A New Model for Value Creation in Business

Welcome back to Exponential Growth, where I’ll share my insights and ideas on brand strategy, platform business, new technology, innovation, and staying relevant in a digital world. For more information, check out my website.

There are two standard approaches to value creation in business: the value chain and the platform. This week, we’re going to delve into those two approaches and explore a third: the interaction field.?

The value-chain

The value-chain company is the classic, asset-heavy organization. It is structured as a hierarchy and has organized its key activities along the value chain from sourcing to design, manufacturing, marketing, and sales. Value is created through these activities and flows from the producer or company to the consumer. It has been the business model of the twentieth century, and in this kind of company, management wants to beat the competition and dominate an industry. They compete by accumulating and building assets and controlling them. The value-chain company is a win-lose, zero-sum-mind-set operation. Success is measured in terms of brand equity, market share, cost reduction, profit per customer, return on equity, process speed, and a thousand other quantitative measures you’ll find at the back of the annual report. While there are many advantages to the value-chain model, there are also many drawbacks. It has a model that only scales linearly, leaves companies slow to innovate, requires assets and investments to grow, and uses resources.?

The platform model

In the last couple of decades, we have seen the growth and now dominance of companies that take the platform model, most prominently Facebook, Amazon, Netflix, Google, and Apple. With the exception of Apple, they began online and thrive there. They freely and gleefully cross boundaries between industries and categories. Success for the platform company can be measured in many ways: Clicks and eyeballs. Average number of users per day or usage per user per day. Membership utilization rate, match rate, share of organic new users to paid new users, or customer adoption rate. Sales and royalties. Profitability per customer, capital hoards, share price.?

Some companies stay ahead of the competition by building an ecosystem that solves a broader set of customer needs than, say, transportation. An ecosystem is a way of providing adjacent products or services by collaborating with other companies or business units and sharing data generated on the platform. Uber entered food delivery with Uber Eats, and then built out the ecosystem to include Uber Health, Uber Freight, and Jump bike and scooter sharing. Check out Brian Kenny and Alexander MacKay on Uber’s Strategy for Global Success in their Harvard Business Review podcast.?

The Interaction Field

What if there was a model that would do more than benefit only the platform owners, digital ecosystem orchestrators, or investors? What if that model didn’t recklessly mow down traditional companies and everything else in its way? What if it didn’t thrive on the old notions of competition and disruption, but instead benefited, indeed fostered, collaboration, engagement, and cooperation with everyone—traditional firms and start-ups, incumbents and challengers? What if the model sought to make everyone a participant, and everyone a beneficiary, whether they were a platform participant, an ecosystem participant, or merely part of society at large?

The interaction field model does all of the above.?

The interaction field company is intentionally organized to generate, facilitate, and benefit from interactions rather than transactions. It is designed to facilitate communication, engagement, and information exchange among multiple people and groups—from partners, suppliers, developers, and analysts, to regulators, researchers, and even competitors—not just the company and its customers.?

A key distinction of an interaction field company, in comparison to both value-chain and platform companies, is that it builds velocity to improve an entire industry or solve a larger social problem. A ride-sharing company that moves into the autonomous driving space could build velocity in an interaction field that allows it to dramatically reduce vehicle-involved injuries and fatalities. What is particularly powerful about an interaction field company is that it can create a self-perpetuating virtuous cycle. It is self-sustaining and gains velocity as its participants contribute to, improve upon and expand its offering and as the company attracts new participants to the field.?

We are in the midst of massive global change, disruption, volatility, and uncertainty. We are seeing that industry after industry has proven to be unsustainable when configured in the conventional models. Strategies for sustainability must be made a priority, as Paul Polman and Andrew Winston expand upon in their Harvard Business Review Webinar. Many companies are not built for the way people think and behave, or live and work, today.

The interaction field model is the business model for today and for the future.

Want to learn more?

Check out my book, The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society.

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