Transactional and Relationship Business transformation Is Market able to value businesses correctly
By: Amit Bhushan Date: 7th Mar.2016
While on one hand we have rising tide of aspiring entrepreneurs trying to make foray into the digital business world, on the other hand the funding agents; angels and Venture funds are having a second thoughts, about long terms viability of many such ventures, casting doubts about the availability of funds. One of the key issues is about the sustainability about the business models based on digital technologies.
Many of these ventures have an initial high burn rate and this is likely to be the case of many of the upcoming ventures as well. What investors are worried about is the continuance of the high business turnover and ability to manage margins in the scenarios when the investment tapers off. In other word the durability of business model is in question.For the aspiring ventures, this translates into question that how strong a bonding with stakeholders is being built by these businesses i.e. will the reliance on the digital world solutions continue even when initial promotions and sops thereunder start to thin and vanish.
While we do have some of the home grown successes like the Talking Yellow Pages where bonding stuck with the free riding consumers continue, and this forces advertisers to keep posting the subscriptions. Again the hotel booking apps have managed to gain reliance of consumers by helping gains on the bookings and therefore we find consumers keep fiddling with these apps, though these are still to make their presence felt in the lower end of the segment where such gains may be valued much more (by consumers) even though the overall room rents may be miniscule and there may be a need for local language as well as may be say dhramshala booking along with B&B sort of PG models as well.
Airlines and logistics are other areas where such digital connects have managed to show their relevance even when promos have diminished. Good movement may still be held by transport centers with their politics rather than efficiency on account of web based apps, though.Then of course we have a plethora of job hunt sites, work order or tender listings, property brokerages, marriage brokers amongst others. Such sites continue in business even due to their ability to provide value by making data available to users including ability to collect a reasonable precise data at very low cost. This is even as many such services have not yet made full use of mobile penetration or managed to transcend the language barrier as of yet.
The reach to cater to the needs of small fries or minnows is also in doubt. Their growth to provide say best fit list or other value adds, has still not met market expectations, although sprouting of such businesses continue even if their reach to accommodate a greater number of people is still in doubt. Basic question about what the business means to its multiple stakeholders in the short to medium run and how businesses is being seen as evolving in the long run; is the key question. What has not happened is high cost service center bookings like say for car servicing during lean period with discount or say expensive medial non-emergency service bookings which continue to happen basis reference rather than as per grading by these web based apps or site.
The value model of internet retailers or markets is again in doubt with reference to kind of relationships with say either the retailers or with the buyers and the repeat visit/buys as well as sustainability of level of sales for retailers fluctuates a lot. Similar situation has stuck the ready-to-eat food retail sites which relied on promos, rather than striking relationship with stakeholders on a win-win basis. Off course these were totally absent in the bulk catering arena where such services can be valued much more as vendors have high investments while buyer have high stake for their events though again individual buyers may need local language and localized services, a point neglected by these sites/apps.
Even though the news of drying up of funding is pouring through, what basically is being sought for by investors is more relationship based models where transactions and repeat businesses will be carried through even when the promotions and initial burn has dried up. There of course exist a lot of experience in market to be able to throw in a lot of such ventures, where they can be unleashing significant value for the stakeholders to sustain their interests while ensuring a pie of returns for the investor and other stakeholders as well. May be it’s too early to write a requiem of the sector as of yet.