By Kim Stewart
MIAMI BEACH, Fla.—When former Harvard Business School professor Thales Teixeira counsels business school students eager to found startups, he tells them to target customers they can steal from established companies. How? Make consumers’ lives easier by decoupling the things they enjoy doing from the activities they dislike.
Teixeira, who co-founded consultancy Decoupling.co, was a keynote speaker at the NACS Leadership Forum last week in Miami Beach, Florida. Teixeira shared with attendees a framework for understanding and responding to disruption by eliminating consumers’ pain points and reimagining a more efficient and bespoke customer experience. He’s not talking about passively experiencing disruption. Instead, he means adjusting business models—resetting the value proposition—so that customer-centric businesses position themselves to be disruptors.
“No matter what product or service you’re selling or what the customer group is, all businesses offer activities to customers that can be classified into one of three types,” said Teixeira, co-author of “Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption.” Is it a value-creating activity (eating good food, for example), a value-eroding activity (buying groceries, filling out forms with personal information, for instance) or a value-capturing activity (payments, etc.)?
“Decoupling,” Teixeira said, “is the breaking of the links between customer activities—often by a digital player—that have been traditionally provided together.” Think the way that videogame fans no longer need to go to the store to buy physical copies of games. Instead, they can play games for free on services like Zynga, subscribe to online game-streaming services like Steam and even watch other gamers play in real time with services like Twitch, then decide if they want to buy the game, just watch for fun or learn how to master it.
Waves of Disruption
Teixeira segments digital disruption into three waves. The first wave started around 1994 with the internet and was all about content. Big media companies lost market share when upstarts decoupled—or unbundled—content that once was packaged together. Think buying a big fat Sunday paper for the entertainment listings, restaurant reviews, classifieds and news articles and now picking only what you want to read in the form of Google News, Yelp and Craigslist.
The second wave began around 1999–2000 when tech companies eliminated the middle man in industries such as travel planning and booking services so consumers could go directly to the brands themselves. Now people go directly to Hilton.com and United.com to reserve travel.
The third wave of digital disruption started a few years ago, he said. It’s characterized by startups looking at the customer value chain and trying to break apart the links and take one activity, not all of them, and do it better for the customer.
Teixeira pointed to Birchbox, the beauty sample subscription box service. Consumers fill out a beauty and skincare profile via app or website, then pay $10 to $15 a month to get four to five product samples to try at home to decide what works for them. They can buy full sizes of the products they like directly from Birchbox—or visit a bricks-and-mortar store like Sephora to buy what they want. The two companies are essentially sharing customers at different points of the value chain. Then there are subscription models that replenish products on a regular basis, so customers don’t need to think about re-ordering Kiehl’s moisturizer, for instance, when they’re almost out.
Yoshi is another startup trying to upend how drivers fuel up by saving them time, Teixeira said. Founded by Nick Alexander, one of Teixeira’s former students at Harvard Business School, Yoshi is a full-service, on-demand gas station on wheels. It can handle fill-ups, oil changes, car washes, checking tire pressure and topping off fluids. The selling point is convenience.
A Recipe for Destruction
“There is a recipe for disruption,” Teixeira told NACS Leadership Forum attendees. Reducing costs for the consumer at each stage, whether that’s money, time or effort, “dictates whether customers will choose to decouple or not,” Teixeira said. “First, the most important part:”
- Map out the customer value chain (all activities your customer needs to engage to acquire, use and dispose of your products)
- Identify the type of value in each of these three activities (value-creating, value-eroding, value-charging)
- Find the weakest link in that chain—the activity that customers are least happy about. “That is the beachhead. That is where you’re going to try to break apart and steal that activity,” Teixeira said.
- Increase the specialization forces—reduce the monetary, time or effort costs for those customers to do that activity. Eventually you’ll start to steal away customers from established companies.
- Anticipate the competitive response (There’s not many things companies can do in response: recouple or decouple)
Best Buy, for example, has adapted to the fact that electronics shoppers were going into the stores to find and test products and looking up reviews and prices at Amazon.com or other e-commerce sites while in the store—and then purchasing online instead at Best Buy. Now Best Buy is a showroom, and it charges manufacturers shelf-slotting fees to showcase their products. “What you see here is a parking lot for brands,” Teixeira said. “What Best Buy did was rebalancing,” he explained. “In order to fend off disruption, co-existence with your attacker is key. Best Buy knows there are a lot of startups trying to disrupt their industry.”
Teixeira outlined the four drivers of disruption:
- Customers disrupt markets, not startups. It’s not that technology in itself is disruptive, it’s that consumer behavior changes.
- Technology changes rapidly and is an engine that can speed growth, but the disruptive ingredient is business model innovation, not technology alone. Focus on the business model innovation, which helps you know which technology to employ to speed up that business.
- Understand what’s going on in your industry by mapping out the customer value chain.
- Lack of innovation is a customer-centricity problem not an R&D problem. Telling your people, “let’s be more innovative,” or telling your suppliers, “I need something new” rarely works because the problem is the organization is not focusing enough on what its customers want.
“Today’s most dangerous disrupters, they are not stealing customers, they are stealing customer activities from the established companies,” Teixeira said.
Kim Stewart is editor in chief of NACS Magazine and editorial director of NACS. She can be reached at email@example.com.