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Author's profile photo Jennifer Scholze

4 Key New Business Models Develop In The Building Products Industry

First published in the Digitalist by Stefan Soeller



Imagine this: a random consumer – we’ll call her Ashley – tweets about a frustrating search for the perfect new living room rug. Your social media sales team monitoring hashtag mentions notices Ashley’s tweet and immediately responds with four great rug suggestions. Minutes later, Ashley buys one of your rugs. No, this isn’t some futuristic sales scenario. It’s happening right now for forward-thinking companies like Mohawk Industries, which are driving innovation and growth with new social media sales solutions.

“If I told you 12 months ago that we could monitor somebody tweeting about a rug, and close the transaction in two minutes, nobody would have believed me,” says Jana Kanyadan, the SVP & CIO of Mohawk Industries, Inc. “That is what I call innovation.”

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Increasing globalization, including the emergence of new competitors, building regulations, and digitization, is upending established business models in building products industries. Companies must reinvent traditional business models in order to maintain a competitive edge.

In addition to the social selling model described above, companies are innovating new business models in the following key areas: home automation/smart products; individualized/specialized products; and vertical/horizontal integration. Here’s what your business needs to know to stay ahead:

New model #1: Social selling

Social media is a critical marketing channel for B2C and B2B companies, but it’s not just a broadcast platform. The true power of social media is reaching the right people at the right time with insightful content – just like Mohawk Industries did with their social media rug sale.

“Social listening is the process of tracking conversations around specific phrases, words, or brands, and then leveraging them to discover opportunities or create content for those audiences” says Sprout Social.

Social media listening also helps your business to identify brand ambassadors. These are the satisfied customers who love your business so much they’re telling the world about it without any prompting from you. Social buzz sells products. More than nine out of 10 customers read online reviews before shopping or dining, reports BrightLocal’s 2014 Local Customer Survey. A further 88% say they trust online reviews as much as they’d trust a personal recommendation.

This combination of social listening and social selling is fast emerging as a vital business model for building products companies. These companies deal with a host of decision makers, from architects and builders to homeowners and commercial real estate companies. Social listening helps building products companies better understand customer needs and – together with the power of social selling – close more deals.

New model #2: Home automation and smart products

Automation itself may not be new, but the game is changing. Customers now expect building products to have IoT-enabled services for energy savings, security, and enhanced comfort. Building products companies are responding, equipping their products with sensors and built-in intelligence. For the building products producers, this trend is giving rise to a new business model that unifies the world of smart products and automation.

Smart homes now feature automated solutions for lighting, energy management, safety and security, electronics and entertainment, and even gardening. Wireless dimmers, for example, can do more than just be remotely controlled. Many are also compatible with home automation systems that connect several items together for seamless home control and customization with automated rules and shortcuts. Close the blinds remotely or when the sun is shining or at dawn. Planting a vegetable garden? You can use automation to control the sprinkler system.

New model #3: Individualized and specialized products

New technologies like 3D printing enable building products companies to manufacture individualized products at affordable price points – all while achieving higher margins than standardized products.

This move changes not only where products are produced, but also how the entire manufacturing process works. For example, 3D printing turns digital data into objects that can be manufactured from virtually any material, eliminating the need for construction site waste, massive storage centers, and transportation costs. Customized products require new, integrated processes to take specialized orders, pass this information down the supply chain to suppliers, and manage distribution networks.

Also, 3D printing and other modern production and planning processes arean essential value-add that helps building product companies differentiate themselves in a highly commoditized market.

New model #4: Vertical/horizontal integration

One-stop shopping offers customers the convenience of satisfying multiple needs in one location. This includes design services, direct access to product information, options to buy supplemental products, installation services, and much more.

One-stop shopping does not necessarily mean that a building products company is offering each and every service directly. Being connected with suppliers and service providers via a business network enables digital building products companies to act as an intermediary to facilitate the one-stop shop model. LIXIL, for example, is one of many building products companies expanding through strategic acquisitions and partnerships. This expansion plan is accelerating its growth in foreign markets and providing consumers with a complete bathroom solution.

SAP enables the digital building products company with a digital core, business networks, supply chains, and the Internet of Things (IoT). We simplify transaction processing, account management, and customer service while enhancing building products operations. Learn more about Digital Transformation in Building Products.

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