Jan 28, 2014

Casually… giving away control of the chain of value! Part 1

It has been a long time since I have put on my developer hat! Well, not so much, just one month… But in languages, coding, martial arts, yoga… one month is a hell of a long time!!!
Ok it wasn’t eastern holydays but I had to pass my penitence and now I’m back with my two favorite hats: Touristology and Web-Engineering!
Let’s see what these two perspectives can offer to these posts… Different Business Models mean different technology schemes. You know that (you’d better, because this will be one of the questions in your final test!!!).
We will see the business model to keep control of the chain of value in this post (Part 1) and we will deal with the technological scheme that would allow you to implement this business model in the next post (Part 2)
Ready? Steady? GOOOOO!
As you know, the bedrock of Touristology is the chain of value, and 1,2,3 theory is the framework Touristologists use in order to manage it, foresee threats and opportunities, build up a successful business model and last but, definitely not least, to provide servuction from the beginning to the end of the trip.
As usual, the main features that give you control over the chain of value are economies of scale and innovation (the most powerful being the control over a community of users as we saw here and here.
I like to represent these ideas with this picture:
The strategy followed by some Chinese enterprise is a good case in point about how to use economies of scale in order to control the chain of value. When western companies find out the possibilities of delocalizing production to China, looking for lower salaries and less restrictive environmental laws (when I was younger this it was called social dumping!), they believed that they had found the Holy Grail. In reality, they, casually, gave away control of the chain of value to Chinese companies… and as you know the one which controls the chain of value wins… Chinese companies, nowadays have international customers low price orientated (number 1) they are the only ones able to produce with a very low cost thanks to economies of scale (number 2). If you try to recover the control of the chain of value (number 3) they just implement a distribution center in your country.
They win the low cost battle; the only hope is in specialization. In tourism and I believe in any other sector… As I always said, follow Touristology’s mantra Specialization, internationalization and Groups!
By the way, try to do this kind of analysis using one popular so-called framework, used nowadays in order to define/improve a business model:
My opinion? Canvas is a set of fancy words beautifully orchestrated, NOT a framework which enables you to understand and foresee the evolution of your business model!
It thinks about enterprises as some architects which plan a building without thinking about the eco-system where it will be placed. Touristology see enterprises / tourism destination as a part of an eco-system, as a living organism. It is, in fact, a complex system. You have to analyze the system to see further on and be able to predict the success or failure of a new enterprise or Tourism destination.
But let’s focus on the business model of a big enterprise or a small one who aims to get the trust of a community In both cases they must aim to control the three C’s in the way that we explained here.

If you are a big company, usually, you will try to do ALL by yourself in order to get Economy of scale power. If you are a small enterprise you have to use the 3C’s from all the members of the chain of value, then do a kind of integration and provide the output to the customer in a way never seen before.
My advice? No matter who you are… try to do both!
A big enterprise? Try to improve your servuction try to be at the cutting edge. You can offer the services or, as usual, buy/hire SME that are trying to offer them! Try to build and manage a loyal community (Do as Apple does!)
A small enterprise offering what’s never been seen before? Try to become big! Get economy of scale, get critical mass!
Let me see… who is able to do this kind of analysis, to implement these kinds of solutions? I’m glad you asked! My Touristologists do! They have the knowledge, the skills, the vision… to deal with both, the Business Model and the Technological Scheme.
In this post we have reviewed the Business Model in the next one we will focus on the Technological Scheme. I Love Touristology’s games!!!

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