In this age of digital transformation, business models are changing fast. At the same time, the basic principles of what makes a company successful are timeless. If you want to win in this new era, take a combined approach: combine the wisdom of the last decades with the newest technology. Below, you will find 3 ways to make that happen!

1. The Pareto Principle: Focus on Priorities with the Most Impact

In 1906, economist Vilfredo Pareto found that approximately 80% of the land in Italy was owned by 20% of the population. This formed the basis for a more general rule. As Pareto discovered, for many events, roughly 80% of the effects come from 20% of the causes.

The Pareto principle, also known as the 80/20 rule, is also applied to business. Roughly, 20% of employees are responsible for 80% of a company’s output, while 20% of the customers are responsible for 80% of the profit earned. These customers should be handled with extreme care and may be eligible for special offers. But first, you have to identify the customers in this group.

Advanced data science platforms will help you. These data science platforms are cohesive software applications that offer a mixture of basic building blocks essential for creating all kinds of data solutions. You can incorporate those solutions into business processes, surrounding infrastructure and products. A few examples are Rapid Insight, SAP, Microsoft and KNIME. Here you can find a few reviews for the platforms mentioned.

Another fascinating way to apply the Pareto principle to your organization is an interactive learning module by Simafore. This 1-hour learning module will answer all your questions about the effective use of the 80/20 rule to segment and optimize customer and product portfolios.

2. Cost Reduction: Measure and Analyze Your Processes

Every Euro you don’t spend, you don’t have to earn. Of course, reducing costs is hardly a revolutionary approach, but new developments in Big Data help you to do this better than ever.

Take, for example, the multinational Tesco. This supermarket chain collaborated with IBM and analyzed gigabytes of refrigeration data. The conclusion was crystal clear: Tesco’s stores in Ireland were running their refrigerators at lower temperatures than were needed. Their cooling costs were cut by 20% across 3,000 stores which generated a savings equivalent to 20 million Euro.

Your employees, your customers, even your machines – they all generate reams of data. Do you use them to your advantage, or are you missing the boat? We would advise you to take a look at the IBM, SAS, and Tableau product portfolios to get inspired by the almost endless possibilities!

3. Price Elasticity: Grow Your Profit Margin

There are several ways to increase your profit margin. One way is to reduce costs; another is to increase pricing. Usually, this will result in lower demand, but finding a price point that maximizes your profitability is possible with thorough data analysis.

A basic economic concept, going back to the 19th century, will help you out. Price elasticity of demand is a measure to show the responsiveness, or elasticity, of the quantity demanded of goods or services to a change in its price when nothing but the price changes. In the old days, the perfect price had to be determined by a process of trial and error: prices were increased until the profitability decreased. Today, you have predictive analytics tools at your disposal.

For example, IBM Price Optimization can improve retail pricing strategy to optimize base prices for everyday items and help you achieve your sales, volume, profit, and price objectives. Using science to determine pricing that conforms to your pricing rules, IBM Price Optimization supports your primary and secondary goals, including higher sales, increased volume, and improved profitability.

E-commerce professionals should look into Price2Spy. This is a great price monitoring, comparison, and repricing tool meant to help webshop professionals keep an eye on their competitors or retailers.

We Help You Innovate

At RevelX, we know how to capture new market opportunities. We develop and implement winning, growth hacking strategies which are insightful, innovative, and practical. Do you want to innovate your business model? Let’s talk!