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by Danielle Kost
If women wanted to shake up their makeup regimen 10 years ago, Sephora was the place to go. Beauty product junkies loved Sephora’s candy store-like display of sample-size face creams, glittery lip glosses, and eyeshadows in every shade imaginable, allowing them to test out new products at non-committal prices.
That is, until Birchbox came along in 2010 with an innovative offer: Pay a monthly fee and receive a curated box of beauty samples by mail.
“They said, ‘We’re going to start off doing this one part of the customer value chain, which is helping you identify the better products, and we’re going to do it more conveniently,’” says Thales S. Teixeira, author of the new book Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption.
Many established companies lament the disruption they’re facing at the hand of technologically savvy startups. But Teixeira, the Lumry Family Associate Professor of Business Administration, argues that these newcomers simply spotted and served an emerging customer need faster, taking market share from established companies that didn’t see them coming.
Are companies looking at disruption the wrong way?
Danielle Kost: In your book, you argue that technology isn’t the main force hobbling many companies today—it’s changing customer needs and behavior. How did you come to this conclusion?
Thales Teixeira: When I started eight years ago looking into what was going on in certain industries, what came out initially was this idea that it was technology, right? We all talked about Google, Amazon, Facebook, and Apple. But in many industries, both the disrupter and the disrupted had similar technologies and similar amounts of technology.
The common pattern was that the majority of customers in those markets had changing needs and wants, and their behavior was changing.
Kost: Many of the companies you’ve studied gained a foothold in the market by capturing one piece of the customer value chain, or by following the steps a customer takes to select, buy, and consume a product or service. You call these situations “decoupling.” Could you give an example?
Teixeira: A great example of decoupling is an insurance startup called Trov. It’s an app that allows you to quickly insure expensive belongings for short periods of time. If you’re traveling to Rio de Janeiro next week and you just bought a $700 camera that you fear you’ll lose, you can upload some information about the camera to the Trov app, swipe right, and insure it from the moment you embark. One week later, when you come back, you can swipe left and it will stop insuring it.
You don’t have to do all the activities you normally would do with a traditional insurance company. You don’t have to talk to an agent, look at the policies, list the things you own, pay for the policy, use it, and then cancel it.[Most] insurance companies don’t want to sell you one week of insurance for one product. They have thousands of employees, big budgets, and huge infrastructures, so that they can offer more or all of the activities in the customer value chain.
Kost: Incumbents that survive disruption often embrace it and change their business models to forge new sales channels, revenue streams, and customer segments. Could you give an example?
Teixeira: Incumbents tend to respond to decoupling by gluing back the part of the value chain that was broken. The other alternative is you just live with the fact that it’s broken. That’s called “preemptively decoupling.” Instead of waiting to be disrupted, you just break it.
Best Buy initially tried to prevent customers from showrooming. They considered changing the barcodes on products to make them hard to search for online. The company even tried to use signal jammers, like the ones they use to keep prison inmates from using cell phones.
Eventually Best Buy executives realized that Amazon and showrooming are not going away. They decided to charge manufacturers for putting those items on the shelf. When a company like Samsung puts TVs on display at Best Buy, Samsung is benefiting whether you buy it from Best Buy or Amazon. So Best Buy decided to charge for that value they create.
Kost: What lessons do you hope executives will take from your book?
Teixeira: That the game has changed. In the past, there were a few big companies competing with each other. Coke versus Pepsi. Airbus versus Boeing. GE and Siemens. Now there are thousands of startups in any market, and they’re competing with the big companies without having the resources.
But in most cases, consumers are disrupting markets, not startups and not technology. Your way out as a business executive requires adapting and evolving your business model.
March 11, 2019 at 08:43AM
Forbes – Entrepreneurs