The Digitally Driven Triple Bottom Line: Part One – Economic Innovation

We’ve considered the impact of the fourth industrial revolution[1] on changing business models and stiffening competition across all industries. Today we'll look at how re-shaping your measures of success will be crucial to maintaining a competitive edge in the world of digital fusion.

As the population of millennials becomes more influential and the middle class grows larger, people care more about the ‘goodness’ of a company. Is it socially responsible? Does it do its bit to protect the environment? If not, the perception of and loyalty to the brand will be damaged. For example, a company doing well financially may find itself heavily criticized for its approach to employee safety, its payment (or not) of taxes, or the pollution levels around its factories. These issues are not only a concern for the public relations department. Informed consumers will choose to do business with alternative suppliers who they view as more responsible. This is the thinking behind the triple bottom line[2], an increasingly important way of measuring business success. It covers three key areas:

  • Economic – the traditional measure of financial success
  • Social – commitment to social responsibility both inside and outside of the company
  • Environmental – sustainable business practices and contribution to protecting or conserving resources

Delivering against social and environmental responsibilities doesn’t necessarily mean compromising on profits. Verizon commissioned a study in 2015[3], which revealed that corporate social responsibility (CSR) can help increase share price and revenue, as well as employee satisfaction, retention and brand reputation.

In this and the next two blogs, we’ll consider each of the three bottom lines, in turn, exploring how digital fusion is shaping new business models and ways of working that can and will impact the role each bottom line plays in driving overall business performance. Let’s look first at the economic bottom line, and how it’s evolving in three ways.

1. The Sharing Economy

The sharing economy has taken many industries by storm in recent years. For example, Morgan Stanley Research recently found that almost half of vacationers[4] replaced a hotel stay with an Airbnb visit in 2016. Another survey[5] showed that the average hotel room price was $125, whereas the average Airbnb room price was $145, so the choice wasn’t being made based on cost. Customers were choosing the service they found most attractive.

Some incumbents in other industries – like large car manufacturers – are taking steps to resist being disrupted, and as a result, are driving further innovation. For example, GM invested $500 million[6] in car-share company Lyft in order to leverage the growth in this space initiated by Uber. Meanwhile, Ford has stated a goal to create fleets of for-hire autonomous vehicles[7] in Europe by 2021, which could, in turn, disrupt the whole car-share model.

At the more high-tech end of things, Amazon is also operating this model by offering spare data center capacity for hire through its Amazon Web Services business, which has become a significant revenue driver[8] in its own right.

2. The Co-Creation Economy

Many organizations are now encouraging their customers to input directly into the design of new products and services, which are driving innovation in business models and processes as well. For example, DHL ran a customer workshop that developed the ‘Parcelcopter’[9], a drone-based parcel delivery service. Today, last-mile drone delivery is being used by a number of companies, and it’s helped reduce delivery time from 30 minutes to eight minutes[10].

Lego[11] hosts its own online forum for inventors and creators to submit ideas for new products. This use of collaborative digital platforms that enable customers and suppliers to communicate directly, is critical in this new collaborative business landscape. Another digital example of co-creation is the online app store model (like Apple App Store* or Google Play*), which allows app developers to incorporate user feedback into their offerings.

Meanwhile, the ‘prosumer’ is making waves in the energy market[12]: Homeowners who create their own energy and sell any surplus back to the grid can benefit from cheaper (or free) energy, while the utility providers can use this extra resource to relieve demand pressure. Hobbyists and small-scale manufacturers can also get involved in bigger business by selling their creations through online platforms like Etsy, or by setting up in a local Maker Space[13].

3. The Experience Economy

This is about moving up the value chain from selling commodities (coffee beans) to goods (ground and packaged coffee), to services (brewed coffee), to experiences (drinking a low-fat extra-hot vanilla latte while sitting in a comfortable armchair in your favorite coffee shop). Customers tend to pay more for an experience than a product, and they’ll be more loyal to it as well.

An industry that has embraced this concept successfully is the fitness industry. While companies like Nike and Fitbit will sell you a fitness tracker and the technology that enables it, what they promote to consumers is the whole experience of living a healthy life and getting fit. Nike has even gone a step further and combined this experience with customer co-creation, enabling customers to design their own shoes[14], which helped drive an increase of more than 30 percent[15] in its direct-to-consumer business.

A lot of airlines are doing it too, combating price pressure from low-frills competitors by offering a door-to-door travel experience. Rather than just offering a basic ticket, these companies include perks like a chauffeur-driven car to the airport, expedited security screening and a luxurious lounge at the terminal.

Traditional businesses are increasingly using digitally enabled innovation to up their competitive game. Which of these economic innovations could you bring to your business? In my next blog, I’ll explore the social bottom line and how that is also important to your digital transformation plan.

 


[1] The Fourth Industrial Revolution: what it means, how to respond, World Economic Forum, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/

[2] Triple bottom line, The Economist, http://www.economist.com/node/14301663

[3] New Study, Commissioned by Verizon, Addresses a Persistent Knowledge Gap by Analyzing the Financial Impacts of Corporate Responsibility Programs, Verizon, http://www.prnewswire.com/news-releases/new-study-commissioned-by-verizon-addresses-a-persistent-knowledge-gap-by-analyzing-the-financial-impacts-of-corporate-responsibility-programs-300111270.html

[4] Airbnb Is Becoming an Even Bigger Threat to Hotels Says a New Report, Skift, https://skift.com/2017/01/04/airbnb-is-becoming-an-even-bigger-threat-to-hotels-says-a-new-report/

[5] The Impact of Airbnb on Hotel and Hospitality Industry, HospitalityNet, http://www.hospitalitynet.org/news/4074708.html

[6] GM invests $500 million in Lyft, Bloomberg, https://www.bloomberg.com/news/articles/2016-01-04/gm-invests-500-million-in-lyft-to-bolster-alliance-against-uber

[7] Ford plans self-driving car for ride share fleets in 2021, Reuters, http://uk.reuters.com/article/us-ford-autonomous-idUKKCN10R1G1

[8] AWS Will Take Amazon's Stock Price Past $1,000, Reuters, https://seekingalpha.com/article/4073261-aws-will-take-amazons-stock-price-past-1000

[9] Customer Co-Creation Is The Secret Sauce To Success, Forbes, https://www.forbes.com/sites/christinecrandell/2016/06/10/customer_cocreation_secret_sauce/#f83e1cd5b6dc

[10] DHL's delivery drone can make drops quicker than a car, Wired, http://www.wired.co.uk/article/dhl-drone-delivery-germany

[11] https://ideas.lego.com/

[12] Reversing the Grid, 99% Invisible, http://99percentinvisible.org/episode/reversing-the-grid/

[13] http://www.techshop.ws/

[14]http://www.nike.com/gb/en_gb/c/nikeid

[15] How NIKEiD Is Helping Nike's Push For Greater Profits, Forbes. https://www.forbes.com/sites/greatspeculations/2015/07/09/how-nikeid-is-helping-nikes-push-for-greater-profits/#1beb52ac4e65

© 2017 Intel Corporation. Intel and the Intel logo are trademarks of the Intel Corporation or its subsidiaries in the U.S. and/or other countries. *Other names and brands may be claimed as the property of others.