COGNIZANT CONSULTING

Helping organizations engage people and uncover insight from data to shape the products, services and experiences they offer

Learn More

Contact Us

THANKS FOR YOUR INTEREST IN COGNIZANT.

We'll be in touch soon!

x CLOSE

Refer back to this favorites tab during today's session for access to your selections.
Refer back to this favorites tab during today's session for access to your selections.x CLOSE

Perspectives

Microenterprises: A New Growth Strategy for Information Service Providers

2020-06-17


By treating their processes and workflows as marketable products, information service providers can recast these assets to tap into new revenue opportunities. Here’s how.

The information service (IS) industry is at an inflection point. With successful players boasting long histories and enviable margins, industry revenue grew an exceptional 5.6% in 2018. However, analysts at Outsell expect a return to more typical 3% growth this year — perhaps even lower, as the open-access movement continues to build steam.

The industry has a natural advantage, however, that may be highly under-leveraged. Among its saleable products are not only owned content but also such structural assets as editorial workflows and processes.

To IS providers, editorial workflows and processes are elements of everyday operations. But to many organizations outside the industry, these types of activities are not core to the business and often fail to live up to best practices. As businesses across all sectors struggle with a tidal wave of data and content, reliable, time-tested publishing frameworks may provide significant value. This is a ready-made market opportunity for IS providers.

IS providers’ offerings are largely content-centric, even as such content has morphed from proprietary and heavily factual to highly personalized and analytical. To evolve and compete with digital natives, traditional IS players must expand their slate of offerings to include more specialized services and technology (such as algorithms-as-a-service) that undergirds and surrounds content. IS providers should explore diversification as a strategy to create new, more granular offerings, penetrate new markets and keep pace with digital-first interlopers.

Enter the microenterprise

Microenterprises are independent business pods, formed by rearranging and repurposing discrete components, in the form of talent, IT systems, data and processes, within the organization. Their offerings are aimed at targeted customer needs and priced as a service.

Microenterprises offer flexibility to cater to specific and under-served market demands. One example taken from a different industry is the Haier Group, the world’s largest appliance maker, which comprises  4,000 microenterprises under the corporate brand. The goal: Become less vulnerable to unconventional competitors and more open to new market opportunities. The results are stunning: From 2008 to 2018, according to the Harvard Business Review, gross profits for Haier’s core appliance business grew 23% a year, and the company created $2 billion in market value from new ventures.

For IS providers, creating microenterprises supports the strategic shift from a product-centric company to a service-based digital ecosystem. Unbundling the business lets IS providers mix and match expertise and content with affordable technology to deliver new offerings. By repackaging data, information and services, they can better address demand in new segments.

For example, well-honed and productized editorial workflows can be offered as a service to organizations with publishing needs such as intranets. And taxonomy frameworks established to catalog unstructured information can be extended to serve text-heavy industries such as pharmaceuticals. The primary target for IS microenterprises is organizations that lack in-house technology and are likely to spend heavily on workarounds for editorial processes and workflows.

Focusing the microenterprise

Adopting a microenterprise structure requires organizations to broaden their strategic imperatives and go-to-market strategy. As new opportunities, IS providers can:

  • Expand into the B2C sector. With the rise of open-access, quality information is no longer restricted to buyers with the deepest pockets. The pay-as-you-go pricing structure at the heart of the microenterprise model makes it a natural fit to offer services directly to individual consumers. IS companies have several options in entering the consumer market; they can diversify offerings and rebrand, or maintain their brand by creating spin-offs under a parent group (as Haier has done).

  • Diversify into new industries. Microenterprises present a means to expand into new industries when revenue from traditional segments has plateaued. We helped one client, a leading IS company with little presence in the fast-growing business-to-business digital marketing space, tap into its powerful data assets to quickly enter this new market. (To learn more, see “Data-Rich Company Cracks the Digital B2B Market.”) More on this below, under Stage 2 and in the figure.

  • Personalize offerings, courtesy of AI. For many traditional IS providers, the content purchase represents the end of the customer experience journey. With artificial intelligence (AI)-fueled recommendation engines, IS providers can build on the data trail and patterns of each marketplace transaction to continuously present new or additional offerings.

  • Extend into the expert economy. A new class of marketplaces act as hubs for connecting subject matter experts with clients who need their expertise. By pairing platforms with knowledge-sharing, the expert economy has taken off. A 2018 study from Civic found that expert industry leader Gerson Lehrman Group had almost as many experts (600,000) as Lyft (700,000) and Uber (750,000) had active U.S. drivers. With their technology muscle and sector expertise, IS providers can leverage their expertise to play a prominent role in the expert economy.

For IS providers, embracing this new opportunity presents a means to two important ends. One is the promotion of the revenue multiplier effect that can help level the playing field for IS providers as they take on digital competitors. The second is the encouragement of a more innovative culture. A microenterprise culture is more open to new ideas, which IS providers can use to nurture start-up ideas and encourage free-flowing collaboration. We recently partnered with an IS company on a project for the banking and real-estate industries and saw the firm’s top talent flock to the project, wanting to be part of the innovative initiative. This influx of high performers increased the project’s chances of immediate success; moreover, the pilot kickstarted the company in other ways, with the director of finance exploring options for pricing models and the vice president of business development supervising the restructuring of contracts for as-a-service delivery.

Making the transition

Making the transition to microenterprises is an iterative process that enables an IS organization to improve operational excellence. Here are the four key stages to guide this shift:

Rethink: Take stock

The first step toward the microenterprise model is inventorying the organization’s unbundled assets. Most organizations that we work with are surprised by the range of granular components that they uncover, which can be applied to the microenterprise. For example, on-staff expertise often includes consulting, editorial-as-a-service specialists, and niche content creators. IS providers also have a wealth of processes, from frameworks and algorithms to taxonomies. Their arsenal of digital tools also is extensive, covering not just databases and workflows but also aids for search such as extraction enablers and semantic analyzers.

Reimagine: Map each component’s market potential

IS providers must explore the market need for each asset that they’ve identified. Developing a go-to-market strategy includes targeting potential use cases and segments along with business models for service delivery. Gaps identified in the corporate portfolio can also be addressed through these new offerings. The figure below shows how IS providers can repurpose their assets to meet the needs of various industries.

Rewire: Estimate time-to-market 

Before estimating time-to-market, organizations must assess how to decouple specific components and offer them individually. Culling out the technical components and enabling them for multitenancy is an engineering-intensive activity. The company’s technology deck will be a determining factor, such as whether an application should be migrated to the cloud or replicated in the cloud through a clone. Using the cost basis of engineering and labor, they can then define the costing model for each sellable component. Once the reengineered components are matched to a market opportunity and priced, they assemble to become an independent business pod and thus a microenterprise. To prime their microenterprise marketplace, we advise providers to start with quick, straightforward opportunities.

Reset: Change the organization

Unbundling services alone doesn’t ensure market success. Microenterprises require shifts across the value chain in terms of an IS organization’s culture, business model and ecosystem. It’s not a one-time change. Instead, companies will need an iterative organizational change management plan to help reset internal processes. For example, engineering and infrastructure will require modification to accommodate multitenancy. Acquiring, servicing and maintaining the new customer base will mean retooling marketing and sales functions with new skill sets to support the sale of these smaller components.

For more information, read our white paper “Transitioning to the Microenterprise,” visit the Information Services section of our website, or contact us.

Related Thinking

Save this article to your folders


Save

PERSPECTIVES

Gen Z and the Future of Higher Education

Attitudes and behaviors toward digital content consumption and device...

Save View

Save this article to your folders


Save

PERSPECTIVES

The New ABC’s of Learning for the...

Training and higher ed are under pressure to better meet...

Save View

Save this article to your folders


Save

PERSPECTIVES

Gen Z: The Future of the Internet and...

Gen Z, poses new challenges for businesses. They’ve never known a...

Save View
Microenterprises: A New Growth Strategy for Information Service Providers