Tradition is not a business model

“People don’t want to play piano, they want to listen to music.” At the opening of the EASYTalk Conference for Interaction and Dialog in Berlin, Prof. Dr. Axel Winkelmann of the University of Würzburg explained why the focus should absolutely only be on customer value. Based on his own family history in piano building in the 19th and 20th centuries, he explained that data were once essentially bound to their devices. Someone who actually only wanted to hear music had to buy a piano and learn to play. Later, the gramophone replaced the piano. The decline in piano sales became clearly apparent and hit piano makers pretty hard, for their business model was not based on listening to music, but rather on the manufacturing and selling of pianos. They had not considered the actual value to many customers. The gramophone was in turn replaced by records, records were replaced by CDs, and so on. Thus, in the course of time, technical devices disappeared and along with them the companies that provided them.

The customer value determines the product

If a company’s business model is based on tradition and not on value to the customer, it has no future, as Winkelmann illustrated with his example. In other words: what the customer doesn’t want cannot prevail in the long run. Bemoaning absent sales is futile. Digitization is irreversible. To continue to exist, companies must go with their customers and change. Axel Winkelmann, the internationally recognized expert for corporate software, has spent years considering the effects of digitization and how business models and companies’ databases will change with it. “What opportunities for change and design potentials are there within the framework of digitization?” he asked the audience at EASYTalk. The centralization of data from sheet music to records and today to global streaming databases has led to people hearing music from anywhere. Although it cannot be predicted in what scope the centralization of data will change individual industries, one thing can be said with certainty: There is no industry in which companies can afford to rest on their traditional business model. Rather, they should practice the greatest possible openness to new developments and permanently scrutinize their own activities and products. In short, those who are prepared to change have a chance to exist for the long term.

The magnitude of digitization

It is crucial to recognize customer value and to ask, “Does the customer really want to play the piano, or just listen to music? Do they really want a car, or just to get from A to B? Do they want their letters digitized, or simply have all information centrally available?”

According to Winkelmann, in the development of future business models, companies should consider the following principles:

Virtualization: Everything which can be virtualized will be virtualized.

Integration: All data which can be consolidated for the formation of a central database will be consolidated.

Networking: Everything which can be digitally networked will be networked.

Combinatorics: Everything which can be digitally combined will be combined.

Standardization: Everything which can be standardized will be standardized.

Automation: Everything which can be automated will be automated.

Advancing digitization will lead to ever larger databases with ever larger opportunities for the automation and flexibilization of processes. In order to be well positioned in the digital age, companies must not have any illusions. Because “standing still will not only become more and more expensive, it will become expensive much faster,” according to the conclusion of Prof. Winkelmann, who also comments on the effects of digitization every week in his free audio podcast www.erp-podcast.de.