воскресенье, 7 января 2024 г.

8 email marketing experience trends for 2024

 


By Kath Pay 

Try these 8 new and trending customer-centric approaches to help you keep proving your value to leads and customers over email

Marketing trends forecasts should be resources marketers can consult to help them set strategic priorities for the coming year. But all too often they recycle the same old ideas or serve as thinly disguised showcases for vendor specialties.

So let’s make this email marketing forecast more useful by focusing on one overarching development we see happening in the world of email marketing and the supporting events that make it a significant development.

For my part, I expect that email experience will be the defining trend for 2024 – the increasing focus on improving our customers’ experiences with our brands, products, services, representatives, and messages.

Many of the more specific trends included in forecasts that are beginning to trickle in revolve around improving our customers' experiences of our emails. That includes everything from building up trust in the inbox to investigating Dark Mode email designs.

This rise in the customer experience as a major focus of marketing efforts goes hand in hand with greater attention being paid to customer loyalty. A study by SimplicityDX found the cost of acquiring new customers skyrocketed 222% since 2013, from $9 per customer to $29 in 2022. “Customer acquisition costs and higher rates of product returns account for virtually all of the difference,” the study claimed.

Two supporting trends contribute to this greater focus on customer experience: tools that help marketers work smarter, and practices that help companies become more customer-centric by putting customer and their needs, wants, and preferences first in all decision-making.

The eight trends listed below fall into one of these two categories, but they all contribute to a better CX and help the company continue to prove its value to its current customers.

This more focused attention on the customer experience can lead marketers to seek out and use tools and data that allow them to work smarter at the intersection of loyalty and business growth: helping customers achieve their goals makes the company more valuable to them and more worthy of loyalty.

1. The trend toward working smarter

When they work smarter, companies can serve customers better – everything from better products to more efficient browsing and buying in-store or online, customer support and services, more relevant and effective messaging, and even better deliverability to inboxes.

A. More brands aim for inbox visibility through trust and authentication

We have always advised our clients to create an informative inbox presence with both a quickly identifiable sender name (never a “no-reply” email address) and a strong subject line.

But now marketers must do even more to prove to mailbox providers and subscribers alike that their emails are inbox-worthy. Fortunately for email marketers, they have more tools today to get their emails into more inboxes and to help subscribers trust the messages enough to open and act on them.

These include BIMI {Brand Indicators for Message Identification) and DMARC (Domain-based Message Authentication, Reporting and Conformance), an email authentication, policy, and reporting protocol. 

Using BIMI to build trust: Email fraud is on the rise worldwide, as is the financial damage it can inflict on people and companies who fall prey to attack. More than 3.4 billion phishing emails are sent daily. The financial cost is severe, with an estimated cost of £150 ($181) for each piece of personal information stolen in a phishing attack.

Wary subscribers are more cautious about falling victim to email fraud, but they can also go to the opposite extreme and discard or report genuine emails as spam or fraud. BIMI is gaining more traction as a trust signal, thus creating a better customer experience.

BIMI is an email specification that standardizes logo display across mailbox providers. Because it requires the sender to verify that it is authorized to send email with that logo. It can also assure subscribers that a message is from an authentic sender and not someone spoofing the brand. 

Brands that have passed the necessary requirements for verification can display their logo next to their email message in the inbox. Brands that haven’t gone through the process will continue to display no logo, as in Gmail, or a default image as in Yahoo! and Outlook among others. 

The image below shows a mobile Yahoo! Mail inbox displaying messages both from brands that have gone through BIMI verification and those that have been assigned a default image, usually featuring letters pulled from the brand name.


A brand must follow an authentication path specified by the AuthIndicators Working Group, an industry coalition of mailbox providers and email security firms. They must pass DMARC validation checks, among other requirements.

As of publication, Google/Gmail, Yahoo! Mail, Apple Mail, La Poste, Fastmail and Cloudmark support BIMI. Microsoft (Hotmail, Outlook) does not. Mailbox providers considering support include Yahoo! Japan, Comcast and BT.

DMARC validation becomes a must-do: While the customer experience impact isn’t as obvious here as it is with inbox trust signals, it does ensure that the emails people look forward to seeing in their inboxes will actually show up there.

In autumn 2023, both Google/Gmail and Yahoo! Mail announced plans to tighten sender requirements to place messages in their users’ inboxes. It’s no longer enough to show a subscriber gave active permission to send email. 

Now senders must also authenticate their sender IP addresses and domains using SPF (Sender Policy Framework) and DKIM (Domain Keys Identified Mail) as well as DMARC with at least a p=none policy, which tells inbox providers to deliver email even if they fail SPF and DKIM checks.

However, many email security experts recommend senders set their DMARC policy to p=reject, which tells inbox providers to block any mail that fails SPF and DKIM checks. 

Gmail and Yahoo! Mail also want email recipients to be able to unsubscribe from a brand’s emails with a single click, so they’re requiring brands to use list-unsubscribe headers. This code, which an ESP will add to the email header code, places a native unsubscribe link in the inbox’s message. 

Placement varies between email clients. In Gmail, the unsubscribe is a text link next to the sender's name (top image). In Yahoo! Mail’s mobile app, it appears as a CTA button marked “Unsubscribe” at the bottom of the message (bottom image).


B. Marketers will expand their use of Generative AI

Generative AI, or “GenAI,” has evolved from the latest shiny toy to a genuine business asset in the space of just a couple of years. This adoption should increase in the next year and beyond as more marketers become familiar with AI-driven tools and learn how to use them successfully.

For marketers, much of the attention has swirled around OpenAI’s ChatGPT for copywriting and idea creation and optimization, and DALL-E for creating and optimizing images from text prompts and descriptions.

ChatGPT, which is built on OpenAI’s GPT large language model, is one of the fastest growing AI-driven language bots, with more than 100 million registered users since it launched in November 2022. A number of proprietary tools such as Jasper and WriteSonic have emerged, as well as free or low-cost tools like Bing from Microsoft and Google’s Bard.

As reported in Smart Insights’ The Future of Digital Marketing, about one-sixth of businesses have used AI for content creation and optimization for more than a year, with around one third recently starting using AI for generating content for SEO, social media, and email marketing.

The top three uses for AI in email marketing are content personalization, email retargeting, and subject line optimization, according to 2023 Email Marketing & Research Report: A Look at the Market for the Future of the Channel, a research report by RPE Origin and Ascend 2. Other uses include dynamic content creation, send-time optimization, predictive analytics for customer behaviour, automated segmentation and targeting, and A/B testing and optimization.

Use GenAI to write a campaign brief: The simplest ones are for generating short bursts of highly focused copy, such as headlines, subject lines, calls to action, taglines, email body copy, and the like. Some marketers have experimented with using ChatGPT and other copy-focused bots for producing long-form copy, but results have been mixed so far.

My agency has discovered that ChatGPT can shave a great deal of time off the process of creating a detailed brief for a complex email campaign.
Here’s a recent prompt I write for an email campaign brief in which we called on several persuasion principles developed by Robert Cialdini in his book, Influence: The Psychology of Persuasion. Note the precise instructions! I used ChatGPT to produce this brief, but the principle is the same no matter which GenAI tool you use: The copy is only as good as your prompt, or instructions.

“You’re an email marketer for an ecommerce clothing retailer tasked with writing compelling copy to increase conversions for an email campaign. You’re selling a new range of summer dresses that are affordable, pretty, comfortable and stylish.
Deliver one subject line, opening paragraph, and call to action, using each of the persuasion principles and cognitive biases listed below, without actually mentioning the cognitive bias within the copy, but label each example with the principle or bias:
Reciprocity, scarcity, social proof, authority, anchoring, loss aversions, curiosity gap, endowment effect, confirmation bias, emotional appeal.”

If you're looking to get started with ChatGPT, don't miss our new Free Members' ChatGPT prompt cheatsheet, which contains a fully integrated A-Z glossary of ChatGPT features and techniques, with tips and examples, plus our recommended free and paid tools including ChatGPT alternatives.


C. More use of complex email automations

One example is switching from a single system-generated email to a multi-email series of branded, optimised messages aimed to engage new subscribers and move them to act, such as creating an account or making a first purchase.

Although we have no recent data on the percentage of email marketers who have, for example, added a cart-abandonment series to their email programmes or expanded their welcome email into an onboarding series, I have seen wider acceptance of these automations among my clients and in the wider email marketing world.

Driving this trend are four recent developments:

  • Cloud-based software-as-a-service platforms, including ESPs and start-up AI tech firms, with near-instantaneous integrations and dashboards that take much of the work out of building complex automations and email templates
  • Development of tools that can automate the creation of different customer segments and optimize the timing and content of highly personalized emails based on data held about individual recipients
  • Greater access to data, especially in real-time, without having to wait for database managers to answer requests
  • Cutbacks in marketing team size, especially during and after the COVID-19 pandemic, which forced remaining marketers to look for efficiencies wherever they could find them.

The resulting do-it-yourself approach, which no longer needs the same degree of IT involvement, has made automation more accessible. On average, 81% of marketing organisations use some form of automation, according to Salesforce.  

This means email marketers are getting more sophisticated about automation and their results, and companies are recognising that money spent on these more complex automations gets returned in the form of higher revenue and customer retention.  

With automation, brands can collect and manage individual preferences automatically and call on those details to create more relevant and personalized communications. This helps brands meet customers’ expectations for receiving messages that they are interested in, thus improving the customer experience through email.

As more ESPs add automation features to remain competitive I expect to see more marketers begin to explore them and use them to save time and increase conversions and retention.

D. Better organising and access to data

A key part of the trend toward working smarter is improving marketers’ access to data and using the data we have more efficiently and effectively to inform decision-making – everything from campaign development and audience choice to content selection and message optimisation and analysis.

The CDP, or Customer Data Platform, is on the cusp of becoming a mainstream data entity. The CDP Institute estimated CDP industry revenue would reach $2.3 billion in 2023 – a modest growth over $2 billion forecast in 2022 and says there are 171 defined vendors in the CDP space.

A CDP has some overlap with a Customer Relationship Management (CRM) platform in that both are intended to manage and integrate data, but CDPs pull in and unify data from a larger range of sources to provide a complete view of the customer beyond the sales cycle.

A CDP promises both a better customer experience through more timely, personalised and relevant messages, and a “work smarter” advantage because it can reduce the labour that marketers put into creating, selecting or requesting audiences or segments, building multiple versions of email campaigns to match those audiences and sending all of those campaigns out at once.

I expect more brands will explore CDPs, but while they will appreciate the unified customer views that are a hallmark of the CDP, they will also discover that CDPs need to be able to access that data from siloed sources, such as customer support contacts. CDPs also require a lot of data to be most effective. Other tools, such as CRM platforms, might be able to meet a company’s needs if it doesn’t generate the kind of data, or enough data, to make a CDP worth the cost.

E. Using AI to support A/B split testing

A/B split testing will become more commonplace thanks to two developments:

  • More testing tools provided as features on email sending platforms
  • Using generative AI to create test controls and variations faster and more accurately

As the RPE Origin/Ascend2 study cited in a previous indicated, many enterprise-level email marketers use ChatGPT and other large-language model bots to take some of the drudge work out of doing A/B split testing.

The simplest ways are to use these language bots to suggest alternatives for subject lines, calls to action, or copy blocks that that range from the prosaic (word or character count, word choice, sentence structure) based on a hypothesis, to more sophisticated variations based on emotional approach, or persuasion elements or selecting testing audiences.

Start improving your use of of ChatGPT today when you join us as a Free Member to access our ChatGPT prompt cheatsheet, which contains a fully integrated A-Z glossary of ChatGPT features and techniques, with tips and examples, plus our recommended free and paid tools including ChatGPT alternatives.

2. The trend to focus on customer-centricity

We are still feeling the reverberations of the shifts in email messaging driven by the COVID-19 pandemic, primarily in retooling email programmes to meet customer needs and wants first over driving company objectives.

Although this customer-first trend has receded somewhat as society moves into post-pandemic mode, I still see brand email teams retaining or even expanding on efforts to make email as customer-centric as possible through these three trends:

A. Dark mode email design

Dark mode aims to give electronics users a bit of a break from the brilliantly lighted screens that render graphics so well and is often part of the movement to building greater accessibility into email viewing to overcome challenges for readers with vision or cognitive issues.

Although no recent reliable statistics point to the percentage of users who choose view email and other interfaces in dark mode, an investigation by Litmus found 40% of iPhones have the feature enabled.

A study by the Nielsen/Norman Group also found no single preference for one polarity over another. About one-third of respondents chose dark mode, another third used light mode exclusively, and the remaining third used both.

Dark mode can pose a problem for marketers because designs that are optimized for light mode don’t always render correctly in dark mode. Rendering can vary across different email clients as well. As one example, colours can render differently against a darker background, often becoming nearly invisible.

Designing one template for a dark mode version of an email template can be virtually impossible given how it can render across so many email clients. Rather, determine which email clients most subscribers use and create a template design that renders well across it.

B. AMP for Email – not dead yet!

Originally promising to increase interactivity in email and allow conversions to happen in the message instead of on a landing page, AMP for Email is still waiting for its close-up in email design circles.

However, some brands haven’t given up on this technology, which promised to eliminate one step in the path to conversion – the need to leave the inbox and complete the action on the website. This leads me to believe that AMP for Email could trend again, especially if marketers and email developers discover it can fill a need despite its drawbacks.

AMP has fallen short of the mark for a number of reasons:

  • Microsoft cancelled its AMP for Email pilot for Outlook, and Google has de-emphasised it.
  • Only a few ESPs and mailbox providers support the technology. 
  • Brands pulled back from adding experimental technology during the pandemic and subsequent global recession.

However, AMP for Email could be poised for a breakthrough because it has support from two major mailbox providers (Gmail and Yahoo! Mail) and two ESPs (MessageBird and Netcore Cloud).

Netcore has developed several case studies supporting AMP for Email, including one for YourStory, the content and communications platform dedicated to India's start-up economy.

Your Story had three goals: to increase participation in its events, to grow the number of leads from those events, and to streamline its event registration process. 

Working with Netcore's Customer Success Team, YourStory transformed its traditional email marketing programme by using AMP for Email and introducing AMP-based responses and registrations in its email messages.

The process had two advantages over sending traditional emails that required users to click to a landing page to register for an event: 

  1. Simplified registration: Users could share their information within the email in a matter of seconds and on the fly.
  2. Fewer lost registrants: Because registrants could complete registrations in the email message, this reduced drop-offs. 

According to YourStory’s Aaron Karthik, head of digital marketing, the AMP for Email test generated a 5.5X increase in conversions for event registrations.

C. AI in personalization for higher sales and customer engagement

Along with my general prediction that companies will find more uses for AI in email marketing, I also believe they will find uses that align more closely with strategic objectives instead of limiting themselves to subject-line or call-to-action drafts.

As an example, AI can help personalize the email newsletter – the workhorse of an email content strategy. All too often they are static affairs driven more by what a brand wants to tell its customers than by customers’ highly individual interests. AI can help transform them into more relevant messages, as the report below from Volvo indicates.

Creating a personalized newsletter at scale is an ongoing challenge for many brands. But Volvo used its vast quantities of customer data to build profiles and elevate its CRM function. Tony Allen, Global CRM Lead for Volvo cars, explained to me that Volvo needed to design customer communications that kept them interested in Volvo during the typically extended automobile purchase cycle.

Volvo wanted to communicate more often with engaged segments, send hyper-targeted, relevant campaigns and personalize campaigns that had a single focus. The process included these steps:

  1. Machine learning platform iota-ML, AI-copywriting tool Jasper.ai, and video-in-email system Playable were chosen to deliver this upgraded customer experience. 
  2. The team tested a weekly version of its bi-monthly newsletter on 10% of its audience for 12 weeks. 
  3. After learning that the test audience responded well to the new format, the company rolled it out to the rest of its audience.
  4. The revamped newsletter featured content in two categories: “help and inform” or “inspire and entertain.” Volvo’s CRM team used cross-functional planning to pull timely content.
  5. The email clickstream was classified into 28 customer content preference categories The Iota-ML platform used these 28 categories to build predictive audiences to personalise and engage small segments. 
  6. Volvo sent 75 predictive campaigns in the first year, positioned as “We thought you’d like this.” This campaign format was effective among groups with lower general engagement.

Results: Using machine learning via Iota-ML streamlined data usage for content choices and reduced the campaign process to two hours from idea to campaign deployment. It also resulted in the following:

  • 3X increase in year-over-year engagement
  • 47% of new product sales came from ML audiences
  • The “most engaged subscribers” segment grew 4.5X
  • The highly engaged segment interested in electric-car content grew 6X
  • Volvo used a universal control group, which meant the company could tie the impact of the change directly to higher revenue

The trend of embracing MarTech developments amongst email marketeers

I‘ll be the first to admit that my trends list for 2024 involves some wishful thinking. But I’ve also seen a greater openness to the advantages of using data, technology, and good old-fashioned strategic thinking to keep email going as a way to give customers a better experience with a brand, one that helps them achieve their own goals – which, in turn, help companies achieve theirs. I’m excited to see how this next year plays out!

For more help identifying and prioritizing digital marketing trends to inform your strategy, don't miss the 2024 edition of The Future of Digital Marketing, exclusively for Smart Insights Free Members only.

https://www.smartinsights.com/

55 Business Model Patterns. #23. Integrative Business Model

 


An integrator is in command of the bulk of the steps in a value-adding process. The control of all resources and capabilities in terms of value creation lies with the company. Efficiency gains, economies of scope, and lower dependencies from suppliers result in a decrease in costs and can increase the stability of value creation.


How they do it: Unlike other apparel retailers, Zara does not outsource production of its garments to low-cost manufacturing countries, but operates a number of factories in Spain and other European countries to produce the majority of products in-house. Integrating the different steps in the value chain enables Zara to respond to fashion trends very quickly, in turn positioning them as a leader in the industry.

Below, the top industries for the pattern "Integrator" are displayed, in order to get insights into how this pattern is applied across different industries. We've collected data from 5 firms using this pattern.


Pattern Co-Occurrence

Below, the pattern "Integrator" is analyzed based on co-occurrence, in order to get insights into how this business model pattern is applied in combination with other patterns within the firms we studied.



https://businessmodelnavigator.com/

Integrative Model


With an Integrative Business Model, the focus broadens to complete integration of multiple programs and services in order to improve customer service, increase participation, and support data-driven policy and decision making. In addition, the mission and operating model of the organization is supporting a shift to whole-person and family centric service design. Strategically and operationally, the enterprise bolsters family centric outcomes through seamless, cross-boundary collaboration. Information technologies support enterprise-wide back-office processes, as well as front-office innovations such as individualized client services focused on self-sufficiency, improved health outcomes, and social inclusion.

Diagnostic Metrics & Checkpoints:

  • Outcomes & Impact Design: The enterprise is activating an outcomes model that connects desired impact to overall community priorities and expands the focus to include cross-agency outcomes, metrics, and real-time situational awareness.
  • Organizational & Practice Design: The enterprise is establishing new governance structures, management and operating processes, and data and analytics that focus on and help employees support and drive customer-focused outcome goals.
  • Systems & Technology Design: The enterprise is implementing an integrated, single-view system for case management across programs and organizations and enabling service collaboration and outcome tracking by customer and by aggregate.

Look to the State of Ohio, New York City and Spain for prime examples of the move to an Integrative Business Model. In all three places human services systems faced similar challenges - skyrocketing demand and spending, silo-based services, and cumbersome technology – all of which led to suboptimal outcomes and value. In Ohio the Office of Health Transformation was established to oversee strategic planning and budgets on key initiatives including modernizing Medicaid, streamlining health and human services, and engaging non-profit and private sector partners. A key strategy was integrating state and local silos into an 11-agency Health and Human Services Cabinet that publishes an integrative health budget. As a result, an outcomes-oriented mission has taken hold, with local health districts utilizing shared services and creating health plans by region, officials utilizing data and analytics to shape policy, and sectors working together to track performance measures.

Spain has moved to increase human services collaboration and integration in order to respond to the surge in demands from the lingering financial crisis. The reform plan touches the entirety of public administration, and brings forward a new vision and model for the Spanish welfare system – one that is more integrated and efficient, more sustainable and outcomes-oriented, and more responsive to citizen needs. Spain’s strategies include increasing coordination and integration across all administrative levels to reduce duplicities, using analytics and technology to evaluate public policies, and squeezing savings out of the integration of health and welfare services. Since 2008, Spain’s efforts have saved more than $21 billion (Euros).

For their move to integration, New York City health and human services (HHS) officials focused on performance management and data analytics by launching HHS Connect, a system integrating 35 programs across 15 agencies. A new outcomes model represents HHS Connect priorities, impacted client groups, and outcomes, and is used for every HHS initiative. Today, each initiative must pay for itself through measurable outcomes and metrics such as savings, reduced headcount, or greater productivity. In addition, citizens get a one-stop online shop for multiple program eligibility and online benefits access, and a worker portal allows staff to see metrics and analysis across agencies.

https://lnwprogram.org/

The 3 business integration models: Horizontal, Vertical, and Matrix

Summary : Of the three business integration models: Horizontal, Vertical, and Matrix, matrix is the most powerful but also the most difficult to execute... The matrix integration model is new. Samsung has built it. With it, Samsung has accomplished a major innovation in business infrastructure models.

Of the three business integration models: Horizontal, Vertical, and Matrix, matrix is the most powerful but also the most difficult to execute.

The matrix integration model is new, so don’t be surprised if you haven’t heard it before. I named it to put a label on the business structure Samsung has built. With it, Samsung has accomplished a major innovation in business infrastructure models. Before we get to that, a few definitional notes are in order. The horizontal and vertical integrations are well known and generally provide a better defensive position than being in a single market.

The horizontally integrated business model is perhaps the oldest known. It is a method where your business focuses on a single customer class and moves horizontally outward along a single link in the supply chain to provide complementary products to that customer class. Grocery and Department Stores are probably the earliest models in this class, which evolved out of street markets in the 19th century.

Customers come to the horizontal company for the convenience of one-stop shopping and the brand promise of consistent quality and delivery. In the era of mail order, Sears & Roebuck rose by being a brand you could trust. Suppliers hand over sales responsibility to the horizontal model because that’s where the customers are and it allows them to focus on making their product, while outsourcing the task of selling. The horizontally integrated company benefits because moving horizontally unlocks margins trapped in competitive suppliers, which are pushed down a tier in the supply chain.

Applied Materials, KLA-Tencor, and Tokyo Electron are good examples of horizontally integrated tech companies. Both were built on the basis of a good product and then branched out horizontally with more solutions, as they became brands you could trust. Like someone in the nineteenth-century West ordering from a distant Sears, the semiconductor industry encountered the same trust issues as it went global in the nineties. Hence the rise of Applied, KT, TEL, and others.

Mike Splinter took the horizontal model even further at Applied by using the company’s core technology to expand horizontally into new customer bases, such as Solar PV. This is risky, because a company needs to build a new sales and marketing front-end structured to build the deep customer relationships for sustainable business. The technology is the easy part. The risk is that either you fail in the new market or that success comes at the cost of failure in your existing market. So, you only have a one-in-three probability of success. Mike managed to accomplish the move without dropping one for the other. One could argue that Applied had already moved horizontally outside to displays, but there was a difference: it was Applied’s same customers who had shifted over to the display sides of their business to solve defect issues. They then pulled Applied in, making it a tactical, not strategic, move. In contrast, the move to Solar PV was very strategic and required Applied to build entirely new relationships.

But while the horizontal model unlocks margin traps to each side, it leaves traps vertically above and below in the supply chain. The advantage of this is that customers and suppliers will not see the horizontal company as a competitive threat. While they could see it as a threat to margins, the benefits and efficiencies gained by working with a horizontally organized company typically outweigh any threat. The latter is because the primary profit advantage of the horizontal company is in pricing and negotiation. If one product line is threatened by a competitor or lower demand the horizontally organized company can respond with lower prices, using profits from stronger products to offset the variance. It can also do the reverse when conditions are the opposite. It uses open horizontal lines to strengthen weak points along the line, giving it a strong unified front. As a result, horizontal competitors are typically known as ruthless negotiators, because of their monopsonistic position. Wal-Mart is a primary example of this.

The vertically integrated business model is more modern, evolving in the early twentieth century, most notably at the Ford Motor Company.  At its height of vertical integration Ford processed sand into windshield glass and iron ore into steel. The classic example of vertical integration in technology is IBM, which ruled the computing market for most of the twentieth century. With it, vertical margin traps are eliminated, but horizontal ones remain with competitors. The vertically integrated company competes horizontally. For it, strategic and tactical advantage in the product are critical core strengths. It is price agnostic up and down the supply chain, since there are no vertical margin traps.

Customers come to the vertical company for its expertise and consistency of service and supply. In the era of the big mainframe, computers were expensive corporate investments in which companies had little internal experience. Switching often resulted in what was called a ‘forklift upgrade,’ because it took a forklift to remove the old computer and put in the new one. These were complex and painful transitions. IBM, with its control of the supply chain, could be trusted to make a computer transition as risk free as possible. Moreover, IBM could be trusted to service it quickly and always have spares readily available so capital was not trapped with lots of downtime. They were so trusted that it became common to hear the phrase, “nobody ever got fired for buying an IBM.”  More recently, IBM reinvented itself by transitioning the vertical model to the IT services sector.

The semiconductor equipment business was once highly integrated vertically and even part of the semiconductor industry itself. It did not stay that way because few equipment companies had the unit volumes to get to the economies of scale needed for an efficient vertical model. In the case of the semiconductor industry, even design and manufacturing broke away into that fabless and foundry sectors.

The Matrix Integration Business Model combines both vertical and horizontal integration vectors. It pushes the margin traps to the outside of its vectors, forming strong defensive fronts that become like fortress walls.

The advantage of the Matrix Integration Business Model is that it can use interior lines of profit direction to focus resources on the hottest areas of competition and/or opportunity.  Product development and partnering are the most critical core strengths for this model. The reason is that competitors, customers, and suppliers will all see you as a competitive threat. So you need a strong core technical strength and the partnering skills to convince both customers and suppliers that while you compete with them, it’s worth their while – and even necessary – to partner with you. 

Samsung developed this model by using their IC core manufacturing strength to focus product development outward. They were once Nokia’s largest subcontractor for cell phone manufacturing. When Nokia abandoned them, they had developed the ability to successfully enter the handset business at the low end. They then levered this entry point all the way to smartphones.  Working with Apple to supply flash and foundry ICs, they were able to respond to the emergent tablet market far faster than other electronics companies.

At this writing, two-fifths of Samsung’s workforce is workforce dedicated to R&D. They have extremely high RoR (Return on Research), leveraging both internal and external innovation sources. By 2010, they were second only to IBM in patents registered that year.

The Matrix Integration Business Model is still too new to know if it will stand the test of time. Most never thought Samsung would be able to pull it off in the first place because of the unwritten 20th century rule that you never compete with your customer. But this is the 21st century and the rules of partnering are far more complex and political. It’s very much like renaissance Italy, in which Machiavellian principles and relationships are the rule of the day. If the world changes, Samsung could find itself against a strategic alliance much like Napoleon did, as the fragmented royalties of the continent were aligned by Britain against him.

 

By G Dan Hutcheson    https://www.chiphistory.org/


What are Business Integration Models? | Examples of business integration models

What is Business Integration?

Business integration refers to all the linkages that exist between various activities and processes of a company in such a way that value is added. In a nutshell, business integration models are those management accounting tools that enables business managers to link various activities and processes of an organization for maximum productivity.

 A chef for example mixes different ingredients to make delicious meal that we all eat and lick our fingers. Same applies in business settings where business integrator scientifically connects different components of a business into a functional profitable venture.

A lot of people tend to view business integration as all about IT just as many people see Accounting Information System as purely ICT activities. Information technology is only a tool used in the arsenal of tools that helps a business achieve business integration and not an end on its own.

Our aim today in this post is to discuss the available business integration models and how a small business can effectively utilize them for optimum benefits.

We will be discussing the two most popular business integration models that any enterprise can easily adopt.

Types of Business Integration Model

The two common business integration models are McKinsey’s 7s and Porter’s value chain. These are briefly discussed in the following sections of this write up.

What is McKinsey’s 7s?
McKinsey is a management consulting company that have been around since 1920s. McKinsey’s 7s framework is a management model that was developed by two McKinsey’s employees in late 1970s. For a business to function seamlessly, all 7 components of the 7s must aligned and mutually reinforcing.

The focus of this framework when it was introduced was to boost structure in a firm but events of reality has overtaken this idea and this framework is now more suited to coordinating things which is same as integrating different business processes.

The McKinsey’s 7s provides a framework of linking people, operations, strategy and technology with the sole aim of pushing towards organizational goal. The 7s of McKinsey is classified into two broad groups – The Hard and Soft Factors

Hard factors
Hard factors or elements are those things that are easy to be identified by the management accountant and are easily influenced by the management.

Strategy: a strategy is simply how things are/or should be done in order to achieve competitive advantage. Strategy is made or broken at the operational level. Strategy is a major component of this business integration model; this is so because companies will be floating aimlessly without a proper strategy.

Strategy links to other components of the business integration model is such a way that no one is in doubt of what the strategy of the business is.

Systems: these are formal often documented procedures for performance appraisal including employee reward system. They are tools and technical infrastructures that go a long way in helping employees achieve their potentials. Here, linkages should be established between systems like linking the purchase system with the finance system for example. Good examples of systems are contained in Management Accounting Control Systems. A company can also establish a link between procurement and quality management system.

Structure: this is the organizational and reporting structure of an entry. It deals with how departments are set up to ensure that the business as whole is fully integrated. Reporting should be made in such a way that value is added to the receiving department or individual.

Soft factors
Soft factors are those intangible hard to quantify important facets of the model that must be handles with care in order to achieve desired business integration. Four of such factors are identified within McKinsey’s framework.

Shared value: this is the hub of events that influences all other factors. It is the culture and norms of an organization. Shared values reflect the belief of a company and have a direct link to the mission and vision statement of an organization.

Staff: here, emphasis is on talent management. Staff members have to be optimally motivated. By optimal motivation, we mean not spending too much to get the best out of your staff.

Skills: the organizations ability to do things well. Skills reflect on the overall performance of the going concern. Skills ensure that technology for example is used to crate and add value to the bottom-line of a company.

Style: the way that top officers in the organization chooses to run the business. The nature and industry that a business is in will determine what management style it should adopt. What matters is that whichever management style that is adopted should be able to ensure goal congruence.

What is Value chain model?
Porter’s Value Chain model is a sophisticated model of business integration that aims to reduce non value adding activities. It looks at how business activities and processes are organized with the sole aim of finding and eliminating redundancies. This could be likened to Six Sigma which has proven its worth and has taken the center stage. 

The value chain model views a business as series of interlinked activities and processes rather than sets of independent departments. The central theme of Porter’s value chain model is that each activity within an organization should add value (make product as cheap as possible) to products and services passing through it so that positive customer experience will be guaranteed.

Porter categorizes processes into two main groups as: Primary and Secondary.

The primary activities include: Inbound logistics, Operation, Outbound logistics, Sales & Marketing, and after sales service

While the secondary activities are: Procurement (which in my opinion should be a primary activity), Technology development, Human Resource Management, and Firm Infrastructure.

These headings in the value chain model are self explained so I will not make this article longer by explaining them. However, I need to point out that Swim lane that exist between each of these activities should be reduced to the barest minimum so as to ensure seamless integration of things.

Conclusion
How one views a business integration does not really matter. What matters is that business processes are linked in the most effective, efficient and economic way for the sole purpose of achieving organizational goal. When combined with the potency of management accounting control system, business integration model delivers above and beyond results for the organization. Anything short of this is not a business integration model.

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