As originally published on LinkedIn Pulse
It is time to replace the value chain with an experience chain.
That is the concept I introduced in the first article in this series.
The idea is simple. Companies that manufacture products can’t rely on design, distribution, or sales as the ways to differentiate their goods. They need to reimagine their value chain relationships around customer experiences rather than products. The experience should essentially become the new “product.” It will be the only way to differentiate, increase sales and grow market share in a commoditized environment.
Re-imagining the relationships and processes in a value chain to deliver a new value proposition will not be easy. The starting point for this shift is easy – look to the customer.
Shifting Away from a Product-Centric Approach
What is the driving force behind the manufacturing value chain? Where is the energy generated? What is the “sun” that the value chain orbits around?
Anyone who has worked in a product manufacturing industry knows that the catalyst in these industries is the source of the products – the manufacturers themselves. When their machines start running, that is the signal to the rest of the value chain that action is happening. The sales team, the distribution partners, the retailers, and even the customers, take their cues from the brands creating the products.
This is a product-centric model. The product is the fuel.
Success in a product-centric approach relies on the product’s ability to stand above the rest. The challenge for most manufacturing brands is that their products do not stand out enough to make them a “must have” for the average consumer. Most products are commodities.
This creates the current reality for the players in the value chain. Products are coming, one way or another, and the manufacturers need the chain to get them to market. They have to “push” product down the line. The volume of products they need to get downstream is making the customer’s journey harder, not easier.
For example, an executive at a major home products retail chain told me recently, “The buying experience hasn’t improved in our industry over the last 20 years, yet our stores have five times as much product as they need.”
The customer sits at the end of the line, with too many options and an inability to clearly differentiate between one brand and another.
A New Energy Source
The perceived “value” has shifted from the product to the experience. That is what customers will pay for now. Experience isn’t created by the machines that make the products.
This goes way beyond “experience marketing” where the brands highlight how the product will make the customer’s life easier. The journey of buying the product itself has to make the customer’s life easier. The buying experience has to enrich them and compel them. This is what customers now demand.
This is why consumers need to be the fuel in an experience chain, not the people making the products. As outlined in the first article, the biggest obstacle in building an experience chain is that each player in the chain currently has a different definition of who the customer is. The end consumer’s experience is “someone else’s problem” for most of the players in the current chain. There needs to be alignment that every stakeholder is in business to deliver an experience to one customer.
Merging the Two Approaches
In the previous piece, I referenced Warby Parker and Casper as formidable challengers to the traditional value chain model. These brands are examples of “customer-centric” business models. They have constructed their brand from the ground up to be experience brands. They did not fill factories with machines and then start pushing product. These brands engineered an experience and built the value chain backward. They sell directly to the consumer and can control the experience at each step.
Traditional manufacturing industries will not be able to re-engineer their value chains this way. They have machines they need to run, supplier relationships in place and vast distribution networks established.
The experience chain model sits between the product-centric and customer-centric approaches. The experience chain is a way to address the new customer experience demands, without starting over.
So, the focus has to change. They need to invest more in the customer’s buying journey and less on pushing products. This doesn’t mean the machines should stop running. It means that brands will need to find a way to wrap that product in an experience that makes it more valuable to the customer at each stop along the value chain.
In my next piece, I will address more how shifting the focus to the customer will force the parties in the experience chain to rethink, and re-engineer their current partner relationships.
