When you look at business operating models, there are generally only three from which to choose: Operational efficiency, Product innovation and Customer intimacy. To understand these, it’s effective to look at three companies that exemplify these models:

  1. Operational efficiency: Wal-Mart. Wal-Mart’s goal of lower pricing is driven by operational efficiency. Down to prioritizing their long-haul trucks over vendor long-haul trucks. Or having only two cashiers on staff. Or being a leader in using RFID. They do NOT focus on making customers feel welcome, guided and supported. They do not focus on developing radical new products that change the market place.
  2. Product Innovation: Apple. Apple’s drive to create highly innovative devices (iPod + iTunes, iPhone, TV, etc) has changed the way people think about products. With the exception of their stores (and I might argue they are not really an exception either), Apple is not focused on operational efficiency, or customer intimacy.
  3. Customer Intimacy: Nordstroms. When you walk into a Nordstroms you get “service”. Maybe that’s a personal shopping consultant, maybe that’s someone who walks you to the part of the store you need to find. Above all else, Norstroms will make you feel welcomed, loved and taken care of. They are not creating a wild new product, or being extremely efficient.

When thinking about pure-play Internet companies - whether that is blogging, news, media, retail or content I believe you tend to see only two of the models above: Operational efficiency and Product innovation, but mostly product innovation. Think YouTube: product innovation. Think Google search and think operational efficiency. Think Imeem and think product innovation, or Facebook, product innovation, or Cnn.com - operational efficiency. But - I think what’s missing from pure play Internet companies is customer intimacy. A way to make the customer feel welcome, loved and taken care of. It’s definitely missing from a customer support standpoint, but I mean more broadly. Web 2.0 is/was about ease of use and sociability. It was not about the consumer per se. And even then companies have blogs (typically as a means to drive traffic) that is not about customer intimacy. I think there are a couple reasons for this: 1. the Internet is for geeks. Or at least it was started by geeks and the kind of geeks who are not thinking about customer intimacy. The very notion of anonymity on the Internet is the antithesis of customer intimacy. 2. It’s perceived to be too expensive and the perceived value of the Internet is in efficiency. And for those who say that Web 2.0/social networking creates customer intimacy on the Internet: maybe - but not if you want to sell something other than ads. And that’s not company to customer intimacy, that’s customer to customer intimacy - and that does not really lead to selling anything. This is all true when it comes to on-line music companies too. But we’re going to change that. We’re going to drive to customer intimacy in the on-line music experience. I think it’s a great strategic move. A great differentiatorand a real value add to the consumer. As long as we’re not cheese balls about it and as long as we can scale it effectively - which I think we can.

Originally published on WordPress on April 11, 2008. Migrated to this blog on May 29, 2025.