Reorienting the value Chain

For virtually all of the 20th century, the global economy organized around a supply chain model focused on creating products and bringing them to market in more effective and efficient ways. This model got a huge boost in the 1990s when the rise of the Internet and client-server computing enabled global deployment of ERP systems to accelerate transactions all along the value chain. In fact, it was so successful that by the turn of the century, product was no longer the scarce ingredient in the economic equation. Instead, it emerged that the customer, newly armed with information advantages from cloud-enabled and mobile-enabled information sources, was the gatekeeper to future expansion. For the past two decades, the industrial model has been doing its best to catch up to this shift in power, but there is still much work to be done.

The work itself is easy to model because the value chain itself has not changed—only its orientation, as illustrated by the diagram below:

We still have the same six functions of build & deploy, market, sell, deliver, consume, and extract value, but now, if we are going to get close to the customer, we have to reorient our organizations to work this chain from the opposite direction, starting at the front with value realization and building the path all the way back to build and deploy. So, what does that actually involve?

Step One: Value Realization
We need to start with a clear view of what value our customers are seeking to realize in their organizations (as opposed to what value we are putting into our products). This task falls to the Customer Success organization, which heretofore had been focused primarily on adoption, ensuring our products were getting used, but which typically had little or no visibility into the specific business purposes to be achieved. Expanding that charter means connecting with executives overseeing the day-to-day operations, the ones who are allocating budget to deliver ROI specific to their plans. Connecting with customers at this level gives us line of sight not only into what they might buy today but also what they might need to buy tomorrow. 
 
We used to assign this task to market research, but ask yourself, how often would a budget-creating executive take a call from a market research associate? On the other hand, executives are usually happy to take a call from a peer executive in the vendor company, but how often does that executive file a market research report? A better path forward is to rethink Customer Success in broader terms, and then apply account-based marketing to build a pathway to the budget-directing team.

Step Two: Consumption
Once the specifics of value realization are understood as the customer’s goal, then we have to turn our attention to the actual circumstances in which our products are being used. Inevitably there are barriers to adoption, and these need to be discovered and characterized so that our next generation of offers can design them out. Consumption is the clearest indicator in the short term, which means our offers need to incorporate telemetry to bring back signals of when and how they are being used, or not. Some of those signals can be decoded by humans; others are so buried in the noise they can only be detected by machine learning algorithms. Either way, we need to feed our product ideation not just with what our customers say but also with what they actually do.

Step Three: Deliver
In the back-to-front version of the chain we would call this installing, but in the front-to-back, we are better served by thinking of it as onboarding. That is, in the same spirit that we onboard a new employee, we want to onboard a new customer. In both cases we are investing in building a relationship of trust that will deliver returns in both the short and long term. One key concept here is something I have come to call strategic acts of generosity. By going above and beyond the required minimum, we create a space in which the customer is prompted to lean in as well, all of which leads to better outcomes sooner. To make this real and scalable requires a playbook that enables the delivery team to engage and enlist the customer at both the end user and the management level, and to do so in a consistent way across a broad customer base.

Step Four: Sell
No function in the value chain has been impacted more deeply by the shift in power from product to customer than the sales function. In the old model, once the customer took title to the product, they assumed responsibility both for adoption and for extracting business value. To make this attractive, sales would load up the deal with all kinds of extras “for free.” This led to a whole lot of shelfware and left a bad taste in the customer’s mouth, which we are still trying to recover from. In the new as-a-service consumption models, adoption risk and value realization risk are co-owned by both the customer and the vendor. The days of drive-by selling and fire-and-forget deals are past. That means the sales process has to be a discovery and engagement process that leads to a relationship of trust. Part of the change here is that vendors should introduce and involve their downstream team members for delivery, consumption, and value realization into the deal construction process itself, to ensure customers buy the right set of products and services and have clear insight into their role and responsibilities for making everything work.

Step Five: Market
The big shift here is that front-to-back marketing is product-centric and competitor-focused whereas back-to-front marketing is use-case-centric and customer focused. Neither is inherently superior; the choice depends on context. In the product-scarce world of the 20th century, front-to-back was the winning play. Now the ground has shifted. This means that marketing messages are not about you. Nor are they about your product. Instead, they organize around customer use cases, which markets know resonate well with prospective customers, and which in turn can shape and developer priorities and product roadmaps. To leverage compelling use cases calls for marketing to develop domain expertise that is industry-specific so they can call out the obstacles to value realization and show how your company’s offers can break through to release that trapped value. The more domain expertise you are able to demonstrates, the more likely the customer will prefer your offer to your competitor’s because they can see you really get what they need.

Step Six: Build and Deploy
Finally, we are back to what we do best! The point is, we are now armed with a customer-centric understanding of the market that lets us focus our talents where they can have the most impact, as opposed to trying to match features from a competitor’s product or burn down a backlog of product enhancement requests or follow the latest dictum from our local HIPPO (Highest Paid Person’s Opinion). This is still where the action is. Technology still is the lever we most rely on. We just want to make sure we have it placed at the right fulcrum.

That’s what I think. What do you think?

Written by Geoffrey Moore, Author, speaker, advisor, best known for Crossing the Chasm and Zone to Win with the latest book being The Infinite Staircase. Partner at Wildcat Venture Partners. Chairman Emeritus Chasm Group & Chasm Institute

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