New core: Strategic choices & decision-making

Amazon is a powerful example of how brands can boost their growth by broadening their addressable markets. They have been attacking one market after another, from books to non-food items, groceries, and most recently pharmaceutical products, and that’s just a few examples.

Today Amazon assets cover:

• hundreds of millions of consumers
• terabytes of consumer data but also capabilities to handle this data
• without forgetting state-of-the art logistics and a best-in class customer service

The Amazon example is spreading and the next big trend in commercial and marketing strategy is to enlarge addressable markets, exactly the ones that your company is targeting!

In the next few years we will see an increasing number of companies go after new markets to grow their business. This are often motivated by economy pivots, as many sectors that were benefiting from stable growth have stagnated and heightened competition has further stretched their margins.

There are many different examples, so let’s take a look at three very different sectors to get a better understanding of how this works: energy providers, telecom companies and commercial banking.

In the past, energy companies were highly specialized, selling only gas or only electrical power. The same was true for oil companies who focused mainly on upstream, in other words the exploration and production of oil. Now these sectors are merging, with oil companies entering electrical and gas production or electrical companies moving into gas and home services. And gas producers becoming electricity providers. Today, with the sophisticated technology of automated data analysis using the internet of things, an electricity provider can guess the age of your fridge or your washing machine and make you a proposal to replace it by buying or leasing a new and more cost-saving model offered with a special discount. By doing that they are becoming also retailers of electrical appliances. All this should not ne surprising when you think that in each country with few energy companies you cover 100% of the population, so potentially they could become “the leading retailer” of washing machines and fridges, selling the product with maintenance services, or renting them.

Telecom companies were traditionally focused on offering landline services and then mobile lines, before moving into TV cable channels, video streaming and more. The next big move will be remote services for healthcare. Aging populations in western countries and new remote videoconferencing capabilities will further boost this new megatrend. To make this move you could expect from Telecom Companies to establish partnerships and alliances with global or national health sector providers and also to make some acquisitions into health tech companies.

Looking into commercial banking, for decades their profits had been based on the booming credit market and large differences in interest rates (rate of loans minus the rate of saving accounts). Revenues were also boosted by fat commissions and charges for additional services. With lean fintech companies spreading around the world, competition has heated up and commissions are disappearing. Interest rate differentials were never so low. Two consecutive crises in the last 12 years have brought the economy to the intensive care unit. Central Banks have taken the doctors’ role with low lending rates to reanimate the patient. As bank margins suffer, banks are moving their banking business to consumer commercial business selling mobiles, TV, insurances and whatever else they can find. Banking offices are moving into retail, with new office layouts and bankers trained to sell products, as tellers disappear. Private banking is focusing only on big fortunes and automatizing advisory services for the rest of the population.

Company strategies are undergoing a complete overhaul, moving from having a business as core to having the consumer as core. This means that companies now try to own their consumers and sell them more and more of all the things they could possibly need. This is particularly true for those that have deep knowledge of consumer needs like banking, telecom and utilities.

How will this impact your business? In this fast-changing world it is now unpredictable to guess who your main or new competitors will be in a few years. This makes the decision-making process more complex, but it also makes the work of executives and advisors ever more interesting. Strategic thinking was never so key for companies, thus displaying strategic ability and being capable to correctly implement strategic decisions will differentiate winning companies and executives.