Very interesting article, JM. I absolutely agree with you that the Rocket Internet business model is focused on risk mitigation. They are trying to “manufacture” start-ups by coping US start-ups. The big questions is, whether this is possible in the long-term? Is this operating model sustainable or was Rocket Internet just lucky so far? There are certainly some success stories, most notably probably Zalando, which went public last year. But there are at least as many examples for ventures that didn’t work out (e.g. the Instacart copy ShopWings greatly failed, since RI just copied Instacart without understanding the significantly more competitive German grocery market).
Investors also seem to have some doubt about this business model. Since its IPO a year ago, RI lost more than 20% of its market cap. Zalando’s IPO valued Zalando higher than major German companies like Deutsche Lufthansa, but Zalando raised significantly less money than anticipated.
Perry, great article. I certainly agree that IKEA improved its operating model almost to perfection. I had the chance to get deeper insights into IKEAs global supply chain and can confirm that IKEA has done an tremendous job in integrating and optimizing it. They greatly balance their supplier base between economies of scale (only a few suppliers with a huge output), risk mitigation (production close to demand) and transportation cost. For basically every SKU they sell, they first analyze those characteristics and use the results to develop a sourcing strategy: how many suppliers do we need? should we use suppliers in low cost countries or suppliers close to sales markets? how big should the security stock be? Do we store the article in our regional warehouses or in our local warehouses? and so on… This model gives them a huge competitive advantage, since the customer always get the product he or she is looking for for a reasonable price.
Will, very interesting article. While I certainly agree that the service and especially the on-time performance Amtrak offers is far from being acceptable, my question is, if a national rail company has to be profitable. When looking at the railway history, the railway was never only a means to its end. Regardless whether we look at Europe or the US, the railway has always been closely connected to personal freedom. At its introduction it was the first time that middle class people could afford to travel reasonably fast and save. As railways connected cities and people and enabled trade and business, government historically always supported the development and maintenance of the infrastructure and also covered operating losses. The believe was that the railway created a greater good for the society that far exceeds the government spending on infrastructure and operating expenses. Therefore the railway was also an instrument to reduce social disparity and enable people to travel that cannot afford a car or a plane ticket.
It’s true, many things have changed since the railway became big; still the questions remains, is the railway purely a means to its end (earning money by bringing people from A to B) or contributes a functioning railway system to a better society (enabling people to travel that cannot afford to travel otherwise and supporting business and trade).