TEI 216: Avoid disruption and create new value for customers – with Thales Teixeira, PhD

Map your value chain and rethink your business model to stay ahead of the curve. Many companies have faced disruption. Of course, Uber and Airbnb are the poster children of disruption, but there are many more. Kodak was displaced by the digital camera. Blockbuster’s physical doors could not stay open in the face of Netflix’s virtual service. Borders Books failed in the wake of Amazon. Some companies have also managed to continue in the face of industry disruption, such as Best Buy and Barnes & Noble. What companies, both big and small, established and startup, can do to avoid disruption is the topic of this discussion. Our guest is Dr. Thales Teixeira, Associate Professor at Harvard Business School and research of digital disruption. He has a new book examining disruption titled Unlocking the Customer Value Chain. We discuss how value is now being created for customers. Summary of some concepts discussed for product managers [2:21] How did your book come about? I visited my first startup in 2010 and visited Mark Zuckerberg and other executives at Facebook. I asked them how they were planning to disrupt the media industry and found they had a clear plan for doing so. Since then, I’ve had similar conversations with Netflix, Airbnb, and many others who were all doing versions of the same thing. The book is about that common pattern of disruption across industries. [4:55] Your book covers a few key terms — decoupling, disruption, and the consumer’s role. Can you define those? I use different terminology for disruption than some people do. For me, it happens when you have an established big company in any industry that loses a significant amount of market share to a disruptor in a short period of time. For example, Uber stole a large portion of market share from taxis, and Dollar Shave Club took market share from Gillette. The customer value chain is the process by which customers evaluate which product will be the best fit for them. Customers have to go through it to acquire the goods they want, whether it’s cosmetics or appliances. Decoupling is the breaking of the links in the customer value chain. For example, Birchbox makes it easier for customers to test beauty products. It does not try to replicate Sephora, but it makes one part of the process much easier from the consumer perspective. [9:22] What are some of the ways that startups decouple the customer value chain? Many of them use value capturing activities or new ways of doing things that the customer might not have enjoyed previously. For example, if you don’t like going to the store, a service like Birchbox or Zappos makes it easier to replicate the experience of trying products from the comfort of home. Uber is cheaper than cabs and eliminates the need for the consumer to physically hail a taxi. No matter what type of product or service you have, all you can do is create more value for customers, reduce value capturing activity, or eliminate value eroding activity. [16:02] What’s at stake for established companies that are not paying attention to disruption? A large portion of market share is at stake. A generation ago, market share gains and losses were less than 1 percent between established brands like Pepsi and Coke or Ford and GM. We’ve seen startups capturing 30-40 percent of market share, which is very disruptive. No one seems to be immune from it, regardless of industry. In response to this, companies typically blame technology and build their own technologies. We have yet to see an example of a company that made its own technology and been successful. The other response is to try to buy out the startup. This does not stop the bleeding. In the end, customers are what’s disrupting your business. Their behaviors are changing rapidly and startups can more easily accommodate their needs.