At a recent talk in BDB, third generation jeweller Rami Baron shared his insights into the changing contours of the diamond business, and outlined ideas about the tools, systems and processes, especially the integration of AI, that will be required to shape the future of family businesses and create the new business models to add value to their business models.
Lessons from my father
My father did not teach me how to predict the future. He taught me how to adapt when the future becomes uncertain… how to change my thinking, how to understand the shifts…
My father-in-law told me about systems and technology. I brought them together and learnt from both.
Our industry is undergoing a paradigm shift
Today, our future is uncertain. But, we should not assume it is merely a price correction.
Things have changed fundamentally. There is a 180° transformation in the consumer path. All because of a mobile phone! It’s reading what you do, who you meet, where you go, doing all these calculations mathematically to influence you.
The consumer path has changed
The first conversation that happens with consumers is no longer at the retail store. It is happening online, which means their choices are being impacted by an algorithm which is feeding them information which they never thought about and they’re not controlling. Web search is a commercial business – those who pay get better positions, improved ratings and increased chances of referral to a client.
You’re suddenly getting a funnel which is very distorted, very quick. If you don’t work out how to disrupt this funnel, your information is not in the forefront for the consumer. You’re going to be restricted and limited to how many people get to your storefront, website or whatever online position you have.
Now, think of the disruption that is happening today with AI. We don’t realize how fast it’s moving. It is still such new territory. So these are the things you have to consider.
Desirability of Diamonds
The next generation of buyers is different. Sadly, they don’t give the same importance to a diamond for an engagement ring as before.
So, rather than compete on price, we have to create what is called the ‘Veblen Effect’ – when at a higher price the customer feels it’s more desirable, more valuable.
This is not necessarily true only at the top end. Each layer just wants something a bit more to show.
Importance of Communicating
To impact the consumer’s thinking, to achieve that effect, it really has to come down to your marketing. It has to come down to the image that you’re trying to create and how you price your goods. And what are you doing that’s differentiating you?
But you have to be realistic. There are different segments in the business, and you have to decide where you’re comfortable with. Just because I want to sell what I call a super luxury good, doesn’t mean I’m capable of doing that. And my goods maybe don’t fit into that effect. So you have to choose your market correctly and then decide. Am I really talking to the consumer that I’m comfortable with?
Integration Across the Pipeline
Wholesalers and manufacturers need to understand that too…
Across the pipeline everyone has to realize that they have to make a greater contribution to the knowledge and the tools that the retailer has. Those who provide better knowledge and tools to the retailer are the ones who the retailer wants to work with.
The Role of AI
Anyone who has used AI may have noticed that every time you ask it a question, it says things like, that’s a great question. Wow. And when you say to AI, that’s not the right answer, I want something else, it says, you are absolutely right, I didn’t understand you properly.
AI has been designed to make you feel good. AI has understood how to manipulate emotions.
AI may not be at the counter, but AI will be able to make people feel wonderful. AI can influence those who want to buy a diamond ring online. It can create a conversation to make you feel good, and it will be smarter than a lot of people.
Put AI at the Centre
AI increasingly needs to be the tool at the centre of your business. Build your business around it, because it is a very powerful engine, more powerful than anything else we’ve seen.
Expertise and Automation
Start with some very simple AI tools – say to improve workflow speed. It will do simple processing tasks – like a KYC compliance document – much faster.
It can be used to respond to calls. Imagine having an AI tool that answers the phone and talks to the caller? In their own language? Wouldn’t that be impressive.
The retailer wants information and knowledge about the diamonds that you’re selling, and if you provide it in a familiar language, they’re going to stick with you, to want to buy more from you.
AI can do the hard work. That’s the secret while you use your expertise to enhance its impact!
Transforming the Family Business
My father said the way we built the business will not be how we keep it.
Change is here. It’s coming. It happened to the previous generations. We have to adapt to the change…it’s not always easy.
Develop a Business Plan
Study it. Create a business plan. Write it down. (AI can even help you. Just feed it basic information about your business and help me write a business plan. It’ll do it for you in 20 seconds.)
Think about separation of roles. Is it skill-based Do you separate the roles? Do you give people specific roles based on their skills or …?
Periodically review the plan. Once you put it on paper, look at it again in six months. Did we move? Did we actually do what we said I’m going to do?
Proceed with Respect
But, give it time to take off. Every person here who has developed any good concept will tell you it takes you double the money and double the time to bring a new product to the market, a new service. You have to give it a runway.
The leader most consistent with yesterday is often the slowest to meet tomorrow. So don’t remain consistent. Reach for the stars. Your loyalty to the family is that your plan has to look after the family into next generation. That is leadership.
At the same time, speak to the older generation with respectful consultation.
Align before you Announce
If you want to get a great idea succeeding, discuss, align, announce.
Give the elders small pieces of information, or an example. Show them. And then slowly introduce these ideas and say, could we try this? Don’t think it is going to work in a week. Realistic expectations, you know what it says? Under promise and over deliver.