in stores could revolutionize the customer experience. Retrieved from https://www.retaildive.com/news/how-robots-in-stores-could-revolutionize-the-customer-experience/434056/

Brandli, A. (2018). CX trendsetters: Is the future of malls a robot named Pepper?. Retrieved from https://blog.centriam.com/is-the-future-of-malls-a-robot-named-pepper-cx-trendsetters

Donaldson, S. (2018). How AI Is Changing the Retail Industry. Retrieved from https://www.business.com/articles/artificial-intelligence-changing-retail/

Faw, L. (2016). Pepper The Robot Will Be Your Companion (For A Price). Retrieved from https://www.mediapost.com/publications/article/276387/pepper-the-robot-will-be-your-companion-for-a-pri.html

Kumar, K. (2018). Mall of America tests robots, chatbot as it looks to improve visitor experience. Retrieved from http://www.startribune.com/mall-of-america-tests-robots-chatbot-as-it-looks-to-improve-experience/474997543/

Marr, B. (2015). Big Data: A Game Changer In The Retail Sector. Retrieved from https://www.forbes.com/sites/bernardmarr/2015/11/10/big-data-a-game-changer-in-the-retail-sector/#5e47c5209f37

McCormick, J. (2016). Predictions 2017: Artificial Intelligence Will Drive The Insights Revolution. Forrester. Retrieved from https://go.forrester.com/wp-content/uploads/Forrester_Predictions_2017_-Artificial_Intelligence_Will_Drive_The_Insights_Revolution.pdf

Mobasher, B., Cooley, R. and Srivastava, J., 2000. Automatic personalization based on web usage mining. Communications of the ACM, 43(8), pp.142-151.

Nittle, N. (2017). Mall of America Gets High-Tech With Chatbot and Humanoid Robots. Retrieved from https://www.racked.com/2017/12/18/16781234/mall-of-america-chatbot-humanoid-robots-pepper

Phibbs, B. (2019). 4 Ways To Improve Your Retail Customer Experience and Sales. Retrieved from https://www.retaildoc.com/blog/improve-retail-customer-experience-sales-follow

Santa Cruz, J. (2019). VIRTUAL RETAIL – THE FUTURE IS NOW. Retrieved from https://mr-mag.com/virtual-retail-the-future-is-now/

Tsekouras, D., 2019. Customer Centric Digital Commerce, Lecture 2, slide 20.

Verhoef, P. C., Lemon, K. N., Parasuraman, A., Roggeveen, A., Tsiros, M., & Schlesinger, L. A. (2009). Customer experience creation: Determinants, dynamics and management strategies. Journal of retailing85(1), 31-41.

Felyx – The newest disruption in the transport industry


“When people think of Airbnb, they visualize accommodation. However, Airbnb itself is nothing more than a tech company, cleverly using software that translates into more than a million rooms across the globe” (Eventige.com, 2019).

Whilst Airbnb was founded 11 years ago, it has become one of the leading companies in the hospitality industry. Contrarily to traditional firms in the hospitality industry, Airbnb does not own any property, but offers a platform on which users can rent their own houses and property to each other (Guttentag, 2015). Between 2016 and 2018, the estimated value of the company has skyrocketed to approximately 31 billion dollars, worth more than multi-billion traditional hotel chains Marriott and Hilton (Smith, 2018).

Sharing economy
The phenomenon of the sharing economy refers to the “sharing of both physical and nonphysical goods and services through the availability of various information systems on the Internet” (Hamari, Sjöklint and Ukonnen, 2016). Airbnb is seen by most as the precursor of the sharing economy, being an inspiration for other firms which have built their business model around the concept of the sharing economy (Proserpio and Tellis, 2011). As the hospitality industry was disrupted by the innovative tech company Airbnb, the transport industry has been disrupted by several companies with similar business models. Uber and Lyft are examples of such companies, both to have disrupted the taxi industry with peer-to-peer platforms (Cramer and Krueger, 2016). Along with the disruption of traditional industries, new concepts came to life as well. An example of such a concept would be the carsharing industry. Car2go is one of the leading companies in the carsharing industry. Originally founded as a subsidiary of automobile producer Daimler AG in the late 2000s, Car2Go enables a user to commandeer a shared vehicle and only charges a fee for the time driven (Martucci, 2018). Car2Go has experienced tremendous growth and reached 3.6 million members in 2018 (Martucci, 2018). After noticing the success of Car2go and the rise of the sharing economy, two Dutch entrepreneurs thought off a similar concept which resulted into the successful start-up Felyx.

Felyx profits by charging a 30 cent per minute fee for the time the scooters are used. Furthermore, in case of incidents, large fees are charged to the users responsible. By the end of 2018, Felyx has grown to 50 thousand members and has expanded its business to Rotterdam and The Hague (Van Raemdonck, 2018). Furthermore, Felyx is planning an expansion to cities as Utrecht, Den Bosch and Eindhoven, as well as a move to outside of the Netherlands, where it has to compete with E-Scooter sharing companies as Cityscoot (France) and Emmy (Germany)(Govecsgroup.com, 2018).

Felyx
Felyx was founded in 2017 by Quinten Selhorst and Maarten Poot and is one of the pioneers in the e-scooter sharing industry (Govecsgroup.com, 2018). By collecting a starting capital of 700 thousand euro via a crowdfunding campaign, Selhorst and Poot were able to place the first 108 e-scooters in Amsterdam (Boerop, 2018). Felyx’s concept is as follows: within the service area users can rent a scooter for 30 cent per minute. Through the mobile app users can find the location of the parked scooters, unlock them and thereafter they can drive the scooter wherever they would like. Parking the scooters and ending the drive, is allowed anywhere at any time. If the drive has ended, the scooter will appear once again on the mobile app as available with its renewed location (Van Raemdonck, 2018).

The interface of Felyx’s mobile app

Being similar to the concept of Car2Go (however with scooters instead of cars), Felyx offers a new way of transport, forming an alternative to public transport and the traditional taxi industry, as well as forming an alternative to disruptive companies as Uber. Felyx is unique in the Netherlands, as it is the first company in the Netherlands to offer the possibility to make use of shared scooters (Govecsgroup.com, 2018). Whereas most companies in the transport business which have built their business model around the concept of the sharing economy offer services involving the use of cars (e.g. Uber, Car2Go), Felyx offers a service involving scooters, which are perceived by many to be more convenient for transport within a city (Brustein and Lanxon, 2018).Furthermore, whereas companies like Uber had the regulatory struggle with entrenched taxi industries about unfair advantages, Felyx does not oppose an incumbent industry which could sue them about similar issues (Brustein and Lanxon, 2018). This offers Felyx an advantage in gaining market share.

What is the value created?
Felyx creates value for users in several ways. A first example, as mentioned above, would be that they introduce a new kind of shared transport, which is perceived as more convenient within cities than their competitors as Car2Go (Brustein and Lanxon, 2018). Second, as Felyx’s scooters can be rented per minute, they offer a cheaper alternative to rental companies which usually rent per whole day (Martucci, 2018). Third, as all of Felyx’s scooters are electric scooters, they are better for the environment than most of their competitors. This ensures a sustainable advantage for Felyx.

What are the challenges?
Besides Felyx’s strengths, the company faces several challenges as well. The main challenge Felyx faces, would be the regulatory struggle it has with municipalities. In Amsterdam, Felyx was ordered to remove all its scooters from the streets in line with the removal of four shared bike services in a battle with nuisance caused by the shared transport services (Kruyswijk, 2017). Even though Felyx was able to fight the above-mentioned decision (Boerop, 2018), if in the future similar decisions will be made by municipalities or the government, Felyx will face a gloomy future.

Additionally, another challenge for Felyx would be that the expansion possibilities might not be too big. The concept is expected to work only in the bigger cities of the Netherlands (Keunen, 2018) and the competition in the rest of Europe is fierce (Govecsgroup.com, 2018). Moreover, outside of Europe, riding a bike is not considered as mature way of transport, let alone driving by scooter (Brustein and Lanxon, 2018). These factors might limit Felyx’s potential growth.

References:

Boerop, L. (2018). Hoe twee 29-jarigen met elektrische deelscooters Amsterdam een beetje schoner willen maken. Retrieved from https://www.businessinsider.nl/hoe-felyx-met-elektrische-deelscooters-amsterdam-een-beetje-schoner-wil-maken/

Brustein, J., & Lanxon, N. (2018). How Electric Scooters Are Reshaping Cities. Retrieved from https://www.bloomberg.com/news/articles/2018-09-07/are-electric-scooters-the-future-of-urban-transport-quicktake

Cramer, J., & Krueger, A. B. (2016). Disruptive change in the taxi business: The case of Uber. American Economic Review106(5), 177-82.

Eventige.com. (2019). How AirBnB Became the Largest Hotel Chain. Retrieved from https://www.eventige.com/blog/airbnb-largest-hotel-chain

Govecsgroup.com. (2018). GOVECS boosts e-scooter fleet of Paris-based sharing provider Cityscoot. Retrieved from https://www.govecsgroup.com/presse/detail/news/govecs-boosts-e-scooter-fleet-of-paris-based-sharing-provider-cityscoot/

Guttentag, D. (2015). Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current issues in Tourism18(12), 1192-1217.

Hamari, J., Sjöklint, M., & Ukkonen, A. (2016). The sharing economy: Why people participate in collaborative consumption. Journal of the association for information science and technology67(9), 2047-2059.

Keunen, Y. (2018). Rotterdam krijgt ook een deelscooter. Retrieved from https://www.ad.nl/rotterdam/rotterdam-krijgt-ook-een-deelscooter~a273ca1b/

Kruyswijk, M. (2017). Ook deelscooters Felyx moeten van de straat. Retrieved from https://www.parool.nl/amsterdam/ook-deelscooters-felyx-moeten-van-de-straat~a4522009/

Martucci, B. (2018). Car2Go Review & Promo Code – Flexible Self-Serve Carsharing. Retrieved from https://www.moneycrashers.com/car2go-review/

Proserpio, D., & Tellis, G. J. (2017). Baring the Sharing Economy: Concepts, Classification, Findings, and Future Directions. Classification, Findings, and Future Directions (December 28, 2017).

Smith, J. (2018). From broke to billionaires: The rise of Airbnb founders. Retrieved from https://www.dailymail.co.uk/news/article-5918039/From-broke-billionaires-rise-Airbnb-founders.html

Van Raemdonck, H. (2018). De deelscooter rukt op – newmobility.news. Retrieved from https://newmobility.news/2018/12/12/de-deelscooter-rukt-op/

Stockon: The new kid on the block in the online grocery market


Stockon delivery by PostNL Food

The Dutch grocery market has known a wave of acquisitions and mergers which results in an oligopolistic market with five clear leaders: Albert Hein, Jumbo, Superunie, Aldi and Lidl (Rabobank, n.d.). This resulted in fierce competition on price, where every grocery formula would leverage its scale to the grow faster than their competitors. However, since the arrival of Picnic the field is changing, another dimension is being taken into account; home-delivered groceries. But not only Picnic saw potential in this market, a new contestant has entered: Stockon is a disruptive online retailer, who provides groceries for consumers’ pantry’s and is unique in the Dutch grocery market since it doesn’t own any physical stores itself and moreover, since it is a subsidiary of PostNL they are able to use their vast distribution network via PostNL Food (Boogert, 2018). This partnership enables Stockon to serve all Dutch customers at minimal cost, hence giving it a competitive advantage over their direct competitor picnic who rely on their own distribution network and can’t grow as fast. The business model of Stockon is built upon their smartphone application, where customers can browse through their products and add them to their online pantry. Stockon fills the gap for customers who are looking for home delivered groceries and don’t want to spend time managing their pantry (Stockon, 2019). Stockon is able to fill their customer’s needs because they center all their activities around their customers, Stockon places its customer at the heart of their business decisions. For this Stockon relies heavily on the data retrieved from their customers via their application. Stockon invites their customers to continuously give them feedback on; delivery, products, advertisement and more. This feedback is used for optimizing their business model to their customers’ needs, resulting in a fully data-driven decision making business model. To ensure a sustainable long-term vision, Stock on expanded their proposition by ensuring that all their products will be delivered C02-neutral (Jansen, 2018) with this, they are a pioneer in the online groceries landscape. 

Stockon bag with logo

As mentioned before Stockon’s business model is centered around its customers via its smartphone application. After downloading and log in on the application, customers can select their groceries & timeframe when they want their items to be delivered via PostNL Food. Moreover, Stockon enables its customers to make a standard shopping list that will be delivered periodically. This standard shopping list is optimized using artificial intelligence techniques supported by customer feedback to ensure the ‘basic’ household products are always present before the customer runs out, this ensures filled cabinets from a customer perspective and moreover a steady revenue stream for Stockon. Next to this Stockon implemented their customer loyalty program ‘Stocktegoed’ where the customers automatically save for discounts via purchases and referrals to friends (Stockon, 2019a), this increases switching cost for the consumers and ensures a repeat purchase. 

To assesses the efficiency of this business model we will look from multiple angles, we will look at the joint probability resulting from a joint pay -off for both consumers and suppliers.

The ritme option

First, we will look at the customers and Stockon, as mentioned before Stockon centers its business model around their customers. Decisions will be made based on their preferences retrieved via data mining or customers’ feedback. For customers, there are several joint payoffs starting with the ‘ritme’ option. This option for groceries can really serve customers’ needs because it takes away the stock management dimension of buying groceries. By better learning the consumption pattern of consumers Stockon is able to more accurately predict when a certain customer is in need of a new product, therefore they will be able to assure customers to never run out of groceries once again (Stockon, 2019a).

The recommended products section

Second, since Stockon is continuously learning about customers’ preferences, they are able to better understand their customers and this can help them to better recommend products to their customers (Li & Karahanna, 2015). Moreover, Stockon gives its customers the option to request products which they feel are missing. This gives customers the possibility to customize their obtained service from the app, with minimal complexity while gaining utility (Dellaert & Stremersch, 2005). 

Third, since Stockon doesn’t have any physical stores, they are able to save costs compared to traditional retail outlets, this combined with an integrated supply chain with PostNL Food results in cost savings for its consumers. Moreover, because Stockon is learning every day about consumer consumption patterns they are able to leverage these insights into their planning and supply chain departments. This results in better coordination between Stockon and the suppliers, and therefore Stockon is able to minimize waste (Stockon, 2019b). This waste minimization is combined with an aforementioned C02-neutral mission for the company. The company does this by actively gaining insight into their CO2 emissions. When these emissions are identified Stockon tries to minimize their impact by using recycled plastic and stimulate PostNL Food to decrease their footprint as well. Stockon does realize they will always have some impact on the environment, but to counter this impact, they partnered with Climate Neutral Group to ensure its C02 neutrality(Stockon, 2019b). 

Not only the customers are able to jointly profit with Stockon, but the suppliers of the groceries sold by Stockon also are able to profit in a new way. Stockon shares data about the behavior of its customers, this allows for direct insight into the behavior of its consumers. This direct access to data enables the manufactures to test new products and see immediate results (Boogert, 2018). As mentioned before, customer behavior is completely documented. This could help manufacturers to further increase the accuracy of their forecasting and planning tools, helped by the ‘ritme’ shopping lists of Stockon’s customers (Stockon, 2019a). Of course, this will further decrease the impact these manufacturers have on the environment because shipments can be coordinated more efficiently. 

Stockon has the potential to revolutionize the online groceries market by filling in the customers need to no longer think about planning their groceries. They have pledged to do this as a C02 neutral company. Who knows Stockon becomes the new benchmark for online groceries.

References:

Boogert, E. (2018, February 13). Boodschappendienst Stockon lanceert met PostNL – Emerce. Retrieved February 24, 2019, from https://www.emerce.nl/nieuws/boodschappendienst-stockon-lanceert-postnl

Dellaert, B. G., & Stremersch, S. (2005). Marketing mass-customized products: Striking a balance between utility and complexity. Journal of marketing research, 42(2), 219-227. Retrieved February 24 2019, from https://pinnacle.allenpress.com/doi/abs/10.1509/jmkr.42.2.219.62293

Jansen, R. (2018, August 23). Distrifood. Retrieved February 24, 2019, from https://privacy.vakmedianet.nl/distrifood/?ref=https://www.distrifood.nl/branche-bedrijf/nieuws/2018/08/stockon-bezorgt-boodschappen-klimaatneutraal-101118637+

Li, S.S. and Karahanna, E., 2015. Online recommendation systems in a B2C E-commerce context: a review and future directions. Journal of the Association for Information Systems, 16(2), 72-107. Retrieved 24 2019, from https://s3.amazonaws.com/academia.edu.documents/37448056/Li_and_Karahanna_JAIS_2015.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1548859718&Signature=lIrj90Q8pLPDYNwr1LoDrpSJTNs%3D&response-content-disposition=inline%3B%20filename%3DOnline_Recommendation_Systems_in_a_B2C_e.pdf

Rabobank. (n.d.). Supermarkten, cijfers en trends Rabobank. Retrieved February 24, 2019, from https://www.rabobank.nl/bedrijven/cijfers-en-trends/food/supermarkten/

Stockon. (2019, February 15). Zo werkt Stockon. Retrieved February 24, 2019, from https://www.stockon.nl/zo-werkt-stockon/

Handy: Creating two-sided value in the sharing economy


Figure 1: Handy Mobile Application

The founders of Handy claim that the platform is the Uber for cleaners and handymen. The platform connects service providers with households who need services (Kerr, 2016). By doing so, Handy provides value for both its providers and customers. Regarding the former, Handy enables them to take on many jobs and therefore offers them the possibility to earn additional income. Considering the latter, the platform makes the search for cleaners and handymen simple by automatically assigning a service-provider to the customer (Kletzing, 2015).

The platform of Handy is a typical example of a sharing economy platform. A sharing economy platform is a fee-based internet-platform which doesn’t have assets themselves but facilitates asset-sharing among participants. The established personal interactions are facilitated by the platform but paid by peer-to-peer transaction. To create trust and generate reputation among participants, a reputation mechanism is a requirement of a sharing economy platform (Proserpio & Tellis, 2017). 

The rising interest in using a sharing economy platform, like Handy for home cleaning and handymen services, is due to the increasing reliance on the internet and the underutilization of goods and services (Cullen & Farronato, 2018). The peer-to-peer market balances employees with unstable jobs or income and consumers with non-sufficient resources to compensate for some wanted services (Proserpio & Tellis, 2017).

Figure 2: Sharing Economy by Business Model Toolbox

The success of Handy’s business model is coherent with the rising interest in the sharing economy platforms. In order to keep growing, the company shifted their focus from cleaning services towards home repair services (Dotan, 2018).

The business model relies on the brokering of a transaction between customers and providers and thereby charging a 20% fee of each booking price. Therefore, the fee is paid by the customers who are looking for the services offered through Handy’s website. The pricing of the home cleaning services differs from the handymen services in the function of the pricing variables (Kletzing, 2015). This makes both prices varying but handymen services overall more expensive. Therefore, these services generate the biggest revenue for Handy (Handy, 2019). Most of Handy’s bookings are done by repeat customers, which shows the loyalty towards the firm’s brand. The platform takes care of this loyalty by providing excellent and trustworthy services (Cleverism, 2019). The repeat customers that use Handy’s subscription model are of huge importance for the company because they are yielding the highest profit margins for Handy. Namely, the company will no longer have to pay acquisition costs for these bookings (Kletzing, 2015).

Joint Profitability Efficiency

The value system design of Handy is efficient because of the joint payoffs for providers, customers and the firm itself. The obtained system welfare consists of the total of consumer valuation minus the costs of both the consumers and the firm (Carson et al., 1999). The customer experiences for both users within the sharing economy platform of Handy are higher than in the traditional market for cleaning and handymen services. Considering consumers of the services, the platform allows for convenience and a higher level of satisfaction. The use of the platform is convenient for customers because provider selection is removed from their booking process and executed by the firm’s technology (Kletzing, 2015). Also, customer satisfaction in terms of performance and trustworthiness is realized by their extensive feedback system (Handy, 2019). Delleart (2018) emphasizes the importance of developing mechanisms to build reputations for co-producers in order to exclude poorly performing providers. The costs for consumers are the fees paid by them. However, already in 2017, the convenience and satisfaction outweigh these costs for half a million customers (Rosenbush, 2017).

Figure 3: Cost & Benefits by CarrolPQLearning

In order to generate more profit, Handy has to satisfy providers to make customers of the services pay. For them platform is advantageous because it reduces the costs of customer acquisition and results in more job offering with flexible working hours. The costs of customer acquisition are relatively low because the platform sources the jobs for them (Kletzing, 2015). For providers, the ease of connecting to consumers when participating on the platform offers them the possibility to take on more jobs while having flexible working hours (Kletzing, 2015). According to Dellaert (2018), this is strengthened through the mechanism in which more activity will be beneficial for the collective of the consumers in the platform-network. Namely, the needs of this consumers will be better matched which subsequently results in enhanced customer experiences and more job-offerings (Dellaert, 2018).

When considering the firm itself, the positive customer experience gives them greater returns. The charged fee of 20% results in a wide margin for Handy, which means that the existence of the platform generates enough value to continue with their business model.

The Feasibility of Required Reallocations

When taking the research of Dellaert (2019) into consideration, the institutional arrangement of Handy results in the feasibility of required reallocations. Regarding Handy, this institutional arrangement compensates for the agents who would not want to make the transition to their new marketing value system design. The feasibility, which indicates efficiency, is reached through Handy’s contracting, ownership and social elements (Carson et al., 1999). First of all, the contracting of Handy is covering the commission for the service providers, which are relatively high compared to the industry’s average. A cleaner at Handy earns on average $17,55 per hour (indeed, 2019). The industry’s average for a cleaner in the US is $11,24 (payscale, 2019). Second, the ownership arrangements are in hands of Handy because the platform possesses the customer base and data (Connolly, 2015). This is beneficial for platform-users because it lowers the costs of customer acquisition and solves trust issues (Kletzing, 2015). Finally, the social components consisting of relational and reputational factors are advantages of Handy’s business model. The huge focus on user satisfactory and the implementation of an extensive feedback system show these advantages (Handy, 2019).

Figure 4: Carson et al. (1999) table 1

Based on the research of Carson et al. (1999), the three dimensions of the institutional environment of Handy is are considered macrolevel aspects for the feasibility of the required reallocation through the company’s institutional arrangement. First of all, the judiciary dimension of the US-based Handy is named ‘De Jure’, which means that it relies on democracies with greater independence (Carson et al., 1999). It supports Handy’s institutional arrangements by making contract enforcement easier. Therefore, the platform would always have to meet their promises, like 100% money-back guarantees, to the platform users. Second, the polity dimension for Handy is federal because the company is based in the US. This is not efficient for supporting the business model of Handy. Namely, not all states of the US are supportive towards their business model which hinders potential users in taking advantage of the platform (Kessler, 2018). Lastly, trust covers the dimension of social norms. The clear norms and rules of cooperative behavior in the platform-economy of the US are positively affecting the social components of Handy. This generates efficiency.

All things considered, Handy has implemented an efficient sharing economy business model which has feasible institutional arrangement and generally a supportive environmental arrangement, except for the inefficiency of the federal policy which hinders the use of the platform in multiple states.

REFERENCES

Carson, S., Devinney, T., Dowling, G., & John, G. (1999). Understanding Institutional Designs Within Marketing Value Systems. Geraadpleegd op 24 februari 2019, van https://www.jstor.org/stable/pdf/1252106.pdf

Cleverism. (z.d.). Handy. Geraadpleegd op 24 februari 2019, van https://www.cleverism.com/company/handy/

Connolly, A. (2015, 5 november). How Handy‒s founder Oisin Hanrahan is scaling his startup into an on-demand powerhouse. Geraadpleegd op 24 februari 2019, van https://thenextweb.com/insider/2015/11/05/how-handys-founder-oisin-hanrahan-is-scaling-his-startup-into-an-on-demand-powerhouse/

Dellaert, B. (2019, 19 juli). The consumer production journey: marketing to consumers as co-producers in the sharing economy. Geraadpleegd op 20 februari 2019, van https://link.springer.com/content/pdf/10.1007%2Fs11747-018-0607-4.pdf

Dotan, T. (2018, 27 februari). Handy’™s Lesson for Gig Economy Startups: Profit vs. Growth. Geraadpleegd op 22 februari 2019, van https://www.theinformation.com/articles/handys-lesson-for-gig-economy-startups-profit-vs-growth?

Handy. (z.d.). House Cleaning & Handyman Services | Handy. Geraadpleegd op 23 februari 2019, van https://www.handy.com

Kerr, R. (2016, 3 juni). How does Handy make money? Geraadpleegd op 22 februari 2019, van https://vator.tv/news/2016-06-03-how-does-handy-make-money

Kessler, S. (2018, 30 maart). Handy is quietly lobbying state lawmakers to declare its workers aren’t employees. Geraadpleegd op 22 februari 2019, van https://qz.com/work/1240997/handy-is-trying-to-change-labor-law-in-eight-states/

Kletzing, A. (2015, 6 maart). Handy: an online broker for commoditized home services. Geraadpleegd op 20 februari 2019, van https://www.hbs.edu/openforum/openforum.hbs.org/goto/challenge/understand-digital-transformation-of-business/handy-an-online-broker-for-commoditized-in-home-services.html

Proserpio, D., & Tellis, G. (2017, 28 december). Baring the Sharing Economy: Concepts, Classification, Findings, and Future Directions by Davide Proserpio, Gerard J. Tellis :: SSRN. Geraadpleegd op 21 februari 2019, van https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3084329

Rosenbush, S. (2017, 9 mei). Handy CEO Oisin Hanrahan Says Data Science Key to Startup’s Model. Geraadpleegd op 22 februari 2019, van https://blogs.wsj.com/cio/2017/05/09/handy-ceo-oisin-hanrahan-says-data-science-key-to-startups-model/+/

Netflix’s personalization taken to a whole new level?


When it comes to personalized recommendations, Netflix is a well-known player. Browse to Netflix and the first thing you see at the homepage is content adjusted to your interests, preferences and previously watched series and movies. The banner, carousels, the order of the shows, the text and the search: everything is personalized. These “recommendations for you” are not something new or special as you might think. Indeed, Netflix is not the only one who made personalization an important part of their business strategy. However, Netflix has recently stepped up their game when it comes to personalization.

By the end of 2018, Netflix announced that viewers will be able to choose the next storyline in an episode of a TV show or movie. On December 28th, Netflix released a 90-minute episode of Black Mirror: Bandersnatch. During different moments in the movie, the viewers get to decide how the story will continue. Is this the new innovative idea when it comes to customer experience and personalization?

Netflix as a well-known player in the market

Netflix is one of the first companies that saw the potential of streaming technology. Since 2007, when the company started with a subscription video-on-demand model, the service has reached over 130 million users in 2018 (Statista, 2019). According to Gomez-Uribe & Hunt (2015) an important aspect of the service of Netflix is the recommender system. Through the recommendation systems the users of Netflix can easily find videos to watch in every session.

Gorgoglione et al. (2019) argue that recommender systems are of strategic importance for online businesses. Recommendation systems refer to “web-based tools that tailor vendor’s offerings to consumers according to their preferences” (Li & Karahanna, 2015). The value of this personalized offerings can be seen in the fact that 80% of hours streamed by the customers of Netflix are determined by their recommendation algorithms (Gorgoglione et al., 2019). Since there are several kinds of recommendation engines with different performance metrics such as accuracy, novelty, diversity and trust, Netflix tries to search for the best algorithm (Gorgoglione et al., 2019. Next to this, Netflix is trying to handle issues related to the increasing number of customers and especially how to handle enormous stream of big data.  

“The personalized homepage of Netflix”

A new interactive viewing experience

One of the ideas Netflix recently incorporated, is thus a new interactive viewing experience for the users of Netflix. As this idea is not completely new and Netflix already offered this experience with children shows, the movie “Bandersnatch” is the first interactive show for adult viewers ánd the first big success within this format. Bandersnatch is a 90-minute episode of the Netflix series Black Mirror. Black Mirror is known for its critical commentary on technological developments and its impact on culture and society. In Bandersnatch, the viewers guide the protagonist Stefan through the episode by making a series of decisions (Ralph, 2019). These decisions influence Stefan’s life, experiences and mental state and result in different endings. The decisions that the viewers need to make differ from choosing between what Stefan has to eat for breakfast (Frosted Flake or Cheerios) or whether he has to jump off a balcony (Ralph, 2019).

“One of the choices in Black Mirror: Bandersnatch”

What is the value for Netflix?

What is interesting about this business model is that this form of interactive experience offers new data insights for companies such as Netflix. According to Damiani (2019), Netflix uses the gathered data from the user participation to create an internal programmatic marketing infrastructure. Since the viewers need to make real-life decisions about for example their product preference (such as the choice between the cereals), musical taste and engagement with human behavior, an individual personalized pattern can be discovered. Moreover, how users handle certain decisions (for example if Stefan has to jump off the balcony) offer insight about what the viewers want out of a story and what they want to see the characters in a story do (Damiani, 2019).

By analyzing this data, Netflix could even better personalize the content, but also associate products with specific content or demographics. An example that Damiani (2019) mentions is that the frosted flakes cereals could be associated with, for example, 18 to 24 years old men. This way, effective targeted advertising could take place. Another interesting part of the business model is that Netflix could work together with different brands to test their product designs. Think of the already described example of the breakfast cereal boxes as shown to the viewer with two different box covers.

What’s in it for the customer?

But what is the efficiency of the business model? What is the value for the customer? First of all, the experiences of the series are tailored to the needs and interests of the customer. Each customer has an individual and unique experience as they have to choose between different narratives. Moreover, it is interesting that in the example of Bandersnatch, the customer experiences a sense of power and control. Research have shown that increasing user experience increases user’s confidence in their ability to perform their tasks (Nysveen & Pedersen, 2004). By choosing between different options and determining how the story will unfold, the customers are in charge and can make the choices for themselves.  

It is interesting that the joint profitability of this business model is visible to both the customer and Netflix. With the interactive experience and thus through active customer participation and engagement, Netflix tries to uncover the hidden needs of the customers. As a result, Netflix can use this creative potential of their customers in new product and service development (Saarijärv et al., 2013). What is striking is that Netflix in fact guides the customers through different predefined choices creating the ‘illusion of free choice” (Ralph, 2019). Customers get the feeling that they are in control in the sense that they can literally determine whát and how they experience the content. Moreover, customers engage in personalized and unique experiences and eventually receive more content tailored to their preferences. Thus, through active customer participation the customers and Netflix together create greater value. However, the future will tell if this idea will pull off and will be long-lasting.

References

Damiani, J. (2019). Black Mirror: Bandersnatch could become Netflix’s secret marketing weapon. Retrieved 23-02-2019 from https://www.theverge.com/2019/1/2/18165182/black-mirror-bandersnatch-netflix-interactive-strategy-marketing.

Gomez-Uribe, C., & Hunt, N. (2015). The Netflix Recommender System: Algorithms, Business Value, and Innovation. ACM Transactions on Management Information Systems, 6(4).

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Moovit – The future of urban mobility?


By Denis Ceric, 410688

While public transport itself has not changed that much in recent years, the way in which we find information about public transport has. Here in the Netherlands, I can not imagine taking the public transport without looking at either Google Maps or 9292. However, there might soon be an addition to this small list, going by the name of Moovit.

Moovit is a “leading Mobility as a Service provider and the world’s #1 transit app” (Moovit, 2019a). Moovit combines information from public transport operators with live information gathered from their passionate user community. This user community has been dubbed the “Mooviter Community” and helps mapping and maintaining local transit information in cities that could otherwise not be served by the app (Moovit, s.d.). Moovit themselves dub this community the “Wikipedia of Transit” (Moovit, 2019a). Moovit has over 330 million users across Android, iOS and the web, their app is fully localized to 44 languages and they offer their service in over 2,700 cities across 87 countries (Moovit, 2019a). In addition to this, their community of Mooviters counts over 500,000 members, with another 150 employees working for Moovit itself (Moovit, 2019a).

Why Moovit over alternatives?

This large community is one of the largest reasons why Moovit is likely to surpass alternatives such as Google Maps on a global scale. The CEO presented that Moovit amasses up to 500 million anonymized data points a day from transit riders, which they then combine with data gathered from their Mooviter community (Moovit, 2017a). Additionally, thanks to this data, they offer precise and hyper-local transit data that allows them to provide real-time data for thousands of transit operators worldwide in cities where Google does not, such as Hong Kong, Istanbul, Madrid or even Paris (Moovit, 2017a). Next to this, where Google plots (bus) stops using official transit data, Moovit combines this data with their own technology and community of users to avoid inaccuracies (Moovit, 2017a). The community not only allows Moovit to gather the precise location of the stops where people enter, they also sends active reports about their travel experience, such as bus congestion levels, cleanliness and more (Moovit, 2017b). This combination of data leads to the following analytics:

Figure 1: Moovit Urban Mobility Analytics. Source: (Moovit, 2019b)

This provides for an easy to use app for consumers, but all this data gathered also provides a clear business case for Moovit to convince cities to support their app. With these analytics, Moovit offers cities more reliable data than traditional surveys, faster analysis, granular insights and a rich visualization (Moovit, 2019b).

The future of Moovit

All of the above has played a large in securing a total funding of $131.5 million over four funding series, including a number of notable companies such as Intel Capital and BMW i Ventures (Crunchbase, 2019). Despite such a large amount of funding, they have not gathered much revenue to this date. However, this might soon change, as the founder of the app notes that they will be switching from a focus on growth and coverage to making money through selling data (Solomon, 2018). Building on this, they have already closed deals with multiple cities in Europe and are in talks with cities in Latin America (Solomon, 2018). In addition to this, they are preparing for the future of autonomous vehicles in cities and believe that they will play an instrumental part in making cities ready for these autonomous vehicles (Solomon, 2018).

However, whether this passionate user community will remain as passionate when Moovit starts selling all of their data and becomes the Facebook of public transport has to be seen. Amidst growing privacy concerns across the globe, Moovit will have to tread carefully in order to not suffer from backlash. Moovit, however, themselves appear to be aware of this and are taking user privacy seriously. To use Moovit, you are not required to make an account, they are GDPR compliant, all data is anonymized and all analytics are anonymized as well (Meydad, 2019). As such, what the future holds for Moovit, nobody really knows. But, it does not appear as if they will be slowing down their growth as long as they continue the way they have been.

Link to theory

Looking at the four types of crowdsourcing, I argue that Moovit’s app is mostly a form of information pooling but also has some open collaboration elements (Blohm, Zogaj, Bretschneider & Leimeister, 2018). The tools provided by Moovit make it quite easy for Mooviters to provide the data required to map the public transport in a specific town or city, thereby creating quite simple tasks for the Mooviters (Blohm et al., 2018). While the end result provided by Moovit in the app is quite complex, the individual contributions of the community are not, as most data is simply gathered through the app and not much else has to be done in these cases (similar to Google Maps, a prime example of information pooling). However, as mentioned earlier, the community does provide added value by taking into account individual user contributions, such as pictures of bus stops and reports of their travel experience (Moovit, 2017b).

Looking at the recommendations of Blohm et al. (2018) for governance mechanisms for information pooling crowdsourcing platforms, Moovit follows most of them. They provide clear contribution requirements, they have a demographic-based allocation of tasks (as users map the area around them), they make use of reputation systems and framing (e.g. by recognizing extraordinary Mooviters as “Ambassadors” and providing them with goodies and opportunities to meet other ambassadors at exclusive events), and by providing tutorials (Moovit, 2018). Next to this, recommendations by Dellaert (2019) can also be found in Moovit, as the consumers of the map are often also co-producers. The increase in customers’ joint payoff at a network level is most relevant (Dellaert, 2019). The establishment of the community itself, rather than having each user of the app contribute, is an example of this. By encouraging users to join this network and become active in the network, greater utility for the total network is achieved (Dellaert, 2019).

Efficiency criteria

Lastly, I will briefly evaluate this crowdsourcing approach using the efficiency criteria. I believe the joint profitability is currently efficient, but there could be a greater recognition of their Mooviters and for the future, monetary rewards might be in place. Currently, I believe it is efficient as Moovit is not really generating any revenue so it would not make much sense to use their funding to pay their community, but once the selling of data gathered from this community is implemented throughout the platform, it would make sense to share some of this with these Mooviters, whose data is being sold.

In terms of feasibility of required reallocations, I believe it would be relatively difficult to establish the necessary institutional arrangements and institutional environment for most competitors. This is mainly due to the fact that location-based data is gathered continuously, which could lead to large privacy concerns and trust issues among users. Additionally, the largest strength of Moovit’s crowdsourcing approach now is the large network of Mooviters they have built, and the network effects that come with such a large network (in addition to the map they have built using this network). As such, this would only really be feasible for a large company with an established network and the ability to adhere to the instutional arrangements and environment, such as, for example, Google.

References

Blohm, I., Zogaj, S., Bretschneider, U. , Leimeister, J.M. (2018): How to Manage Crowdsourcing Platforms Effectively? in: California Management Review, Vol 60, Issue 2, p. 122-149, doi: 10.1177/0008125617738255

Crunchbase (2019). Moovit. Retrieved February 23, 2019 from https://www.crunchbase.com/organization/moovitapp#section-company-tech-stack-by-siftery

Dellaert, B. G. (2019). The consumer production journey: marketing to consumers as co-producers in the sharing economy. Journal of the Academy of Marketing Science, 1-17.

Meydad, Y. (2019). Supply and demand: how data collection and analysis became the key to unlocking MaaS. Retrieved February 24, 2019 from https://www.intelligenttransport.com/transport-articles/74591/transport-data-maas-solutions/

Moovit (2017a). Moovit “Eclipses” Better-Known Services Like Google Maps. Retrieved February 23, 2019 from https://moovitapp.com/blog/moovit-versus-google/

Moovit (2017b). Moovit Press Factsheet November 2018. Retrieved February 23, 2019 from https://docs.wixstatic.com/ugd/c729fe_82d633f838e44572a129d75ce2e31eaa.pdf

Moovit (2018). Commuter Kate: How To Make A Difference In Your Community. Retrieved February 24, 2019 from https://moovitapp.com/blog/community-crowdsourcing/

Moovit (2019a). About. Retrieved February 23, 2019 from https://www.company.moovit.com/about

Moovit (2019b). Origin-Destination Visualizer. Retrieved February 24, 2019 from https://www.solutions.moovit.com/origin-destination-visualizer

Moovit (s.d.). Join the Mooviter Community. Retrieved February 23, 2019 from https://editor.moovitapp.com/web/community

Solomon, S. (2018). Israeli founder of Moovit app sees himself as the ‘Marco Polo of transit’. Retrieved February 24, 2019 from https://www.timesofisrael.com/israeli-founder-of-moovit-app-sees-himself-as-the-marco-polo-of-transit/