The growing influence of individuals and startup businesses are transforming established systems in societies and industries. Individuals with greater independence and unfettered actions, leveraging new ideas and modes of expression, will enjoy a more flexible society with limitless options.
Born in the mid-2000s as merely a bidirectional communication tool for anyone, social media has transformed itself into something that empowers the public to spread and interact with information. For example, in the Middle East, social media helped to trigger a pro-democracy movement called the Arab Spring.
Businesses are using social media extensively as a communications channel with customers to create close relationships with them. Some companies also use social media for product research and development. Influencer marketing, which targets individuals with strong influence in social media, became popular when it was discovered to be effective in motivating product purchasing decisions. In 2017, for the first time, internet advertising exceeded TV advertising expenditures. Given its ability to reach the right targets in the most appropriate context, social media advertising is continuing to grow rapidly. The importance of social media is also increasing as a tool for customer support. In a sharing economy, where goods and services are shared, social media will become an important bridge between strangers, fostering trust and accountability.
With added functions like news reporting, concierge service, shopping, games and payments, social networking services (SNS) enable individuals to interact with society. The first source of news for many people has become SNS, and an increasing number of politicians have been substituting SNS for traditional mass media to transmit messages directly to constituents. Some social activists also use SNS to reach the public about significant social causes such as the violation of human rights and the protection of wildlife and the environment. Alternatively, the great influence of SNS has resulted in suspicion of possible manipulation of public opinion through the transmission of fake news.
Other adverse effects of SNS include addiction and dependence with long-term use, and the reinforcement of current opinions while selectively reading information in which one is highly interested or agrees. Nevertheless, SNS will likely enhance its bidirectional communication characteristics and continue to serve as an important social infrastructure platform. Future society will likely reflect the opinions of the individual even more so than today.
Startup companies are appearing in many different fields using digital technology such as FinTech (financial), AgriTech (agriculture), GreenTech (environmental science) and HealthTech (healthcare) to solve problems and create value. These companies have expertise and technological capabilities in specific areas and collaborate as equal partners with multiple large companies. Also in progress is the unbundling of products and services, where users select and combine necessary and appropriate functions.
The digital economy has reduced transaction costs, and the provision of all functions by a single company has become less of a competitive advantage. As a result, more incumbent companies have been investing in or collaborating with startups to accelerate digital transformation. Partnerships with startups increase opportunities for incumbents to expand business boundaries and develop new business relationships by leveraging the core value of startups. Re-bundling based on clear concepts and customer needs may also increase. For example, in the financial field RegTech was born to harness technology to more easily comply with complex and rapidly changing regulations. In the future, similar services may be developed in fields other than financial.
The on-demand economy, which provides products and services based on demand, is also expanding. With the pervasiveness of product information and the growth of mobile ecommerce, consumers are now empowered to get what they need when they need it. Some consumers pay a premium for personalized goods and services that are highly convenient. Several companies have adopted crowdsourcing, which uses consumers’ opinions and innovative ideas as part of product development.
A changeover to a demand-driven business model requires the construction of an innovative supply chain. Development of digital technology, as well as small and flexible production systems such as 3D printers, has enabled manufacture at sites closer to the consumer. With such an innovative supply system, large companies and new businesses are on equal footing. Supporting this change, the gig economy, where independent workers provide skill, ability and time on demand, is continuing to expand.
A new business model being adopted mostly in the apparel and accessory areas is called directto-consumer (DTC), in which manufacturers and consumers are connected directly. This business model uses social media to acquire customers and sells products only on its own ecommerce site. Skipping a middleman enables the faster sale of higher-quality products at lower prices. The model is also characterized by a clear concept different from that of existing business operators, such as limited product options, transparency of materials, processes, costs and hyper-personalization based on customer data. One of the benefits of this model is that a company can collect all data about a customer and not just a purchase history. Highly accurate analysis based on continuous feedback enables commercialization and recommendations of products on the basis of a customers’ preference and lifestyle. Some incumbent companies are trying to cooperate with DTC companies to strengthen their own customer channels.
Some DTC companies are opening physical stores that offer consumers different experiences, for example, advice from a personal stylist or personal counseling. Other instances include pop-up stores1 and stores without inventory, where you try on clothes but purchase online; stores with restaurants and cafes where you can taste a company’s drinks and food; and stores that focus on customer response and on the observation of customer behaviors. The benefits of physical stores have been redefined when combined with ecommerce sites. Additionally, a synergy develops when customers visit both the ecommerce site and the physical store. This clientele tends to buy more and has higher customer loyalty.
Meanwhile, another movement to deepen the understanding of customers and improve customer experience has begun, by clarifying the complete picture of customer behavior, including the hours outside the timeframe when customers are visiting the company, online or offline. In addition to purchasing histories and customer attributes, location information and social media posts are analyzed in real time to better predict customer values and expectations.
1 Stores that open for a limited time at event sites and vacant spaces
The growing influence of the individual has already taken root in society, changing the power balance between provider and consumer, politician and citizen, and large company and startups, making society more difficult to lead. Because it has become easier for individual opinions to influence politics and business, more products and services that satisfy individual preferences are being supplied. At the same time, the opinions of people dissatisfied with society’s fast changes have also become easier to influence, resulting in a global rise in populism. Concurrently, the international community has slipped into a state of reduced leadership. In an individually driven society, it is indispensable for each individual to act with a wide perspective for the growth and wellbeing of that society.