Disruptive Changes

There is no room for doubts that a revolution on business models has arrived ant that it has come to stay. The concept of business innovation has already jumped off from within companies Head Quarters to a wider range world plenty of new ideas establishing a double way road for innovative relationships between companies and its peers, its competitors, its customers, its suppliers and other stakeholders.

In my point of view these new scenarios have come to replace old ones. Nevertheless for companies succeed in this future world they ought to foreseen what sort of new business or new technology is going to last longer. New model arrivals come so often that gets hard to know exactly what is going to succeed or what is predestined to fail. It seems to go like the recent competition between 2 new technologies for high definition in movies recording; Blu-Ray against HD-DVD. There is a chance for both cohabit in this new world, but there is a higher chance for one to fail and the other becomes the new world adopted model of recording data. The same competition happened a few years ago between Sony Betamax and VHS recording system. Betamax was vanished as the market chose VHS as a preferred technology. I personally make my bets on Blu-Ray to succeed.

I believe new business models brought up by new technologies and new thinking innovations will face multiple results. It will be similar to a Product Life Cycle. New business models (that l will call as NBM for easier further mention) will have NBM Life Cycle. Some will last very short, others will last longer and others much longer. Moreover, even those NBM which last longer than others based on its success, will need to be refreshed in the future in order to keep its attractiveness facing newer NBM that will eventually pop up.

Below we can see how NBM life cycle might happened in comparison with regular PLC’s. This is a chart extracted from “Global Marketing”, Pearson Education 2007 - 4e de Svede Hollensen where shows different life cycles faced by Sony Betamax and VHS products, among others.

I do not believe on NBM as a trend or a shift. I think it is going to be a positive combination of both. We can foresee that some NBM will be fashion as a newcomer and will disappear soon due to lack of long term consistence or due to other NBM better timing adjusted approach. For those NMB that will last longer (we may think about years of life), a refresh of ideas, concepts, and new technologies must be implemented to not allow the start of its declining period of life cycle. In this case, refreshment will represent an extension of life cycle. What, definitely is not going to happen, is the maintenance of the Status Quo for old-fashioned business models based on its past success.

The most amazing and robust changing process come from the media sector. Due to the Digital Convergence, that has shown an impressive fast evolution, media sector has changed for good. There is no more apart media industries, such as it was set up in the very recent past; movie industry, paper media industry, TV industry, music recording industry and so on. The boundaries of media industry have blurred and continue to banish any sort of distance among them. Interactivity between all sort of media broadcast and media electronic devices is already on place, however, evolution of new technologies has poping up so quickly that will improve it to unpredictable levels. The changes are coming in a so fast pace that we can barely comprehend. Ordinary people are amazed and trying to understand what is happening in this world. As stated by Ross Dawson, Chairman of Future Exploration Network, “we will soon have to explain CDs and DVDs to our children”.

Easy to identify changes that have impacted this sector;

 Hardly we will see a movie company as it was in the past. Now they are just a part of a media conglomerate. Big players in the media industry are buying companies who are specialized in different fields of media and technology companies focus on media integration, aiming to attend new demands created from digital convergence. According to PriceWaterhouseCoopers in its Media Market report published in 2007, a massive 43 billion worth of complementary media fields’ deals took place in Europe in 2006. Furthers 40 billion was expected to be done in 2007. The main reason is the expected re-direction of advertising investments on different sort of medias, in detriment to old models. For the next few years is expected to see a fast growing on digital advertising mainly on paid search, mobile and videos. Also, new segments of digital advertising are expected to emerge as personalized outdoor and in-building advertising, and advertising in virtual world. For example, newspaper may be delivered on e-paper as new forum for digital and personalized advertisements.

 Another change, based on the ability of people of getting used to new technologies and making deeper use of it is the growth of personalization of media products being made available. As an example, the majority of the 7 billion online videos streamed each month are user generated. The media sector is running after this new sort of audience which has already enlarged the size of each niche on the long tail, becoming more and more important on commercial matters. Media companies must to pace faster to keep selling its products and ads. YouTube, for instance, has established itself as one of the most popular online sites globally, exemplifying the impressive fragmentation on video programming and, as consequence, its new broader marketing segmentation.

Philips Guerrilla Marketing - For those who has chosen The Philips Case Study as final assignment of International marketing, here is a nice video

Crowd-sourcing for hospitality industry

| View | Upload your own

InnoCentive Business

InnoCentive is a Market Place structured by a web company which enables companies searching for R&D solutions to reach an extensive number of unknown professionals worldwide which may help to find effective answers to questions which puzzled them.
innoCentive, which has its name designed by a fusion of the words innovation and incentive, set up a platform which creates this Market Place, where a revolution can take place on the way companies or non-profit organizations seek for people who have capability, inventiveness and, through this tool, possibility to bring out to the world their innovative solutions for what initially seemed to be impossible to be solved through traditional methods of R&D.

The beauty of this process relies on its simplicity. Who needs a solution for any sort of problem, in all field of acknowledgement (from Chemistry to Business and Entrepreneurship, from Physical Sciences to Engineering and Designs), the SeekerTM, as so-called by InnoCentive, post it on InnoCentive website and offer a prize for who else, the InnoCentive SolversTM, believe can come up with effective answers for the puzzle. The prizes vary essentially from $10.000 to $100.000 per problem solved.

This new concept of relationship between companies and individuals is known as Open Innovation. The central idea of Open Innovation, as defined on Wikipedia, is that “in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own research, but should instead buy or license processes or inventions (i.e. patents) from other companies. In addition, internal inventions not being used in a firm’s business should be taken outside the company.”



Problems solved
From the customer’s point of view by adopting Open Innovation model companies can dramatically reduce the pitfalls, costs, and risks associated with closed innovation. Companies who have realized its business model is more important than its technology, its Intellectual Property – IP or Patents by itself have acquired more motivation to spend more time on thinking about different ways to reinvent its business model leaving the origin of the best ideas for its technology for its products to be developed outside. Small and big companies are learning it.

There is no time wasting on trial-and-error sort of problems most of R&D companies departments normally pass through on its day-by-day attempt to develop new products or needed solutions. The company posts its challenges on the Market Place along with some guidance of what it is searching for solution, set accomplishment time line and the prize for the winner. Only the solver who come up with the solution that accomplished company’s query gets its award.

Advantages of the use of Open Innovation by companies or Non-Profit Organizations can be long listed as described below:

Creating and capturing value ahead of the competition
Reduce the risk of innovation
Less risk guessing what the market wants
Let the market / community tell you what they want
Integrated community innovation
Innovation can come from anywhere and anyone
Some of the best ideas are outside of your organization
Lower your R&D and operating costs
Supplement your R&D
Tap into the virtual R&D community
Shared IP can create a formidable barrier to entry

This is a pathway to companies to maximize the dollars they have got for Marketing and Research and Development.

From the suppliers’ point of view, where individuals will sell products to companies, it is established a completely new and inverted position on commercial relationship. A broad world of opportunity is open to their inventive minds. They have just sign in, with no cost, to the web site and search for puzzles posted. Normally it is posted as questions to be answered followed or not by a few formulas or scratches. Professionals who have found no rooms to show their abilities on its own place of work can be the source of a brilliant solution for a much bigger company that the one he works for, besides he can raise good cash as a competition winner. This is a place for everyone shows its inventiveness.

As a sort of Ebay of Ideas, Open Innovation adheres to the laws of globalization. Noticeably large numbers of Russians and Indians participate in InnoCentive's competitions, for example. For them, the prize money can often mean an entire year's salary. Professional recognition achievement is also an outcome normally as important as financial awards.

Creative thinkers, engineers, scientists, inventors, and business people with expertise in life sciences, engineering, chemistry, math, computer science, and entrepreneurship can join the InnoCentive Solvers™ community to solve some of the world's toughest challenges”.

The downside for solvers lays on the secrecy on which businesses insist to protect intellectual-property rights, they are not able to know anything beside whether they won or lost. Losers' knowledge isn't widely shared.

Non-Profit Organization such as Rockefeller Foundation has become partner of InnoCentive, aiming to expand its capacity to invest its philanthropic funding in a broader community of scientists. Rockefeller Foundation is one example among several others Non-Profit entities which has adopted the model of web scale searching for inventive answers to a few specifics human common challenges they have catch as proper goals to solve.

The same way Open Innovation works for companies (clients) it works for these entities. The web platform posting problems, along with appropriate awards, are open to a much larger community of possible thinkers and problem solvers while reduce cost and risks of non success for Philanthropy. Only the successful response gets its prize.

Also, InnoCentive Seekers and Solvers are anonymous. The judgment is based on the sciences, not on who is standing behind it.

As nothing can be really perfect, this new form of R&D cost-cutting has its problems, too, as Frank Piller, a researcher at Massachusetts Institute of Technology has discovered: "Some full-time researchers, apparently worried about losing their own jobs, are intentionally flooding online innovation marketplaces with unsolvable problems, in order to frustrate their competitors on the Internet."


Groups served
The customers’ group served is wider as the number of companies and Non- Profit Organizations existing around the world. Non-Profit entities have entered in this market more as partner of the web platform companies. The hottest start-ups and handful of innovative Fortune 500 companies are just a few to mention, among many others, who understand that some of the best ideas come from the outside.
Adopting the Open Innovation model is just something that organizations should not only be discussing but aggressively adopting.

As well as for customers, suppliers can be as large as to the extent of the human being who can have internet access. No need to be a Star Rocket scientist, anyone can be inventive. The people who use a particular product are often the better experts, simply as a result of daily use. However, it is not a physics law and surprising results can really come from anyone.

After examining 166 problems posted by 26 research labs on the InnoCentive site over four years, Karim Lakhani, a Harvard Business School professor, found 240 people, on average, examined each problem, 10 offered answers and 29.5% of the problems were solved.
One surprise: The further the problem was from a solver's expertise, the more likely he or she was to solve it. It turns out that outsiders look through a completely different lens. Toxicologists were stumped by the significance of pathology observed in a study; within weeks after broadcasting it, a Ph.D. in crystallography offered a solution that hadn't occurred to them.

Around 80,000 inventors have already tried their hand at solving the various problems posted on InnoCentive.


Source of Revenues
InnoCentive has only one visible source of revenues. The web site charges the companies and the Non-Profit Organizations a fee to post their challenges. In return, they remain anonymous, in order to protect organizations secrets.
It is not totally clear if the partnership with Rockefeller Foundation generates extra income other than the mentioned fee posted by them on the site.


Sustainability and Scalability of the model
New technology start-ups companies have making use of Open Innovation business model involving internet as part of their core strategy to come to the market. The number of Fortune 500 companies which has adopts the now so-called crowdsourcing has seen remarkable growth. Wikipedia defines Crowdsourcing as “a neologism for the act of taking a task traditionally performed by an employee or contractor, and outsourcing it to an undefined, generally large group of people, in the form of an open call.

For example, the public may be invited to develop a new technology, carry out a design task, refine an algorithm or help capture, systematize or analyze large amounts of data”, which is basically what InnoCentive provides through its created web platform. Some examples of companies who are embracing open Innovations as intelligence source.
Apple
Google
Amazon
Zimbra
Meebo
Skype
Salesforce.com
Eli Lilly
P&G (Procter & Gamble)
BASF
DuPont
Dow Chemical
General Mills
Kimberly-Clark
GSK (Glaxo Smith Kline)

Even companies which have crowdsourcing as a normal source to new technologies, the use of it is growing fast. Alan Lafley, CEO of P&G and one of the most admired CEOs in the world, proclaims, as he did in 2003, that “50 percent of all P&G discovery and invention could come from outside the company”. This is even more remarkable when you think that only one-fifth of P&G’s R&D came from the outside in 2002.

Clearly some of these new initiatives reflect the commercial viability of open innovation and business models. In the early days, most open source projects had no commercial intent. Also is interest to remark that a handful of companies like Google, Amazon, and Salesforce.com found it strategically advantageous to use free open source software (FOSS) for their own infrastructure. Now, the perception of the need of being more “open to innovations” lead companies to thrown away old believes regarding creating its own IP as it is not a determinant or a pre-requisite for success.

According to Kameran Ahari, an information technology e-marketing and strategy consultant, “75% to 95% of patented technologies stay on the shelf and go to waste. Not to mention the fact that 90% of all products fail. Moreover, if your IP management policy prohibits reassignment, then your patents are not assets. With rising technology development costs and increasingly shorter product life cycles, the risk of innovation is almost certain. Technology life cycle has gone from 4-5 years, from a decade ago, to 6-9 months. In other words, your window of opportunity to recoup your investment got even shorter. Having your innovation, business model, and community aligned is more important”.

The crowdsourcing model itself neither it’s not new nor did not born on internet. “In 1714, Britain offered £20,000 (roughly equivalent to £2.5 million, or $5 million, today) for a way for mariners to determine their longitude. Sir Isaac Newton was convinced the solution lay in astronomy. He was wrong: John Harrison, a working-class joiner with little formal education, built a clock that did the job. In 1919, hotel owner Raymond Orteig offered $25,000 for the first nonstop flight between New York and Paris. Eight years later, Charles Lindbergh won”.

“Prizes prompt a lot of effort, far more than any sponsor could devote itself, but they generally pay only for success. That's "an important piece of shifting risk from inside the walls of the company and moving it out to the solver community," says Jill Panetta, InnoCentive's chief scientific officer.

Repeating what was previously stated which summarizes the perception of the future and sustainability of the Open Innovation model, “Adopting the Open Innovation model is just something that organizations should not only be discussing but aggressively adopting”.


Stretching
The increase of users or customers are already growing fast, however I would expand platforms capabilities to reach people native from countries different of English, French or Spanish spoken. The limited use of these languages restrain access to people who is as inventive as others but without abilities to understand the challenges in other language rather than your own.

I would develop a team with very special languages skills to make fair translations to spread out the challenges bring many other possible solvers to this Market Place.

I couldn’t see revenues coming from advertising. Initially, I supposed that companies which seek for crowdsourcing would not like to see its image related to a web site which provides this sort of solution. It might harm its image of technical competence. However, as many major companies are clearly declaring its strategies towards crowdsourcing, I would invest in selling advertising through my site. Also, partnership with Non-profit Organizations could utilise its relationship in a more publicly form by advertising its achievements such as success on challenges, cost reductions on the search for answers and the enlargement of public taking part of its challenges.

I believe that the expansion of challenges to new language solvers will attract new customers from many other countries which are also restrained by language limits. The growth of the existing market can come faster along with as the world for solutions has expanded as well.


Other industries in Open Innovation market
Beyond regular high tech companies, which in its desperate search for new discoveries spend millions of dollars to keep up-to-date with market demands and ahead of its competitors’ fast movements, many sort of companies which is in the fast-paced industries can take advantage of the Open Innovation source of solutions.

A great market for Open Innovation is on the marketing sector. Marketing companies might post challenges to outsourcing inventive people to find solutions to every task of its own work, like products and logo designs, digital graphics solutions and many others.

Another example come from the fashion industry; the Chicago-based company Threadless prints T-shirts that its designs are based on ideas people submit to its web site. Only the designs that win the most votes actually make it onto the company's T-shirts. The winners receive a $1,000 reward and a tiny shot at fame. The competition gives young designers the opportunity to make a name for them, while helping Threadless to cut down on flops -as well as employees.

Social Entrepreneurship - a world changing tool

According to Eckhart Tolle in his best-seller book, “The Power of Now”;‘Humanity is sick’. What Mr. Tolle meant saying this is that each of every single person born as a complete human being fulfill by the whole spiritual truth, a complete sense of life, full of goodness and knowing what pathway he should take in his lifetime to elevate himself on spiritual evolution process.

When, this complete self-contained being, grows as a human entity surrounded by people widely developed by distorted truths, prejudices, twisted values and, as consequence of it all mixed, with very poor or with lack of the original goodness, he start its own process of losing his real inner being. He reaches up his adult life as sick as everyone else who couldn’t see this process growing within him. He ends up full of prejudices, twisted values, etc, etc, etc.

As a sick society, we believe that a successful life is displayed by having expensive cars, luxury products, big mansions and many others enviable consumer goods. Behind all of this comes the money. By extrapolation, who has succeed financially in his life is a person who also achieved happiness. This is the strongest expression of misunderstanding of life’s sense. Unfortunately, just a small number of people worldwide have jumped off this trail and search for happiness through different pathways.

This said story is the base of why “Corporate scandals and excessive compensation packages for rapacious CEOs have dominated business news during the past three years. Profiles of visionary corporate heroes have given way to cautionary tales about greedy villains, and public trust in business has plummeted” as cited by Laura D'Andrea Tyson, dean of London Business School, in her article ‘Good Works - With A Business Plan’ on Businessweek in may 2004. After found themselves lost on the happiness life search, people aim to achieve such distant state of mind, by making the more money they can, no matter the cost it might take for their health, their families, their friendships and frequently stepping over anything that might slightly being seen as a harm on their mad pursuit.

As we’ve been seen recently an increasingly movement toward social responsibilities actions taken by corporations, should we believe it is a transitory trend or a real behavioral shift? It is hard to answer this question as no one has a crystal ball to read the future. It seems to me that as the number of people being enlightened by new believes, detached from the pursuit of wealth, are clearly growing, we may be seen a real, not only corporate behavioral shifting, but a society as a whole entire changing.

The corporate behavioral changing is only happening as a cause of society's claim(playing its role as part of the enlightening process). However it's still hard to predict what is going to happen with these new truths and believes humanity is showing now. Major events, such as petrol war, ethnic manslaughter and other ugly actions might throw back in time society’s evolution reached to date. On the other side, the expanding perception of how badly men had treated the mother earth causing great and scaring risk to humanity future can accelerate the expected behavioral changing, reducing the risk of negative major events. Such scenario will strongly support society and corporations onto a major behavioral shifting during next few years. We must all do our part on the game as a small, but not least, part of this still sick society, demanding and acting responsibly in our own life or when we are playing as corporate representative. The change will always depend on our own attitudes.

In a more formal definition Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change. Social Entrepreneurs are a more visible example of people who seek for career success achieving key positions but who decide to make their own part to society’s shifting onto a better living world.

As I consider myself an incorrigible optimistic l incline to believe this corporate changing is for real starting a win-win humanity game.

Ventes Privées - Le phénomène

The Private Sales concept has popped up recently as another e-business opportunity of purchases and sales. The difference it brought to others e-commerce sites lays on the need of each party be invited to enter as a member of a private network. The sponsorship system is very similar to Orkut, the first successful e-platform created to increase and narrow relationship worldwide. Basically a sponsor, who might be a seller or another purchaser, already member in the network, invites a third party to join the group. As a full registered member everyone is entitled to receive by e-mail all information on good deals offered by all kind of stores and web sites promoting best deals over internet.

The phenomenon has gathered momentum with the explosion of e-commerce. The sites of private sales are proliferating in fields as varied as fashion or the appliance industry. The principles are always the same: to offer, under a limited period of time, high discount rates over articles mainly of renowned brands.



Benefits
Regarding the unquestionable success achieved by this sort of trading benefits are being profited by both sides. For customers, eager to consume good quality products from famous brands, at a highly discounted prices and being noticed in advance and privately apart them from ordinary buyers. It is a luxury for those who are not keen to pay what famous brands charges for its products. Also there is a group of customers who don’t like to go shopping searching for Shops Sales. It is definitely unpleasant entering into a crowded store and get close to fight against others customers for the last available desired items. Also, this process of trading attracts those who like to feel they are part of something special as a private network suggests. Besides them, everyone who gets an invitation from a sponsor can get benefit from the Private Sales system.

On the other hand, producers have an extensive network of consumers just waiting to be advised of their sales through this e-shopping channel to clean up its inventories of old collections or just to reduce its size of inventory (the inventory keeping cost might be higher than sell it for a low price), depending on the sort of articles we are talking about.

In order to connect these 2 avid extremities web shops have proliferated offering e-platforms and strong marketing strategies to narrow the size of this trading wire. They are profiting of the situation mostly by getting commissions over each sale. Also, websites get revenues coming from customers’ subscriptions and advertising. Some websites have developed extra source of revenues by using the private network to market other sort of deals, even gathering donation to unprivileged people in developing countries. I suppose they charge commissions over these funding raises as well.

The idea has achieved this tremendous success because it is good for everyone. All parties have a benefit to take from this business, as long as each part does correctly its role on the chain. There are growing concerns on legal aspects of this sort of trading as most of countries don’t count on up to date legal system for open e-business relationship the more for private networking deals to protect customers’ rights.

The Private Sales model
In spite of the fact the remarkable success of this trading model has been based on the existence of numerous e-platforms available, this model might be, and I believe it should be, adopted by “brick and mortar” stores. Most of big stores or renowned brands have its own data over its clients. Having such powerful tool they should split the annual or semi-annual Sales between ordinary customers and special customers. The latter might be invited to enter into a selected group of clients that would be informed in advance of special sales and would have preferred time sessions to profit of all benefits coming from the Sales before non-private-networking clients. These procedures might increase interests from its special customers to be more present (and to buy more) of each Special Sales. In terms of scale, it can go as big as the size of the retail market worldwide. Big retail chains stores, famous brands with self stores and others can make use of this strategy to enter this new world of opportunities.

Stretching
It is a quite tricky strategy expanding your internet marketing actions without facing the risk of becoming or to be seen more as a spammer rather than a serious trader. There is no internet user who amuses himself of getting spams all the time. It is easier to get an enemy instead of a costumer if a very selective marketing strategy is not appropriated adopted.

In order to increase my own sales l would invest on knowing my clients better. Regular customers use to respond to researches (as long as it is short and not boring) if they see any further compensation. The major cost of marketing l would invest would be in creating this compensation programs in order to enlarge as much as possible the data bank with my customers’ information; and the Data Bank Software itself. That would make difference to understand how to reach each of their weaknesses, desires, financial capabilities, consumption interests, and many other power information which might be explored towards consumption motivation. It might re-direct my sales efforts to other products or to add services, by instance.

The growth of users and revenues would come naturally by knowing for real what my portfolio of clients seek instead of pushing products that l would like to see my clients buying. Moreover, this growth would enhance my ability to negotiate with suppliers that are still not in my list but should be as their name was captured by my Clients’ Data Bank Analysis Software.

Vente Privées Links

| View | Upload your own

EasyGroup business model assessment

The EasyGroup is a private investment venture owned by Stelios Haji-Ioannou, a 40 years old already fabled Greek entrepreneur who had started his company by founding the budget airline company EasyJet P.L.C in 1995. Since then the group has rapidly grown to a number of 17 companies, all of them under the low cost – low price management concept model. Besides EasyJet, there is an array of other Stelio’s (as he is worldwide known) experiments in low-cost living companies like EasylnternetCafe, EasyCar, EasyMoney, EasyHotel, EasyCruise, EasyPizza and many other distinguished business.
The birth of the first venture under the strict concept of Yield Management was the basis and inspiration for every new idea that was later transformed into a real business.
The adoption of the Yield Management concept to the furthest extent surged EasyJet to the fourth European Airline Company to date.
However, the success of the firstling of the group hasn’t rehearsed among all others Stelio’s group new ventures, at least so far.
What Easy companies seek to offer to its clients is the lowest price for its products or services based on “no added frills”. The companies envisage in each of its product or service the basics that each customer would be satisfied of knowing he is not paying for what he doesn’t worth and he doesn’t want to pay for. The technological platform leads all operation process to work electronically, with the minimum human intervention. It is an e-business model to its extent which surpasses conceivable use of internet by dealing many products and services which seemed not practicable before easy companies brought it up to the market.







Stelio at London easyHotel launch, 2005


The Yield Management
Yield management is a Methodology to optimize/maximize the revenue earned from a fixed, perishable resource by understanding, anticipating and reacting to consumer behavior. The main goal is to sell the right resources to the right customer at the right time.
Yield management implements the basic principles of supply and demand economics in an intelligent and focused way to generate additional revenues.
There are four essential conditions for revenue management to be applicable:
1) That there is a fixed amount of resources available for sale.
2) That the resources sold are perishable. This means that there is a time limit to selling the resources, after which they cease to be of value.
3) That different customers are willing to pay a different price for using the same amount of resources.
4) Also is important to have direct access to consumers. The sales through intermediaries or wholesalers makes the process much harder to understand demand and often impossible to control and vary price.

Yield management is often applied through a computer system which process mathematics models of simulation and prediction of trends and it is particularly suitable for dealing with perishable products, i.e. goods that become unsellable at a point in time (for example air tickets just after a flight takes off). Industries that use yield management include airlines, hotels, stadiums and other venues with a fixed number of seats, and advertising. Applying the model an advance forecast of demand and pricing flexibility, buyers will benefit of the price sensitivity by using more power in off-peak demand or by purchasing with considerable anticipation. Customer’s demand affects the final price; early morning flights will have higher cost as well as weekend’s theatre seats. Internet has become the greatest instrument to facilitate this process.
Synthesizing, Yield management is a process of knowing, comprehending, anticipating and reacting to the trends of demand in order to maximize revenues and/or occupancy.

Benefits of the use of Yield management methodology
As previously mentioned, internet has been the greatest facilitator to spread out the benefits of Yield management methodology.
Customers have reached a powerful ability to manage its own profile of consuming. The same person can act as a conscious money saver when plan his vacation trip by searching the best deals offered by Yield management applying companies in flights, hotels, car rentals, stadiums or theatre seats or when he is living his regular days as a businessman who is not concerned on paying more for a seat when booking late.
In the case of EasyJet customers they are all aware that they will not have free meals or any other “frills” which raise tickets prices to a level unfair regarding these “frills” may be considered unworthy to them.
Having a look from EasyJet side which built its business on the Internet, the benefits are enormous: It books 95 percent of its tickets over the Web. It never issues paper tickets, and runs an almost paperless office to boot. EasyJet has also never served a free in-flight meal, which is one reason its jets turnaround times average about 30 minutes, among the best in the business. As Yield management is a computing intensive system working on behalf of the company its anticipate demand and maximize pricing and seat occupancy to get the most revenue out of every flight.
However, the Easy managers are still learning how best to adapt yield-management techniques to new ventures. As an example, EasyInternetCafe stretched its Web Cafes from Europe to US having the world’s largest LAN house opened its doors offering 800 computers but no amount of yield-management sorcery could keep them occupied. The venture lost an estimated $150 million from 2000 to 2003. In face of this bad results, Stelio brought in to the company an internet expert who set up partnerships enabling Easy to put about 20 terminals each in dozens of Burger King, McDonald's, and Subway outlets all over western Europe; last year the Internet cafe business made a modest profit, and it is now expanding into eastern Europe.
This ability of simulation and prediction provided by the cited methodology also enable the company to better plan its demands with its suppliers. Nonetheless, intermediaries are forcedly excluded from this game.
Interactive relationship provided by e-technology platforms is a key factor for the success of the implemented strategy aiming increasing sales and enhancing profits. Companies which have implemented the Yield management system saw its turnover increasing as much as 10% although a number around 4% is more often achieved while profits can raise 50 to 100% without any increase cost.

Benefits for customers
The variety of client groups that can benefit themselves from the Yield management system can’t be smaller than almost the totality of customers spread out worldwide. Everyone who is willing to consume any good or product can make use of this tool to optimize prices they will pay for its purchase.
Cultural changes are in process and will enhance ability of customers to adopt new attitude to pricing what they want to buy.
The use of Yield management tended to be limited to larger companies that can afford expensive software to analyze patterns of demand and alter prices accordingly. Smaller companies need to insert themselves into this new world of techniques and tactics as they don’t have competitiveness in comparison with who carries known brands worldwide.
In fact, many small companies already do use Yield management techniques intuitively. "Market traders do it when they sell off fruit cheap at the end of the day or when they drop prices because the weather is poor," explains David Molian, co-director of Credo, the small business unit at Cranfield Business School. "Fashion and technology retailers do it when they charge a premium for the very latest designs. I see no reason why window cleaners and other service providers shouldn't at least consider doing the same."
Our culture has a history of having one publicly announced price for goods and services. YM involves having many prices, often subsidizing ridiculously low prices with ludicrously high prices. This cultural consuming changing is the drive which will enlarge the benefits of the YM to any kind of groups of consumers.
It is a powerful tool that must be profited by everyone. Revenues for companies and money savings for customers can be come from many sorts of products, as long as they carry the 4 essential conditions previously mentioned ( fixed amount of resources available for sale; resources being perishable; different customers willing to pay different prices for the same products and no intermediaries between sellers and buyers).
The basics for revenues increasing is to sell cheaply when the demand would be, in past times, lower and raise the prices following the demand movement.
Nevertheless, companies ought to understand their customers intimately. For instance, airline companies should not set its early prices so low that it would fill the plane with people paying peanuts or when it comes to peak demand set the prices so high that people refuse to travel. “Get it right and it can transform your business. Get it wrong and it could put you out of business” states Molian.

The model application
Despite the fact Yield management have been created by airline industry as a consequence of deregulation of its industry by early 1980s and developed to attend its needs to increase and optimize airline seats occupancy (and profits, of course), the model shows to be applicable to many different products or services. The system got its development in parallel with the implementation of GDS -Global Distribution Systems (Sabre, Apollo, System One). This system allowed airline companies to have direct access to thousands travel agents worldwide online.
Nowadays, it’s clear that the use of Yield management can be used off line as well, even for small and non systematized companies of any size or business scale. As an example cited above, even an open air market’s fruit and vegetable trader can apply YM by understanding his customers, their consumption trend and the perishability of his products.




easyHotel



As the mathematical algorithms required by Forecasting & Optimization used by Yield Management Solutions are highly complex, there are only a handful of companies who can provide such technology today. Existing Systems require intensive consulting and necessitate months of data collection before being fully operational for their use by YM specialists within the operation.

easyHotel is one of the several companies part of the easyGroup which uses Yield management in order to optimize its prices and room occupancy.
Hospitality industry is quite similar to airline and car rental industry on the matters related to simulation and prediction that Yield management mathematics algorithms system can calculate.
easyHotel likewise it sister company easyJet has adopted YM to its further extent which allows management team to:

• Increase revenue by maximizing occupancy and protecting rates when necessary
• To have access to accurate statistical reports both future, current and historical
• Detailed demand forecasting information to help with sales and marketing initiatives
• Competitor analysis on both the internet and GDS to help react to market influences
• Group analysis to help evaluate the impact group reservations have on occupancy and therefore revenue
• Series analysis which assess the impact a tour series contract will have on your property
• Access to reports and real time information on a group wide basis for Head Office personnel

Besides the regular source of revenues as a hotel chain and as easyHotel is still on its taking off life period having to date only 6 hotels to be managed (coming to open at least 9 in India by 2009), the company make good use of its well know brand and e-technology in use to embrace other income springs. The company plays a role of hotel rooms dealer for hotel industry earning commissions over each room booked through its website. That is another way to optimize existing structure, even if doesn’t require YM techniques to be put on practice.

View Upload your own

The Long Tail concept

The business concept named as “The Long Tail” derives from a statistical XY graphic when charting popularity of products sold (line X) against the variety of products (line Y). The products hits on sale occupy a narrow space on line Y while it peaks the numbers on line X. However, the stretching of the curve on line Y shows a real demand for niche products, as shown on the graph below:





The Long Tail graph identifies an important demand curve by showing that the total volume of low popularity items exceeds or may exceed the volume of high popularity items.



The Long Tail concept provides a consistent and endeavoring changing on the relationship among all links of mostly of market chains. Numerous challenges come up when an attempt to connect all those links of the above mentioned chain is put on place.
1) How a producer of a non popular specific good will find the clients out there which he knows they exist, show its products, create a demand for it and deliver it at an acceptable price?
2) How consumers avid for being away from mass products would find those would suit better their needs and expectations?


The Players on the Long Tail

The Long Tail business market opportunity is divided into three categories:
1) Long Tail Aggregators (that include both the head and tail of content and products)
2) Niche suppliers/producers (who get aggregate by someone else)
3) Filters (which help people find what they want)

The e-technology which has been experienced an unstoppable innovative constantly development is the key reason, if not for the appearance, but certainly for the stretching of the size of the tail.
New players turned up to make useful and, most of all, accessible all the range e-technology can provide to narrow distances between producers, consumers and its prior unknown room for business.
The first good example of how e-technology helps and creates new demands comes from Amazon.com which has significant portion of its books sales coming from obscure titles that is not found, for instance, on Barnes and Nobles, one of the biggest traditional book retailers of the world. The aggregation of this huge list of niches client driven products comes as a substantial extra source of revenues followed by an insignificant increase of its fixed costs. That is the key supply side factor which determines whether a sales distribution has a Long Tail is the cost of inventory storage and distribution. Where inventory storage and distribution costs are insignificant, it becomes economically viable to sell relatively unpopular products.
The Long Tail is a potential market and, as the examples illustrate, the distribution and sales channel opportunities created by the Internet often enable businesses to tap into that market successfully.
The so-called Market is formed by an unimaginable variety of niches of clients that are now able to purchase goods that they don’t even know it might exist. These specific groups, or niches, have their own particularities, their own desires, their own dreams which might become consumption dreams. Only if appropriate products and in an efficient way of commercialization are for them offered.
For instance, people in the south-east Asia might love been the chance to buy Brazilian songs composed by south-eastern Asian descendents, which they would never know its existence. Imagine the good feelings it may arise on those customers seeing their culture influencing and/or being influenced on the world music. Definitely this sort of product wouldn’t become very popular elsewhere, but at least, somewhere for some ones.
Another example, that fits my own business project to be developed after MBA conclusion, would be offer to European tourists an small, unique, charming bungalows structure hotel on a marvelous beach in Brazil where their 5 senses would be instigated to the extreme. A place where each detail, among dozens out of do not fit here being mentioned, as the internal decoration of the room would be selected to achieve prior mentioned purpose and those very ones items would be available to be purchased (like local sophisticated crafts) for the clients who had had unforgettable moments there. Again, this is a product to be offered for a very specific niche which will give value and will pay for it. I will need to be able to find the right tools, software and people, the so-called Filters to find the public for the product I will be bring to the market soon.

From the customers side ought to become easier the ’how to use’ tools which will guide clients to the products they really would like to consume. As tools we may consider software and people, which act as ‘Filters’ in order to facilitate this process.
There are reasonable sorts of Filters available off and online, like blogs, clients and costumers reviews and recommendations, playlists, Google measure, etc.
The questions are:
1) What are the correct drivers to be used in choosing each of these Filters?
2) Are they reliable enough?
The answer lay on the bed of your own experience. If someone is encouraged by a Filter to consume a specific product or to consume through a specific aggregator, he must say loud out his words. Each one must become a Filter himself by making own reviewing on blogs, magazines, and websites. The Long Tail is formed by millions of people who need information before anything else. Each consumer must understand that he has now become one of the tools others can make use of.


Sustainability and Scalability

Most of the world’s well known and described players such as Netflix.com, Amazon.com, ITunes fall into the first of three described categories, aggregation.
A paradox seems to rise from the examples given:
The Long Tail is all about the shift from hits to niches. But aren't all those aggregators "hits"? They're not only the largest players in their category, but they seem to be getting even larger, gaining market share at the expense of their competitors. Is there something about aggregators that tends to favor a few big winners, even as the other two categories fragment into a million niches of varying size?
The major of all examples is Google which in a sense is a classic Long Tail aggregator, one that uses great filtering (its Page Rank algorithms) to improve the s/n ratio of the tail. And not just one tail. They aggregate the tail of information, the tail of advertisers and the tail of publishers.





What Google has done is to find and monetize the Long Tails of both advertisers and publishers. These include millions of small companies and individuals who may never have advertised before, at least in commercial scale. But Google ads are self-service, cheap, and performance based (pay-per-click), which all combine to dramatically lower the barrier to entry.
Matching these advertisers are hundreds of thousands of previously sub-scale "publishers", from blogs to niche commercial sites. Most are too small to have their own ad sales business, but they can now run relevant Google ads by just adding a few lines of HTML to their site. About half of Google's business now comes from such "partners", rather than from ads sold against search results themselves.
Eric Schmidt, Google's CEO, explained how these millions of small-to-midsized customers represent a huge new Long Tail ad market. "The surprising thing about The Long Tail is just how long the tail is, and how many businesses haven't been served by traditional advertising sales," he said. Google now has revenues of more than $1 billion a quarter, a least half of which is made up of Long Tail advertisers by this definition. This is, needless to say, just a glimpse of what's still to come.
Certainly we can assure this model is scalable and sustainable on long term, based on what was mentioned above, in addition to information disclosed by JupiterResearch in its 2005 study named ‘The Four Horsemen’ stating that retail and travel, which are the most developed long tail markets will continue to be the top categories through 2009. The researchers predict both markets will almost double in size over the next four years, with travel increasing from $54 billion to $91 billion and online retail growing from $66 billion in 2004 to $130 billion in 2009.
Examples of already established search engines devoted to retail include Shopping.com and Shopzilla.com, with many more start-up engines like Become.com (a search engine devoted specifically to comparison shopping) expected to launch in the next 18 months. Travel search engines like Yahoo's FareChase, Kayak.com, SideStep and Mobissimo have also begun to make an impact in recent months.
Below are the links for 2 of these mentioned competitors who provides searching and comparison of the best available deals for travels customers, as flights, hotels, car rentals, cruises, etc.

http://farechase.yahoo.com/
http://www.kayak.com/

Source of Political and Cultural changes

The Long Tail has possible implications for culture and politics. Where the opportunity cost of inventory storage and distribution is high, only the most popular products are sold. But where the Long Tail works, minority tastes are catered to, and individuals are offered greater choice. In situations where popularity is currently determined by the lowest common denominator, a Long Tail model may lead to improvement in a society's level of culture.
The example of how television programs can be split through the HDTV technology allows the sector now to widen the variety of its broadcastings programs towards previously ignored groups which become profitable demographics with this new niche appeals in the long tail.. As the opportunity cost goes down with more channels and smaller niches, the choice of TV programs grows and greater cultural diversity rises as long as there is money in it.
The Long Tail has made possible a flowering of creativity across all fields of human endeavour. One example of this is YouTube, where thousands of diverse videos, whose content, production value or lack of popularity make them inappropriate for traditional television, are easily accessible to a wide range of viewers. Such tremendous new possibilities narrow dramatically political attempt of information mass strategy application, and at the very same time it reduces the monopolist cultural influence dominant over people around the world hunger for information.

Stretching - My own Business

As pointed previously I have as goal to build and manage my own small boutique hotel by the beach with innumerous differentiation qualities. I expect to have this hotel ranked in a separate category from the regulars of the sector, focus on a very specific niche of special people who value its differentiations.
Besides the construction, architectural, gardening and service concepts developed to achieve its side segmentation; a major issue will be to find these customers I believe are out there.
My first thoughts marketing strategy are driven to use as many Filters as I be able to find. Having the marketing concept designed and a first class interactive website put in place, I will make all of specialized magazines and websites be aware of the product arrived. In sequence a list of reviews and recommendations will be distributed among selected people, acting as professional of the sector. Specific and dedicated online communities, which are being spreading out to exchange reliable reviewing and information between them will be focused as well.
The growth of base client list will necessarily being related to become myself client of aggregators of travel market, like Expedia.com, Venere.com, Bookings.com and etc.
I don’t expect, however I see how I could expand the hotel revenues sources after have being recognized as for its distinction. After become a reference, the web site hotel might be used to apply ad widgets within the connection with, the aggregators who are there primarily to sell rooms occupancy). Also, the business could be value added by becoming a re-seller of the producers of decoration crafts and art pieces that will be desired elsewhere.
The starting point to sell occupancy in a larger scale will be through the aggregators. That will happen after the launching of the project, having sector respected specialists invited to feel the experience of environment and concept by themselves.
These actions will be followed by a close following of the comments and reviews which will start to pop up from place to place. Engine tools to find it will be implemented as well as marketing strategy to give a follow up to this.There is no magic on creation a growth model for this project. It will follow the belief on the reality of the existence of customers for everyone within the Long Tail curve and the applying those above mentioned tools (aggregators and Filters) to make the
rate of occupancy increase from at least 30% on the first year to any number close to 70% by the next 2 to 3 years.