Monday, August 07, 2006

Using technology to expand your market

I was reading this article in and found it to be a great explanation about how technology is changing how the value chain is perceived. The article is specifically about when two related technologies are bundled together to create a separate and new value-added product. The techy-term for this is a mashup. We just call it Zillow, Trulia, House-Values, 4MySales, or any other firm that uses available technology to create new and useful products for clients.

Here is a link to the article: Article Here
The description of the change in value chain structure is worth reading:

“Think back to the 80's and early 90's. The value chain examples used back then were Dell and Intel. Value was created in what seems a linear fashion. First a product was designed, then parts purchased, then manufactured, then marketed, sold and delivered. The one who could own the full design to delivery could generate most customer value. The goal in optimization back then was to look at how to get good customer insights early in the process, because you needed a long ramp to get to market.

In the mashup world, one company doesn't have to innovate all the development pieces. In fact, the idea isn't to think about the value as the "thing," such as a computer, is. Instead, customer value can become really about the usage of what someone needs.

In the new era, different parts of the value chain can operate as silos. Let's use a non-technology example. Safeway, a grocery chain, might think they are in the business of supplying groceries, and possibly meals. But the reality is that they are one part of a larger effort. Those who are going to throw a dinner party might use Evite to generate a list of guests and gather RSVPs, and they might use Microsoft Excel to put together the recipes and calculate the recipe sizes. Effectively, they would go offline to plan the meal. Then they would use Safeway to buy the food. Another part of the value chain is to clean the house (if you're into that kind of thing), cook the meal, and serve the meal. There is no one company in the chain that thinks of itself as serving this unique value chain. But the customers have a unique value chain they must assemble for themselves. Through mashups, it could be possible for Evite to link to recipes and recalculate the supplies needed based on RSVPs, and then generate a shopping list and complete the solution.

And that is the big idea. Through mashups, any one company can link easily to other parts of the chain. If Evite ends up delivering the full "party creation value chain," then Safeway could be circumvented. Any part of the value chain can end up connecting the dots for the customer and thus create the value the customer is truly trying to generate.

And disruptive as the idea of getting displaced by adjunct businesses is, know that parts of the value chain can be "free" and supplemented by the economics of another. Effectively, it's become a "mosquito world." Mosquitoes could surround the dinosaur's revenue stream, draining it of its nutrients. We don't have to go too far down the path to see the dinosaur being killed by mosquitoes that can survive and thrive on 10% (or less) of the dinosaur's take. “

Cheers –

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