Tired of returning to the market for toothpaste every time the tube runs dry? One day soon, you won’t have to. A scanner in the garbage can will simply read the bar code, and automatically re-order for you.
It’s a new business model that Forrester Research President George Colony calls dynamic trade. Colony himself admits that the toothpaste example may sound “kind of goofy,” but consider where this new business model is coming from: Few names in technology research are more golden than Forrester [http://www.forrester.com], — one of the first firms to recognize the impact of the commercialization of the Internet in the 1990s.
As he recently told the Financial Times, Colony thinks the “next big wave” on the Internet is “dynamic trade.” This coincides with what Forrester believes is a shift from “early Web” to a new business trading model, the “dynamic trade” model. But he warns it will be “brutish and short, and led by technology.”
Colony says as more and more consumers move online, companies will be forced to deliver in “real time.” It will be a change for almost everyone: Of the 2,500 global firms Forrester tracks, Colony says “about three percent” are capable of doing this today.
This means customer service will be much more critical, Colony explains, since “it is easier to customize service than it is to customize the product.” He gives the example of ordering 20,000 light bulbs from General Electric in four-packs, but GE only having that many in eight-packs. “The systems at GE have to be smart enough to say we can substitute the eight-packs for the four packs,” he explains to Financial Times. That way they can deliver the light bulbs tomorrow, instead of waiting two weeks “until the four-packs are in.”
Colony believes this new order will finally finish off the lumbering dinosaurs of e-business — hidebound top management. “CEOs, presidents, and managing directors who would rather default to the old ways — play golf with their cronies rather than come to grips with changes” will be gone, he says in his Web site opinion column, “My View.”
The “subscription toothpaste” will be one element of the new dynamic trade, says Colony. Imagine what it will mean to be able to “subscribe” to physical products we need every week. This alone has the potential to revolutionize much of business today.
Another trend Colony sees coming is the build-to-order model of marketing, such as Ford’s building a minivan to a customer’s specifications. This can be done today, of course, but it requires three months’ lead. This is because Ford’s systems do not support quicker turnaround, Colony tells FT. In the future, he says, they will.
And naturally, along with this comes pricing-to-market. It’s much easier to find what customers are willing to pay with online marketing, Colony says. Indeed some companies are already experimenting with time-of-day pricing. Coca-Cola is testing smart machines that would price Cokes higher during hot days, and cheaper during cooler times. Little Caesar is mulling a plan to price a pizza $10 at noon and $8 at 3 p.m., a move Colony praises because if it happens, “their traffic increases and they get better use of their capital,” he told FT.
