Organisations typically fall into one of three different types of business models; innovators, transformers and improvers. There is also a fourth: the enablers, the ones who help others to get things done (us).
The next type of business model we’re discussing as part of this series are the transformers. They are second to move, after their innovator predecessors.
What Makes Transformers Different
They might not be the first to move but being a transformer doesn’t mean you don’t have an advantage. Transformers take it upon themselves to make the business model better.
Karl Benz may have been the first to move and the innovator of the car industry for example, but he didn’t transform it. Henry Ford did.
Ford did this by working out how he could achieve scale and exponential growth. His success lay in the creation of the first moving production line and optimising processes. Meaning he could produce cars faster and cheaper than anyone else.
“If I had asked people what they wanted, they would have said faster horses!”
Most of today’s transformers are born through digital ideas; food waste app, Too Good To Go for example. They help tackle the societal problem of food waste, contributing to living more sustainably. The app enables consumers to purchase unsold food from top eateries at the end of service to prevent it being thrown away (for a subsidised price). It’s not the first iteration of this idea to help contribute towards sustainability. There have already been initiatives that help distribute unsold food to people. Pret a Manger for example have been partnered with charities that distribute their unsold food to the homeless for years. Too Good To Go is a transformer as they’ve taken the concept and modernised it, this time to add value to a different audience. Notably young people or students looking to eat food from a restaurant at a cheaper price.
The Five Second Mover Advantages of Transformers
Likewise with the first mover advantage that innovators of digital transformation have, transformers gain second mover advantage. They are agile and usually technology start-ups in todays’ environment. There are five key second mover advantages that transformers experience:
1. Less risk of product acceptance
Since transformers are the second to move, they already know that their solution is needed within the market. Innovators are sometimes overshadowed by the uncertainty of being the first to bring something to market, they know they are addressing a need but what the uptake of it will be is a mystery until they start. Transformers know that their solution is needed because it is already being sold by the innovators.
2. Less time and money spent on research and development
Entering the market second is less costly. There’s already a tonne of research out there to suggest customers need your service or product. Therefore it’s cheaper and quicker to bring your idea to fruition.
3. Taking advantage of new technological developments
At the speed technology moves, the innovators needs to move faster. When they are too slow to respond to new technological advancements and the opportunities they present, this is when transformers move in. Being second to take the market by storm means you know where new technologies can add value and out think the incumbents.
4. Choice on basis for competition
Entering the market second means that you’re able to choose your differentiation basis for competition. Whether it be on price, delivering better customer service or increased offerings, knowing the advantages of competitors already in the market mean transformers can choose where their competitive edge comes from.
5. Learn from the mistakes of innovators
The annoying reality for innovators is that once competitors start emerging they struggle to stick around, we found that in our previous article. Once you’re an innovator, you can’t stay there. Transformers quickly learn from the mistakes innovators made when they a launched their new service or product into the market. Successful transformers are savvy enough to take this information on board too.
Adding Value is Key
Transformers are usually start-ups, coming to challenge the organisations (the innovators) that already exist in the market. Although their offering might appear similar to those that are already available, the transformers have one quality that means they will stand out in the market: added value.
Whether it be to their customers, or for their employees enabling them to recruit the best people, transformers are able to create more value that what already exists on the market.
Spotlight: The Transformers of the Banking Industry
It’s starting to get interesting in the banking industry. Recent years have seen the rise of new ways of banking like Monzo, Starling Bank and Revolut. The digital only current accounts that are taking on the established names. Who would have thought these new start-ups would have been able to challenge the likes of HSBC, Barclays, RBS and Lloyds without a single shred of high-street presence?
The challenger banks have transformed the banking experience and that is why they are becoming so successful. They have taken the concept of money management to a level the original innovators weren’t able to capture first themselves.
And no we’re not just talking about their colourful debit cards (Monzo’s coral card is our favourite). The entire experience both in-app and when you set up an account is easy, intuitive and able to be personalised. For instance, your ability to set up saving goals, analyse your spending into different categories and easy bill splitting or direct payments.
This is where these transformer-challenger banks have added value. Particularly for the younger generation who, are very comfortable with the technology and don’t feel as much loyalty for the more established banks. It’s estimated that within the next three years, half of consumers will use challenger banking.
It’s safe to say though, the legacy banks are not quaking in their vaults just yet. They are fighting back with mobile applications that offer similar functionalities, like real-time spending alerts. The FinTech revolution is well and truly in full swing, it will be interesting to see which contenders go on to continue to be the improvers of digital transformation.