Executive Briefings

Shaking Up The Value Chain-Revaluing Your Position In The Value Chain

Imagine the experience driving your car on a normal day. Your car brings you to anywhere 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 revenues.

The other brands, way up in the value chain, do not capitalize on this. They experience difficulties to change their position in the traditional value chain due to vested interests and old habits of thought. Their margins are shrinking because at 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 of this position: 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 isn't there any action taken yet by most companies? It is becoming clear that companies struggle with the introduction of new innovative marketing techniques and they experience difficulties in establishing a sustainable dialogue with the end consumers; simply because they are not used to playing that role. And often they fear the consequences of their fresh ambitions. But some companies do take action. They realize 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. The website is gaining more and more customers because they engaged their user base from the start and gives them 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.

It is not strange they succeed exactly 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 sensible for traditional communication. They only communicate with brands that advocate an authentic two-way relationship. In the mean time more and more products and services have become a commodity. Companies experience difficulties to differentiate with added value. They notice joint value creation might be the key to differentiate again. Real time, iterating product development is at hand. To convince companies that are still in doubt, luckily success stories come up of traditional business-to-business organizations that successfully entered the consumer market. 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.

Therefore, 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 organization to become more relevant to the end-consumer. But where to start?

Becoming most relevant in the value chain means a shift from a traditional push to a more innovative pull go-to-market strategy. In realizing 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 start with. 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 organization, 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. Compare this with the Intel brand: first 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.

Parts of the "Shaking Up the Value Chain" methodology are successfully introduced at a Dutch Telco in order to build a new business community. For more information about "Shaking Up the Value Chain" please contact either jaco.van.zijlllanghout@capgemini.com or eric.bun@capgemini.com.
http://www.shakingupthevaluechain.com

Imagine the experience driving your car on a normal day. Your car brings you to anywhere 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 revenues.

The other brands, way up in the value chain, do not capitalize on this. They experience difficulties to change their position in the traditional value chain due to vested interests and old habits of thought. Their margins are shrinking because at 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 of this position: 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 isn't there any action taken yet by most companies? It is becoming clear that companies struggle with the introduction of new innovative marketing techniques and they experience difficulties in establishing a sustainable dialogue with the end consumers; simply because they are not used to playing that role. And often they fear the consequences of their fresh ambitions. But some companies do take action. They realize 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. The website is gaining more and more customers because they engaged their user base from the start and gives them 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.

It is not strange they succeed exactly 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 sensible for traditional communication. They only communicate with brands that advocate an authentic two-way relationship. In the mean time more and more products and services have become a commodity. Companies experience difficulties to differentiate with added value. They notice joint value creation might be the key to differentiate again. Real time, iterating product development is at hand. To convince companies that are still in doubt, luckily success stories come up of traditional business-to-business organizations that successfully entered the consumer market. 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.

Therefore, 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 organization to become more relevant to the end-consumer. But where to start?

Becoming most relevant in the value chain means a shift from a traditional push to a more innovative pull go-to-market strategy. In realizing 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 start with. 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 organization, 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. Compare this with the Intel brand: first 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.

Parts of the "Shaking Up the Value Chain" methodology are successfully introduced at a Dutch Telco in order to build a new business community. For more information about "Shaking Up the Value Chain" please contact either jaco.van.zijlllanghout@capgemini.com or eric.bun@capgemini.com.
http://www.shakingupthevaluechain.com