I work with what we at Reaktor call Strategy & Business Design. It is a modern form of management consulting combining business strategy, Design Thinking and Lean Startup methodologies and mindsets into a creative yet critical approach to crafting business viability.
My focus areas include business strategy and innovation, evidence-based decision-making and data-driven business, and product business and service business models. I have worked with clients in Helsinki, Amsterdam, Dubai, Tokyo, and Stockholm, in industries from industrial equipment and airlines to luxury fashion and hospitality. My broader domain is using digital technology to build and develop business in a customer value-driven way.
A start-up like culture of innovation is a must-have rather than a distinguishing asset in many industries. This is particularly true for information industries such as finance and media, where the entire business formula of value creation, capture, and delivery is fundamentally changing with what digital technology enables. More generally speaking, there is hardly any industry in which digital technology would not have an impact on the business environment. An industry may be substantially physical but still be heavily affected.
Take hospitality as an example, in which the core offering is physical by necessity. Yet from the paying customer’s point of view, the nowadays non-physical part of discovery, search and booking, have to a significant extent been digitized and overtaken by online travel agents (OTAs) familiar to most of us. This layer in the full service stack takes a rough 20% cut of the booking value, which means that it corresponds to roughly 20% of the value created in a hotel stay.
What tends to happen in similar industry transformations is that any value creation component that can be digitized will be. The key distinction is that this makes it near-infinitely scalable, which in turn turns these components into software plays and that is a game that is played at a whole different speed and intensity than most physical plays.
And this is where a start-up like culture of innovation becomes crucial. It is the only way to stay in this fast-paced game, let alone gain an edge in it. Progressive companies have realized this and are building in-house innovation and development capabilities similar to what we know from start-ups. One should remember that being innovative in this way is not about building everything in-house, but about being smart about what distinctive capabilities to build in-house, and what to source as software tools and services, and then being able to change operations and ways of working to take advantage of what all of it enables.
Decisions turn into business value over time. What matters is not the outcome of a decision, but the quality of the decision. Across industries, businesses, and operations, decisions are made each day regardless of the extent to which they are data-supported. This is something to keep in mind when debating the merits of data-supported decision-making. If data sophistication is weak, so is the decision-making. Some decisions have little risk or consequence while others may have a very significant impact.
Typically and naturally more effort is put into high-impact decisions, which may require significant amounts of data and intellectual work. This makes sense, but it is often beneficial to think about where there is potential for improvement in the ratio between decision impact and effort. It may just be the case that some rather repetitive and seemingly low impact everyday decisions may show significant potential for business improvement.
This is where solutions such as AirFaas may prove their value. It may come in the form of superior decisions due to better data and automated decisions, but also in the form of lower effort due to an automated process. And with a progressive approach, such solutions may enable entirely new ways of working and scalability that would be impossible with human constraints. The right mindset, the right data, and the right tools may really be what sets a business apart from its competitors going forward, regardless of industry.
At that point, I had tracked my entire wardrobe and everything I wore every day for three years. I did this in order to unveil the actual cost of each different garment as measured by Cost Per Wear (CPW). One of my key learnings is that the price of a garment tells us close to nothing about its cost performance. A cheap piece that is rarely worn can be much more expensive than an expensive one that is used frequently. This is hardly surprising, and the logic is really simple.
From a financial perspective, the takeaway is that we can gain a lot by shifting our thinking about clothes from consumables, to durables, and even to assets. I have since opened up my service to the public and now have quite a few other users doing the same tracking. I see the same patterns of cost performance as for myself. I treat this as a collective effort in understanding and betterment.
Roughly the same goes for the environmental impact. I see cases where one piece of garment outperforms another by a factor of 3.5x, but is only twice as expensive. This means the more expensive garment is actually cheaper in use, but it also means that for each expensive piece produced, we will have to produce 3.5 cheap ones. The more expensive piece may, of course, have a somewhat higher environmental impact due to its superior durability, but it is hardly 3.5 times more. So I believe it should be fairly safe to say that in this case the more expensive piece is also the more environmentally sustainable one.
To me, the overall key learning from the tracking with all these other people is that there tends to be a rather large gap between how we think we use our clothes, and how we actually use them. That means even the most reasonable person is incapable of improving. This goes to show the value real data can play in not only optimizing things as they are, but looking at them in a new perspective in order to take a step-change to a whole new level.
Some parts of fashion are already service based. As in many other domains, high-end rarely-used assets have been service based for many years and popularized at scale by companies such as Rent the Runway. Sustainably progressive brands such as Sweden’s Houdini Sportswear, have introduced rentals a few years back in order to optimize for use rather than sales at the system level. These are mainly constrained to one use case (e.g. a party dress) or a brand.
I think the real potential lies in the system level that spans brands and categories. One model I find particularly promising is Sweden’s Hack Your Closet, who acquire high quality pre-loved women’s clothes and provision to customers as a personally curated monthly service. This solves the problematic tradeoff between the demand for frequent use of a single garment (in order to get high utilization) with the very typical demand for style variation. In essence, the model separates use and ownership, which solves the issue at the system level, i.e. across users as opposed to for a single user.
In summary, I believe some parts of fashion will be service based but not all. What I do both hope and believe is that we will start to properly transition away from fast fashion towards more durable garments, coupled with more efficient and liquid secondary markets. Then we don’t need to unbundle use and ownership (as a service model does), but still get the benefits of durability as proven by my project.
To someone who takes pride in cultivating integrative thinking and an open mind, that is a great question. In this regard, “difficult” and “challenging” are good things. I have read a lot of behavioral economics and cognitive science around thinking and biases. I don’t claim to be on top of the “I’m not biased bias” as Adam Grant put it, but I try to stay keenly aware of my biases. That makes reading any book however provoking or challenging an endeavor of curiosity rather than conflict.
Having said that, there is one recent book that really challenged me in a very useful way: The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous, by Joseph Henrich, 2020. It is an excellent account of how the co-evolution of psychology and culture created the peculiar Western mind (WEIRD is Western, Educated, Industrialized, Rich, and Democratic). It was a thought-provoking read that uncovered some hidden assumptions and biases about what is culturally “normal”.
Self: The Righteous Mind: Why Good People Are Divided by Politics and Religion (Jonathan Haidt, 2012)
Career: Range: Why Generalists Triumph in a Specialized World (David Epstein, 2019)
Fun: Mythos: The Greek Myths Retold (Stephen Fry, 2017)