Although there is no written-in-stone means of thriving during this chaotic new normal, Softtek welcomes a panel of experts to discuss a strategic approach inspired by a modern Japanese form of martial arts.
Aikido
Like many martial art forms, Aikido is “a type of self-defense, in which you hold and throw your opponent and use his or her own movements.” However unlike many other fighting styles, it does not leverage brute strength and is instead based on the principle of disarming the threat without causing physical harm.
Softtek CMO, Alex Camino, relates the concept’s ideation to the general economic surplus we saw near the end of 2019, which was then followed by a swift decline: “We were in a growing economy… we were on the offensive… And suddenly, the pandemic hits us and puts on the defensive.”
Faux Shields
Among many players, any cost-optimization strategy during hard times is generally seen as a good thing. However, this isn’t always the case, as former Forrester analyst and current SVP of Marketing for Softtek, Stephanie Moore, introduces faux shields— defensive cost strategies that look great on the surface, but derail savings and true modernization in the long run.
- Maximum spreadsheet cost-out
- Cheaper is better
- Lipstick evolution (glamorize tech portfolio)
- “Concession” deals
- Mess for less megadeals
- Trojan horse savings
The future is here, and we have the technology to help us leave these common, yet flawed defensive techniques in the past, replacing them with modern and strategic alternatives. And as we will continue to see reiterated, the trick is to invest with value, not cost, in mind.
Predictable paths to recovery
Shafqat Azim of ISG takes a customer-data-and-research-driven approach to explore how businesses impacted by Covid-19 can realize the highest value in their digital initiatives.
Three Horizons Framework
While Covid-19 has brought liquidity and profitability issues to about 2/3 of ISG’s clients, the remaining 1/3 (particularly those in industries like life sciences and healthcare) deal with the overwhelming increase in demand brought upon them in a very short amount of time. No matter the challenge, survival is key for all players before entering the “Three Horizons” identified through ISG research.
- Recover and Resolve: After surviving through immediate cost take-outs, companies will use the following 1-2 business quarters to evaluate how to get back up to speed—or in Azim’s words—how to “peel off the band aids without having the blood gush out again.” How can companies balance technology spend, become cloud- ready and continue critical processes, without damaging sustainability?
- Invest Differently: Costs have been reduced, and future sustainability is looking brighter. At this point (1-3 business quarters), Azim explains while drawing upon a common theme throughout the webinar, that we must “start to invest with value in mind, not just cost reduction.”
- Business Change in the Next Normal: By next year, businesses will need to evaluate how to behave differently, based on different ways of investing and executing strategies.
The common denominator
Across these Three Horizons, Azim identifies a common denominator: How do you recognize value from your ongoing investments?
ISG leverages a “digital value assessment,” using data from over 550 organizations to evaluate the capabilities, level of investment and business value realized (in the form of revenue, customer retention or operational efficiency) from digital initiatives.
Since the top 25% of these businesses have shown significantly above average numbers, their recipes for success were able to be studied and put into capability groupings:
- Clients who realize higher than average revenue increases:
- Regularly assess automation’s impact on employees
- Analyze IoT data streams
- Co-create digital products with customers and partners
- Clients who realize higher customer retention:
- Adopt common tech platforms
- Create end-to-end visibility into product
- Service backlog in development teams and IoT streams
- Clients who see higher OpEx reduction:
- Adopt personalized content for employees and clients
- More strongly leverage automation
- Adopt common tech platforms
History tells us the best thing we can do is embrace the new norm
Anja A. Allen of Ernst & Young begins by reminding us to take a step back and think about other events that have drawn change on a global scale. Humanity has dealt with plenty throughout history, and we can learn from it (read more).
“As much as we feel that our life is out of our control, there’s typically a pattern to these things; there’s always order and chaos” – Anja A. Allen
Ernst and Young has found with its clients that it’s not good to fall into the cycle of mindless cost cutting, but it’s also not good to be overly tactical. Instead, success comes from coordinating cost-cutting initiatives and transformations for the future; we must embrace the new norm and adopt new ways of doing business.
Unfortunately, embracing today’s change is hard for many organizations. It’s human nature to pursue things that are familiar.
What's the trick?
Embracing new norms and adopting new business models places even more prominence on technology, and fundamentally different approaches to the way that technology is delivered. There are 3 things to consider:
- Humans are at the center of every strategy. Businesses must determine how to source internal and external talent to tackle various initiatives. Additionally, they must activate strategic partnerships to help one another enable strategies and delivery models.
- Innovation at scale. “If we had Covid-19 in the 1980s, we would have not been able to work the way we work today.” Now we have platforms, like Microsoft Teams or Zoom, that allow business to carry on, and we can leverage these platforms to better align our pre-Covid-19 business strategies with the changes taking place.
- Technology at speed. Many businesses tend to glamorize their technology portfolio rather than modernize, which ties back to the previously mentioned “lipstick evolution.” The better choice, Anja explains, is to simplify the technology portfolio and only consider elements that drive operational efficiency. Finally, these kinds of standardizations should be done with transparency—the last thing businesses need is to lose client trust or upset an entire workforce.
Funding your digital future
Softtek Managing Director for the US Beni Lopez revisits a topic from the past webinar, with a refreshed outlook.
Optimizing costs
If cost reduction wasn’t a primary concern for your organization in January 2020, like the rest of the world, with the exception of a few outliers, it likely secured a top spot in lockstep with the start of the “Great Shutdown.” Cost optimization is also the first step in laying the groundwork for a digital future. This step has ideally been completed already, but includes:
- As soon as the CEO calls for a % cost reduction, CIOs must look to short-term quick hits: (reduce hardware spending; renegotiate maintenance, monthly Saas fees and telecom usage; and rationalize procurement process and the existing vendor landscape).
- Next, optimizing costs involves accelerating the digital labor force with cognitive Robotic Process Automation, enabling AI, clearing a path to scale and integrating new processes and workflows.
- Big takeaway: these are value-focused, not cost-focused optimizations.
- Honoring the Aikido reference, organizations must use momentum from these optimizations to remain advantageous amidst unfavorable circumstances. Through further digitization and automation of operations, costs can be reduced by up to 30% in just one year.
- Big takeaway: these initially costly steps have a fast time-to-value metric
- Lastly, businesses should consider divesting non-critical processes to digitally enabled partners. This is becoming more common, as organizations are starting to see the benefits of outcome-based outsourcing strategies like Build Operate Transfer (BOT) CoEs, digital hub nearshoring (with partners in nearby tech hubs like Monterrey, for example), moving from CapEx to OpEx, amongst others.
Invest in the right direction
Also mentioned in a previous webinar, businesses must identify, protect and enable their “A team,” talent who have adopted and adapted with more fluidity and confidence. More analytics and AI are one way to enable these individuals to continue creating above-average value in their projects.
Get ready for the recovery
Organizations who have adopted any combination of the strategies highlighted will have freed up a substantial amount of financial and talent resources, allowing for new business models, new lines of service and an understanding of new expectations related to customer experience.
Conclusion
We live in the best of times to deal with the worst of circumstances. Even before the pandemic, the word ‘disruptive’ has become an exemplary aspect of the aggregate business environment. And in dealing with all things disruptive, we have learned to better adapt. It is through these adaptations that even the most unlikely businesses to survive have shown resiliency—grocery stores have become pickup centers, movie theaters have become streaming platforms and healthcare players have expanded digital capabilities in record time to keep up with unprecedented demand.
Hasty cost take-outs have been proven to destroy future resiliency, demonstrating the need to be strategic in our adaptations. We must leverage strategic partnerships with an “I scratch your back, you scratch mine” attitude. We must avoid tunnel visioning a cost-focused mindset, with the consideration that sustainably reducing costs may require an initial expenditure through hiring consultants or contracting different digital projects. We must stop yearning for the old way of doing things and embrace the inevitable change.
Finally, in returning to the Aikido reference, sometimes the best offense is defense. If we keep an eye on the enemy’s movements, we can use the force imposed upon us to make it out in one piece, or better yet, in a more advantageous position than before.
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Swatch business model
The Nintendo Business Model In A Nutshell
Nintendo is a Japanese consumer electronics and video company founded in 1889 as Nintendo Karuta – a manufacturer of decorated, hand-made playing cards. By the 1980s, the company made significant investments in a rising technology: video games. It then produced popular titles like Donkey Kong and, later on, Super Mario Bros. Today Nintendo generates revenues through video game franchise sales, e-commerce, and the Unfold System.
History of Nintendo
Nintendo is a Japanese consumer electronics and video company headquartered in Kyoto, Japan.
The company was founded in 1889 as Nintendo Karuta – a manufacturer of decorated, hand-made playing cards. Nintendo would produce these cards for over seven decades, but sales fell after the cards became associated with gambling and Japanese organized crime.
In 1950, 22-year-old Hiroshi Yamauchi took control over Nintendo and expanded the product range to include toys and amusement arcades. Over twenty years later, Yamauchi made a significant investment in an emerging technology: video games. The popular title Donkey Kong was released in 1980, catapulting the company to the global stage.
The even more successful Super Mario Bros. was released five years later, named after the landlord who owned Nintendo’s American headquarters. The success of the game was nicely complemented by the release of the Game Boy in 1989, the first handheld electronic game console. This pioneering success has been built upon with the subsequent releases of consoles including the Super Nintendo Entertainment System, Nintendo 64, Nintendo DS, GameCube, Wii, and Nintendo Switch.
Today, the company continues to be an innovative player in gaming and consumer electronics. Profits in 2020 were 376.6 billion JPY, or approximately $3.6 billion.
Nintendo revenue generation
Traditionally, console-based home entertainment companies make money via the continual creation and licensing of games.
Let’s take a look at how this plays out for Nintendo.
Nintendo is well-known for regularly adding too many of its video game franchises with periodic releases. For example, the Super Mario franchise has been running since 1985.
This strategy builds brand loyalty and allows the company to charge a relatively high price for its products.
eCommerce
Nintendo sells gaming consoles, games, and gaming accessories via their online store.
Games are also available for purchase directly from the gaming console interface. By allowing users to download games with an internet connection, the company saves money on the distribution and physical production of games.
Unfold System
The Nintendo Unfold System is an evolution of the franchise sales model.
Instead of Nintendo paying developers to make and release new titles, the onus is on the consumer to pay to expand a single game. An unfolding game differs from expansion packs or franchise titles in that entire parts of the game are hidden and locked at release. As the customer becomes more invested, they pay Nintendo to unlock additional features, adventures, or lands.
For the company, this is seen as a far less risky strategy than franchising. Rather than building a new game on the same platform as the existing game, Nintendo simply keeps the existing base and charges the customer for any new features it develops.
In theory, the Unfold System expansion method can be used indefinitely. Games may have no endpoint and a new version may only be necessitated by a console upgrade.
Smash Bros: Ultimate
The fighting game Smash Bros: Ultimate is already utilizing the Unfold System. Users must now purchase a season pass to take part in each game iteration – otherwise known as a season.
In 2019, the first season was charged at $24.99. This fee gave players access to exclusive items, stages, and five new characters. The following year, the game was unfolded further to incorporate a second season that was charged at $29.99 for six new characters.
Pokémon – which Nintendo owns a 32% stake in – has also added new lands and adventures using this revenue strategy.
Key takeaways
- Nintendo is a video game and consumer electronics company headquartered in Kyoto, Japan. The company was founded in 1889 as a manufacturer of decorative, hand-made playing cards.
- Nintendo makes money by creating and licensing video games. The company has been particularly successful in building brand loyalty via high-quality franchise releases.
- Nintendo also sells access to additional game features as part of its Unfold System. Instead of paying developers to build new games on the same base, players pay Nintendo to expand access within a single game.
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