Traditionally, I visited the 'Bazaar Steendam' with my parents, a large toy shop located in, guess where, the Steendam. During this preparatory visit, I sniffed, touched and admired the toys that would soon adorn my wish list. A week before St Nicholas, Mummy went on an 'errand' and upon her return, my brother and I were firmly requested to go to our bedroom. The tension that had built up as a result knew only one outcome on the morning of December 6th, after we had carefully left our letter to St. Nicholas on the central heating the day before. At dawn, most of my dreams came true as we unwrapped Luke's X-Wing Fighter under the affable gaze of parents and grandparents.How times have changed. Today, a typical toddler takes the iPad in hand, usually during 'potty training', to fill the virtual shopping basket with toys selected by an algorithm. Mum finalises the order using her Paypal account and a little later, underpaid workers get to work delivering the toys to the doorstep within 24 hours. Of course, from time to time we express our displeasure at the wretched working conditions at Amazon and speak out against Post.nl. But our indignation, like our New Year's resolutions, soon fade away when we order the next parcel. After all, as parents we are busy today, and this is nice and efficient.
Therefore we shouldn’t be surprised that companies traditionally organise themselves to meet our demand, quickly and cheaply. In other words, companies try to be cost-efficient. They therefore assess how well they are succeeding by using parameters such as ROE (Return on Equity). In simple terms, this is the ratio of net profit generated by a company during the financial year to the equity it has used for this purpose. An ROE of 20% (10-20% is considered healthy by the way), meaning that for every 100€ of equity, 20€ of profit is made. In this way, Amazon achieves an ROE of 31%, by posting 29.44 billion euros in profit on 93.4 billion euros in equity. Apple achieves an ROE of even more than 100% while Tesla lands on 12%. Investors use this measure to compare companies within the same industry, so its impact is high. Economists, however, increasingly criticise this one-sided approach. On the one hand, because a company can have a high score but the figure says nothing about the optimal capacity or potential of the company. On the other hand, two companies can score equally high but the quality they deliver can differ greatly.
That is why there are more and more voices calling for profit optimisation. This measure maps the distance between the current profit and the optimal profit a company can achieve. This idea has its origins in the attempts of researchers to find the answer to the question of why some companies consistently outperform others, despite identical market conditions. These studies led to a Resource Based View (RBV) of organisations. The starting point is organisation-specific characteristics that enable a competitive advantage. Characteristics such as the management skills at hand, the quality of customer relations, the brand reputation or the specific knowledge within a company.
To remain successful tomorrow, organisations had better take these characteristics into account as well. After all, a change is taking place. Customers have had it with the throwaway society. That is why Apple has finally decided to allow private individuals to repair their devices themselves using original parts. More than 73% of global customers show willingness to switch to a brand that is explicitly value-driven. Fourty percent of Americans want to buy less from the giant. More than four in ten Amazon customers under the age of 30 suffer from feelings of guilt after a purchase. After all, they think it is important that a company treats its staff well and pays its taxes.
Perhaps this is the perfect moment for us, the paying customer, to send out a signal. Not via a tweet or a reaction on Facebook, but by doing something. Going to a local toy shop together with the children, for example, or buying from companies that stand for more than cost efficiency. Change happens when a large group does small things differently. And if you'll excuse me, the postman is at the door with a package.