How “Value Chains” have become “Value Constellations”

Posted by Chris Luxford | 23 Nov 2012
positive experience

Value is the real service traded in any transaction. Companies provide their customers with the value they require for a price, so everyone profits in the long run . But the process by which this passes from organization to customer is undergoing a massive transformation today.

Transactions are most commonly described as a linear process, a chain leading roughly from suppliers to a service provider then to the customer. Where does the role of the customer come in? Most commonly, right at the end of the chain. This is called a Value Chain.

Let us explore this with an example. On a typical weekday, I order in a sandwich from a global health food chain for lunch. This simple sandwich is the end product of a long value chain. Bread, butter and fresh vegetables: each of these products comes to the vendor as part of a separate value chain. The creation of the sandwich as a whole is the health food chain’s addition to this value chain, and the final product, i.e. the sandwich, gets delivered to me, the consumer.

At every stage of the chain, value is added to the product by making it, processing it, adding to it, or polishing it.

But how customer-centric exactly is a value chain? Most companies today base their models on Michael Porter’s value chain approach from the mid-80s, where the quality of end product is most important to the customer. However those values are now changing. Customers today want brands to be more engaging, honest, ethical, and transparent in high esteem. The most popular companies now engage their customers a lot more than regular companies. Most organizations have woken up to the realization that a high level of customer engagement is not an option, but a necessity. In fact, an analyst advisory firm predicts that by 2013, 60% of Fortune 500 companies will actively be engaging customers with Facebook marketing, up from 20% today .

Today, customers want customized products and experiences. Customization is a process that requires active participation by the customer, and requires working through a model that is more multi-directional that a linear value chain.

The solution to this is working through a Value Constellation. In a Value Constellation, the focus does not lie on the company or the industry (as it previously did) but on the value-creating system itself, within which different economic actors – suppliers, business partners, allies, customers – work together to co-produce value.

An example of a service provided through a Value Constellation is Paris’ Autolib’ scheme. Autolib’ consists of a number of self-service electric cars parked across the city. The number of players involved in making this a reality was stupendous. About 26 municipalities first agreed to take part in this movement. Companies Bolloré and Pininfaria provided the cars. City planners, engineering consulting firms and mobility experts defined the numbers and size of the stations. Water companies helped identify where the sewers/water pipes were located and if they should/could be moved, electrical and gas companies located the pipes and the cables, and a geological study was conducted to check the quality of the ground.  The Prefecture of Police was consulted to assess the level of security of the zone, and Firemen assessed accessibility in case of accidents. Architects from the Bâtiments de France, endorsed the choice of location in order to validate the compliance of planned infrastructure with the architecture of Paris. All this was done just to finalize on the location of parking spots. Once launched, citizens were made to contribute towards the creation of value in this scheme through an evolving franchise policy. They pay €250 for the first accident, then €500, €750 and so on. This scheme also aimed at reducing the carbon footprints of residents by more than half .

A value constellation like this provides the customer with a more rounded and positive experience. Here service providers and merchants provide products and services wherever required during the course of the chain. The flow of services is non-linear but effective. To implement such a system, an in-depth analysis of the Customer Experience Maps generated for these customer journeys, is required. A CEM is the mapping out of a customer’s potential journey, describing potential roadblocks and successful scenarios.

We will explore how your organization can use CEMs to provide better, more intuitive services, in our next blog.

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