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How the Internet Changed the World

February 17th, 2016

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By John Eggleston

The internet has been a hugely powerful enabler for many SMEs: in a survey of more than 4,800 firms in 12 countries around the world, management consultancy McKinsey found that those which use web technologies grew more than twice as quickly as those with little internet presence.

“The internet’s biggest impact on SMEs has been as a great leveller, making it possible for a small firm to be a global company from day one, with the reach and capabilities that once only large companies could possess.”

But the benefits that the internet offers aren’t confined to what we think of as ‘online’ businesses. While the web has spawned thousands of new ventures that could not exist without it, many conventional ‘bricks-and-mortar’ businesses are harnessing its power to grow far more quickly than they would ever have dreamed of if they had been launched in the pre-internet world.

That’s because the internet is now making a major contribution at every stage of the value chain, boosting productivity wherever you look. Not only has the web fundamentally changed the way products and services are sold, but it has also revolutionised development, design, production and distribution. Even the smallest companies can now tap into the sort of geographically diversified supply chains and workforces that were previously the preserve of large multinational corporations.  Here are three examples.

Building a community of customers: AFG media

AFG is the company behind Morphsuits, the all-in-one fancy dress costumes that have become a common sight at stag dos, fancy dress parties and special events all around the UK. Founded in 2009, AFG had revenues of £1.2m in 2010 but has grown quickly. This year, sales totalled just over £10m and the business is now expanding internationally.

Gregor Lawson, one of the three founding directors of the company, says AFG has social media to thank for its growth. “Without Facebook, we simply would not exist in the way we do today,” he explains.

With little to spend on advertising or marketing in its early days, AFG’s strategy was to build a community of customers through its Facebook page – not everyone would buy a costume straight away, Lawson reasoned, but the more they participated in the community, the more likely they would be to spend money when the occasion arose.

“People underestimate the commercial power of Facebook,” says Lawson. “For every one person who does something on our page, another nine will ‘like’ it and another 90 will see what’s been done.”

AFG is scrupulous about engaging with everyone who posts on its page – even complainers become advocates of the business if you engage with them, Lawson argues.

In addition to the ideas its Facebook users come up with – not least a remarkable number of photos of Morphsuit wearers in ridiculous poses – AFG offers plenty of proactive opportunities to engage. It organises competitions and even meet-ups. A ‘flash mob’ in Trafalgar Square, for example, attracted 200 Morphsuit-wearing fans.

“People think social media is flitty,” Lawson says. “I disagree – if you’re clear about your objectives and your customers, you can deliver real commercial advantages on Facebook.”

AFG’s own statistics prove the point – they have 1.3 million Facebook fans and counting. And only a small proportion of those fans need to become customers to sustain AFG’s rapid growth.

Accessing global suppliers: Primrose

The business model at online garden products retailer Primrose developed as a consequence of the way search engines operate. Type, ‘barbecue’ into Google and the site it delivers you to has to pay the search giant for referring you – even if it then discovers you were after a £5 disposable barbecue rather than the £300 gas-fired models it sells.

The solution, says Ian Charles, one half of the husband-and-wife team who founded Primrose in 2003 and still run it today, is to make sure you sell everything the customer might possibly be interested in.

“We realised we needed to expand into every possible type of garden product and to offer the deepest possible range in each case – to become the Amazon of the gardens world if you like,” says Charles.

“Fortunately for us, one thing the internet has done is made the infrastructure of sourcing free – it now requires far less of an investment to find the manufacturers.”

Primrose aims to offer greater depth in any given garden product range than anyone else and therefore needs to source huge amounts of stock in an industry where manufacturers are based all around the world . For a relatively small business, the cost of such a sourcing operation would traditionally have been prohibitive, but the internet has changed that.

Much of Primrose’s sourcing is now conducted entirely online. That has enabled it to build the sort of stock range that means customers who use imprecise, generic terms when using search engines – that’s most customers – will usually find what they’re looking for at Primrose. “This sourcing has enabled us to be real product specialists in larger and larger number of ranges,” Charles says.

Achieving global reach: Workshare

For Workshare, the internet has enabled the company to compete on a global stage ina remarkably short space of time. Founded in 2009, Workshare provides businesses with a highly secure cloud-based document management service that enables users to share files with colleagues and clients of their choosing. Those files can be accessed via PC, laptop, tablet or smartphone and worked on by any user granted the right access privileges – the system also tracks all changes made to documents.

Workshare targets markets such as legal services and financial services, where there’s a high concentration of skilled and mobile workers operating in a regulated and sensitive environment. Other examples include the pharmaceuticals industry, as well as government services.

Ordinarily, it would take years to build trusted relationships with such businesses and even longer to achieve critical mass. But not for Workshare – while it has only a handful of overseas offices, it already has hundreds of customers in 65 countries all around the world.

Anthony Foy, the company’s chief executive, says that in addition to the right product offering, it is the viral distribution model on the internet that has enabled Workshare to achieve such reach so quickly.

“Every one client that subscribes to our service typically invites five others to join them – and every one of those five then invites three more contacts of their own” he says. “We haven’t got round to tracking what those three contacts do yet, but you can see how the maths works for us.”

Clearly, the numbers begin to add up very quickly, and have already done so for Workshare. But Foy believes there is plenty more growth to come – “we’re nowhere near the point yet where we run short of potential new clients,” he says.

 

John Eggleston is Technology, Media & Telecoms Director at the Business Growth Fund (BGF).  BGF was established in 2011 to help Britain’s growing smaller and medium sized businesses. Backed by five of the UK’s main banking groups – Barclays, HSBC, Lloyds, RBS and Standard Chartered – BGF is an independent company with up to £2.5bn with which to make long-term equity investments. John sits on BGF’s Investment Committee and works with a number of BGF investee company boards.

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