Creating New Value Through CX Business Models
When planning for strategic growth, companies are faced with an obvious challenge - Are we providing the right value for our consumers in the marketplace? The answer most of the time is really a non-answer - that we have a product or service that we advertise in order to drive revenue and profits. This mindset is rooted in the paralysis of “we’ve always done it this way.”
“‘Standing on the shoulders of giants’ looks at what it means that 4bn people have a smartphone; we connected everyone, and now we wonder what the Next Big Thing is, but meanwhile, connecting everyone means we connected all the problems.”
However, consumers and industries are quickly waking up to the economic reality that value propositions are shifting as is revenue along with those preferences and decisions - rendering the growth playbook of advertising alone ineffective or useful.
The shifting consumer expectations and value propositions are driven primarily through the business model within the consumer experience. Growth leaders and disruptors are identifying and deploying new strategies that continuously enhance the symbiotic value exchange between brand and consumer. They are not, however, creating new products and services, but looking at serving their consumers in a new way.
Benedict Evans, a startup and industry analyst, recently published a presentation, Tech in 2020: Standing on the Shoulders of Giants, where he discusses how technology is driving business and consumer behavior. He provides a great overview on how things are evolving and the economic viewpoint of what is next.
The way that these growth companies are finding and creating growth in their business model is looking at their value proposition in 4 new ways:
Unbundling
Bundling
Vertical Integration
Horizontal Expansion
Unbundling
Unbundling, as we’re seeing in many industries like entertainment, automotive and retail, is the act of removing options or elements of the business offering to return to the essence of the value exchange. Here, value is created through ‘disruption’ by effectively unbundling complex business organizations and stripping them down to a core element. Consumers have been shifting their behaviors and decisions to companies that are offer simplicity in process and value. For example:
Netflix has disrupted the media and entertainment industry by unbundling cable offerings and providing users with direct access to content on one portal. They’ve expanded this service by creating custom programming, but all through one personalized portal versus a package of channels.
Uber shifted the taxi and limousine industry by unbundling the process of access to transportation. They targeted the pain point of dispatching and waiting for a taxi by connecting the driver directly with the rider - forever transforming the industry.
Casper has started to transform the consumer behaviors in the mattress marketplace by unbundling the process of shopping for and buying a mattress. They targeted the the pain point of going into a physical store by providing a direct to consumer solution through ecommerce.
Bundling
On the other hand, bundling, which isn’t a new concept, is the act of adding new offerings to an already effective value proposition. Here, value is created by piecing together an expanded value proposition by bundling products, services and, now, experiences isn’t a new practice, but the way they its manifesting is. NYU Professor Scott Galloway has coined the term “rundle” which is the idea of bundling products and services into a subscription-type model to create recurring revenue for organizations. Which is seen as a driver to this transformation of industry, value creation and consumer behavior.
Examples of bundling are:
Apple, at it’s core, is a device or hardware manufacturer. However, with the connectivity of their devices and scale of their market penetration, they have been able to release new products and services that add value to the consumer and their bottom line. Services like Music, Arcade, TV+ and News, Apple has created massive present value as well as future value for their organization.
Nike has started to jump on this trend as well. Not only has Nike started to create experiences like Nike Training Club which bundles product and content in a way that fulfills their brand promise, but they have recently launched Nike Adventure Club. This is a subscription model for parents to have access to new shoes for their kids on an as-needed basis.
The act of bundling or unbundling adds or removes products and services from your organizational offering. These actions are done in two ways across the organization, vertically or horizontally.
Vertical Integration
Vertical integration, adds value to the top or bottom of your organization based on the current offering or industry your company is in. Here, the value is created by network effects in the development of an ecosystem. For example:
quip, the electric toothbrush startup, has started to create an ecosystem of oral health. They have expanded their offerings beyond the toothbrush and into other products like toothpaste, floss, etc. The interesting thing is they have also purchased a dental insurance company and started to partner with dental practices to provide more, connected value to their consumers around their oral health.
Ford launched FordPass a few years ago as their foray into mobility. FordPass offers access beyond the physical relationship with the product (controlling the vehicle), but has integrated to other aspects of driving or transportation. The program connects to enhanced dealer services, provides access to parking and refueling and has a loyalty program built in to reward driver behavior. This seems to be building the foundation of an ecosystem of mobility that will help the organization usher in a future of autonomous driving.
Horizontal Expansion
Horizontal expansion adds value by expanding your organization in new service areas through new products and services in adjacent or tertiary industries or marketplaces. Here, value is created through a flywheel of value that can quickly expand into new markets with new service or product offerings. For example:
Really all the trillion dollar companies (Alphabet, Amazon, Apple, Microsoft) are experts at this. They have built massive amounts of value by leveraging their position in their core markets to flywheel out to other services and offerings. Whether its expanding into the cloud like Azure or AWS or getting into voice like Alexa or Siri or integrating with physical hardware like Fire or Surface, these organizations are continuously finding and creating value horizontally by adding new service and product offerings in new markets.