I recently attended the Forbes Philanthropy Summit in New York where Bill Gates, Warren Buffet, Bono and others talked about the state of various global social inequalities. In one interesting session, Bono gave his take on what he calls the “Transparency Revolution” and how information transparency is the key to fighting the corruption sustaining these social inequalities in Third World Countries. The idea is that if corrupt political manipulations were known to the public, those behind them would be deterred from such practices fearing they could face the consequences of their actions.
Just as information transparency is working to expose and deter corruption in the Political World, it is also beginning to expose customer exploitation in the Business World. But few seem to grasp the magnitude of what it is about to mean.
For those of you in the Information Technology Industry, there is a famous saying that goes something like this — “No one ever gets fired for buying Cisco”
I first heard the phrase when I was in college and assumed it to reflect wide-spread customer endorsement of the great value proposition of Cisco’s solutions. That was my understanding anyway from an “Outsider” point of view. Later on, in my professional career (designing Information Technology), I began to see things entirely differently — this time as an “Insider.” I soon realized it was not Cisco customers promoting this saying, but rather it was an instrument designed by a collusion of the company’s own “Insiders” working together to strengthen their profit hold on their customers.
So, who are these “Insiders”? They are a collection of different groups brought together by a singular aligned common interest — to make the customer pay as much as possible. From huge sales, marketing, and business development organizations to multi-tiered distribution channels, to complex user experiences and certifications, professional system integrators, and post sales re-occurring support and licensing parties. Whether they know it or not, customers have been largely paying for a set of “relationships” that have nothing to do with technology value of the product they are paying money for. They are essentially getting ripped off.
Traditional company business models aren’t built to empower customers and pass on value to them. They are built to extract profitability from them. And information asymmetry gives them the perfect cover. But, with an increasingly connected world paving the way for more and more information transparency to the customer, all of this is about to change. No longer are “Insiders” able to control the flow of information. If a product is great, soon customers will tell other customers on the Web and rave reviews spread like wild fire. Similarly, if a product is bad or customers realize they are being ripped-off, relationships will provide little recourse to contain that information from being widely disseminated.
What does this mean moving forward? As an Engineer first who enjoys building great products, and a Businessman second who has no patience for politics and inefficiencies, I feel very fortunate to be at the early stages of my career in this point of time. Moving forward, I can say with certainty that the most successful tech companies of the future will be the ones who deliver the best products and technology value first and foremost which empower customers. This is very different than the traditional business model which leverages relationships to control information asymmetries and extract profit from customers.
Three companies that I believe are positioned well in an increasingly information transparent world are: Tesla (Electric Vehicles), Xiaomi (小米科技; Smartphones), and Ubiquiti Networks (Enterprise/Carrier Technology). What is important to note is that although these companies deliver technology value very efficiently, all take concentrated R&D approaches to produce leading edge performance products which in turn generate evangelism for their brands.
Robert J. Pera's weblog 