Shaking up the value chain

Imagine the experience of driving your car on a normal day. Your car brings you to your destination in a safe and comfortable way.

Which brand is accountable for this every day experience? Of course it is the car brand you would say.

But consider all the supplier brands, developing and producing every single part that contributes to this total experience.

They are invisible; you will not make the connection.

The experience is accurately managed by the car brand in flashy ads and expensive commercials.

This is no coincidence. Having a firm client relationship is key in acquiring the sweet spot in the value chain.

Companies with direct end-consumer contact are in control of the value chain in today’s bottom-up market system.

The connected brand is able to capture client’s desires and build on a solid customer database.

Meeting these wishes will finally result in a reinforced brand image and more revenue.

Other brands way up in the value chain, may not capitalise on this.

They experience difficulties changing their position in the traditional value chain due to vested interests and old habits.

Their margins are shrinking because in the end they always will be the victim of power play and their unfavorable position in the value chain.

Next to this, they face another important consequence: relevant customer information is biased due to the absence of a direct connection with the end consumer.

The connected brand is willing to share some market information by which suppliers are able to make the right adjustments, but real consumer insights will not be provided.

The connected brand is aware of the value of client insights, and ‘knowledge means power’.

When all disadvantages are clear, why don’t more companies take action?

It is becoming apparent that companies struggle with the introduction of new innovative marketing techniques and they experience difficulties to establish a sustainable dialogue with the end consumer.

This is simply because they are not used to playing this role.

Often they fear the consequences of their fresh ambitions.

But some companies do take action. They realise the potential chain conflicts do counterbalance the potential benefits.

Established market players lose market share over young niche players that take direct action to involve the customer.

Take for instance ‘DimDim’, an innovative, open source web based meeting system.

Having engaged their user base from the start, this website is gaining more and more customers.

DimDim gives users the opportunity to co-develop the source code, suggest emendations and discuss about future candidates.

Due to its high customer intimacy, DimDim is able to gain market share over institutionalized market players as Microsoft with Netmeeting.

Start revaluating your spot in the value chain.

It is not strange that such companies like DimDim are succeeding at this time.

Customer interaction has changed in terms of involvement, bargaining power and new communication channels.

Consumers have become ‘prosumers’, actively involved with those brands that are willing to open up and invite consumers to participate in a part of the value creation process.

Due to information overload, customers are becoming less sensitive to traditional communication.

They only communicate with brands that advocate an authentic two-way relationship.

In the meantime more and more products and services are freely available. Companies are experiencing difficulties differentiating and adding value.

Innovative companies are observing that joint value creation might be the key to differentiating and re-inventing themselves.

Real time product development is at hand.

Examples of traditional business-to-business organisations that have successfully entered the consumer market using this strategy abound to convince any companies that are still in doubt.

Linksys, as an example, is a brand evoked by the typical B2B player CISCO, who used its strong position in the IT server market to conquer the consumer market.

It seems possible in terms of market and consumer trends to shake up the value chain.

There is a chance to escape the value chain squeeze and it is possible to change an organisation to become more relevant to the end-consumer.

But where to start?

Becoming more relevant in the value chain means a shift from a traditional ‘push’ to a more innovative ‘pull’ go-to-market strategy.

In realising this, an innovative end-consumer interaction has to be established and a new internal organization – which autonomously manages the new value chain position – should be designed.

Two Capgemini Business Innovation consultants, Jaco van Zijl Langhout and Eric Bun, developed a practical approach to help orgainsations make a start.

The approach consists of three manageable steps with measurable results.

Step One is about making the first connection with the new target group.

The brand has been invisible for them till now.

This group will be asked to come up with ideas to improve a specific situation in which the consumer and the brand are both involved.

During Step Two the new relationship will be strengthened, extending the brand awareness.

The existing marketing activities will be adjusted to match the new target group.

In the final Step Three a multidirectional platform will be established as a central point for new product development and sales.

In this way every organisation, no matter the industry or branch, will be able to shift to the most favorable value chain position.

Finally the brand cannot be neglected and will be an important part of the experience while using a specific product or service.

Consider the Intel brand as an example: not so ong ago, the chip manufacturer represented no value for most consumers.

Nowadays A-status PC brands put an ‘Intel Inside’ sticker on their hardware to use it as a Unique Selling Point.

In addition, the “Shaking Up the Value Chain” methodology have been successfully introduced at a Dutch Telco in order to build a new business community.

For more information about ‘Shaking Up the Value Chain’

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