Unlocking the Customer Value Chain
Decoupling: how entrants steal the profitable step in a customer's chain.
Summary
Thales Teixeira, formerly of Harvard Business School, argues that most successful digital disruption does not come from superior technology but from breaking a link in the sequence of activities a customer performs. His term for this is decoupling.
His framework describes the customer value chain as the steps a consumer takes: evaluating options, choosing, purchasing, consuming, and disposing. Incumbent businesses bundle these steps and monetise some while providing others as a cost of doing business. A decoupler takes one step and does it better, leaving the incumbent with the steps that cost money and none of the ones that make it. Showrooming is the clearest case: a customer evaluates a television in a physical store and buys it online, which separates the evaluation the retailer pays for from the purchase it earns from.
Teixeira classifies decoupling into value-creating, value-capturing and value-eroding types, and works through cases including Amazon against Best Buy, Netflix against cable bundles, Birchbox against cosmetics counters, and mobile services against banks. His prescriptions for incumbents are to identify which link is vulnerable, to rebalance what is charged for against what is given away, and either to rebundle by making the separated steps interdependent again or to acquire the decoupler. The framework is genuinely useful for analysing where a business is exposed. The cases are selected on outcomes and the classification requires judgement that is easier applied retrospectively.
Key takeaways 7
- Most successful digital disruption breaks a link in the customer's sequence of activities rather than introducing superior technology.
- Incumbents bundle customer activities and monetise some while supplying others as a cost, which is what makes them vulnerable.
- A decoupler takes the profitable step and leaves the incumbent with the costly ones, which is why revenue falls faster than volume.
- Showrooming separates the evaluation a retailer pays for from the purchase it earns from, and is the clearest illustration.
- Incumbents should identify which link is vulnerable and rebalance what they charge for against what they supply free.
- Rebundling means making separated steps interdependent again so that taking one requires taking the others.
- The cases are selected on outcomes and the classification is easier to apply retrospectively than in prospect.
Who should read it
Operators in incumbent businesses assessing where they are exposed to digital entrants, and founders looking for which link to break.
Where it sits in the reference 2
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