On this episode of The Innovation Engine podcast, we look at unlocking the customer value chain. Among the topics we’ll discuss are why companies need to be thinking more about business model innovation than technology innovation, why they should focus far less on the competition and far more on their customers, and what we really mean when we talk about the concept of digital disruption.
Joining us for this episode is Dr. Thales Teixiera. Thales is a professor at the Harvard Business School in HBS’s marketing unit, and his focus is researching digital disruption and the economics of attention. He’s also the author of the just-published book Unlocking the Customer Value Chain, which focuses on decoupling disruption and innovation, helping readers uncover the true drivers of change in business today, and why the answer usually isn’t technology (as we’re so often led to believe).
“Digital disruption is the process by which an incumbent, a large established company, loses a significant amount of market share in a relatively short period of time,”Thales says. “And, generally, those who steal this market share are so-called digital startups.” For example, in the span of about four years, Dollar Shave Club stole about 51 percent of online razor sales from Gillette, and Gillette’s market share, at the time, was 21 percent.
“The idea behind the customer value chain is when consumers have to procure products and services, they go through a series of steps in order to achieve this goal.” If you want to buy a refrigerator, you have to go to visit a store, evaluate the options, compare all of the prices the features, choose a refrigerator, pay for it, receive it, use it, and a few years later, dispose it. All of these are activities in the customer value chain. All of these activities, across anything that an individual buys, or a company buys, or the government buys as a customer can be classified into value-creating, value-capturing, and value-eroding activities. And that is the customer value chain. So, if companies want to remain competitive amidst all the challenges they’ll face, they don’t need to just excel at innovating at the product or service level. They need to succeed at business model innovation.
Customers are becoming more and more important in the process of disruption – but most companies are still focused on competitors. Why? “After talking with so many executives…it revealed itself to me that competitors are easily tracked,” Thales says. “They’re easily compared, to be copied, and to fight back. You become solely focused on competitors and what they are doing.” On the other side, consumers and customers are much harder to cater to. There’s very few competitors compared to millions of customers. There’s no media channel that’s going to each individual customer’s household and learning from them. So, it’s much harder to cater to your customers – but in this world where customers hold the power, you have to.
You can tune in to the full episode below.