Find growth through new value propositions

This article is based on the idea that organizations which require a Digital Transformation are facing a technology adoption gap. A gap that grew silently but steadily for the last 10-15 years. This article aims to address the creation of new value propositions as a way to face the slow growth being experienced. If needed please refer to my first article.

Legacy organizations are struggling to grow their businesses, but there are ways to tackle the problem. On one hand organizations can work to improve their existing value proposition, check this article. On the other hand organizations can work to create new value propositions, which is the topic I’m writing about below.

Nails (Market Pull) vs Hammers (Technology Push)

To develop new value propositions and ultimately new businesses or business units, one needs to consider the possible starting points for this venture. Let’s take the much recognized analogy of hammer and nails. Photo below by Ono Kosuki at Pexels.

• Nails refer to existing customer pains, needs, or compensating behaviors. Starting with nails means you are seeking to serve or solve a situation that already exists and can be measured in terms of market size and valuation.?
• Hammers refer to inventions, operations, new business models or new technologies. Starting with hammers means you may have a very cool and disruptive technology, but there is work to be done to find the right market (nail).

Bill Aulet refers to these two starting points as Market Pull (nails) as you are being drawn to action by something that needs to be fixed, and Technology Push (hammers) as you are looking to apply an existing concept to an unknown market. If you have an interest in innovation or entrepreneurship I strongly recommend you to read Bill’s book “Disciplined Entrepreneurship: 24 Steps to a Successful Startup”. Bill has a special note for technology pushes, saying teams often get “enamored” by technology and lack the focus to get paying customers. Beware :)

Where can legacy organizations find “hammers”?

Legacy organizations have been optimized to execute a single value proposition, but in order to deliver this value proposition it is common to find unrecognized hammers along the value chain. Unrecognized hammers within legacy organizations can be activities or intellectual property which are perceived just as an additional cog, but which are in themselves an untapped opportunity. A few examples may help my case:

• Marvel’s comics value proposition growth was limited, thus they went back and understood that they had an unrecognized hammer in their heroes and storytelling. All there was to be done was pushing that hammer to movie theaters.?
• Fujifilm saw their photographic film business decline 90% in 10 years since 2000, but during this time they launched a cosmetic value proposition, under a different brand naturally. Their unrecognized hammer was their knowledge and technology around collagen, a key ingredient for cosmetics.
• Mondelez went through their production processes and found a hammer in the 70% waste generated in cocoa fruit preparation. Mondelez developed CaPao, a new value proposition that gets Mondelez into the upcycled certification program and positions the organization into the environmental friendly trend.

These three organizations managed to find hidden value within their activities, processes or intellectual property that could be explored in parallel with their business as usual.?

This approach to hammer finding is rooted in Clayton Christensen’s strategy to avoid commoditization by finding, within your existing business, the “Performance-Defining component”. While Clayton refers to this concept as a way to find the next strategic move, I believe this is also a great way to provoke organizations into searching potential candidates for new value propositions, regardless if they are “the” performance-defining component or just an unrecognized hammer.?

A special note for the fact that the three examples above refer to existing unrecognized hammers, but hammers can be found outside the organization or even industry. Let's check some examples:

• Uber disrupted the taxi industry by applying a combination of technologies and business models already in place in other industries. GPS tracking and platform business models were not developed by Uber.
• Tesla disrupted the car industry by consolidating and creating a game changing electric car and ecosystem. They managed to correctly apply their technology push to the right market.

Where can legacy organizations find “nails”?

Customer is a very clear definition for an organization. Every employee knows who is buying their product or services, I’m not implying they know a lot about them, just that everyone can articulate who they are serving.

To find “nails” organizations must realize that their customer definition should be a little bit more fuzzy than crystal clear. What I mean is that stakeholders that gravitate around an existing organization should be researched for pains, needs or compensating behaviors which are yet to be worked upon. Lets see some examples:

• Existing customers or addressable market, regardless of type (businesses or individuals) or segmentation, are often regarded as a numb money machine, which is put into motion by marketing efforts. Is the existing value proposition addressing all the customer journey or job-to-be-done? What new value propositions could be developed?
• Partners, suppliers and distributors are seen as cog or part of the value chain, entities that provide an input to the existing value proposition. How could your organization enhance that existing relationship? What kind of value could you provide back to your partner/ distributor industry?
• Adjacent industries are not perceived as competitive ground for the existing value proposition. Again, what pains, needs or compensating behaviors could be addressed with some tweaks to your existing operations and value proposition?

A good example of nail finding is Uber Eats (I know it’s the second time I’m mentioning Uber, but it’s an easy example that everyone can relate to). Uber understood there was a pain, need or compensating behavior in the food delivery industry, and that their existing operations, with a few tweaks, could be reworked to create a new value proposition to this new industry.

The tip of the iceberg…

If you’ve looked closely there is a common trait shared by these two approaches. Organizations looking to create new value propositions have no way around research to keep up with both technology and customers. The speed to which the world is changing and evolving has brought research out of the laboratories, into the main street. Before taking the leap into new value propositions there needs to exist a robust research period, which is often underestimated or bypassed altogether.

Finding a hammer or a nail is the beginning of an exciting, perilous and long journey, and you can say it is clearly just the tip of the iceberg for legacy organizations. Consider a startup going through this process and its ability to pivot and shift in a short time. Now think about the processes, systems and culture that exist in legacy organizations with thousands or more employees. Now that’s a challenge :)

This article finishes my first take on the three triggers for Digital Transformation. I will be exploring topics that were raised in the last articles to dive deeper into the trenches. If you would like me to explore a specific topic let me know in the comments.