New Rules for Value Creation

In 1930, Wiseman, Alaska, a small mining and trading community and the home of the Gwich'in tribe (Caribou People), was the subject of Robert Marshall’ book: Wiseman, Alaska Arctic Village: A 1930's Portrait of Wiseman, Alaska. Fascinated by this village and the peaceful confluence of cultures that came together to trade in the summer, Marshal called it "the happiest civilization" I have experienced. 

When my friend Bob Rich, the new Executive Director of ARCUS ((Arctic Research Consortium of the United States), visited the village in July 2015, Wiseman was but a shadow of its former self and its population had dwindled to a mere 12 people. Just a few years ago, even the shortest trip for simple daily necessities, was at least 300 miles away and required an overnight trip. Can you imagine the isolation of a community of 12 for which the simple act of buying a loaf of bread for the week was a perilous two-day adventure during the winter months?  

Yet, according to Bob, an enormous transformation had occurred in Wiseman. And the change agent was none other than Amazon. With its discovery of Amazon, Wiseman’s tiny population was connected to products, suppliers and consumers throughout the globe. Nothing—not weather, distance, resources or time of day—could interfere with their ability to access the vast outside world at will, 24/7. Everything they ever wanted—from medicine to groceries and household products—could be ordered at a click of the mouse and delivered to their homes in no time. This was not simply an improvement in delivery but, as Bob reports, a dramatic change in the way people lived; their culture and identity. 

Believe it or not, this dramatic transformation has numerous implications for associations and any consumer based business.

First, there is the obvious fact that you can no longer generate competitive value on the basis of products alone. The value derived by the Wiseman community was not just in the products themselves.  Amazon provided an entirely different platform for transactions and redefined their experiences of shopping and doing business. A mere touch of the keyboard connected this community of 12 people to global communities of millions and empowered them to make choices among unprecedented numbers and types of options.  

And all this means a shift of focus from products to customers; from meeting product specifications to understanding how and to what end customers will make use of one’s products.  This is where value and wealth are generated today.

Most marketing and product development mechanisms in conventional organizations, such as associations, are still product-based: measuring numbers of participants and transaction histories and patterns; gathering demographics; relying on answers to questions we devise on the basis of their assumptions. Market-leading companies, as well as membership organizations in our research, took pains to understand customers’ behavior, experiences, goals and intentions.  Best-Buy achieved its turnaround in the early 2000’s by understanding that their customers wanted more than electronic devices. They wanted a one-stop-shopping solution that included: installation; compatibility with other devices, on-going technical support that could be accessed in real time. With the addition on Geek Squad and a transformation in customer service, Best Buy was transformed from product to solutions provider.

Secondly, Wiseman is just one more reminder of how profoundly technology has transformed provider-customer relationships. It has shifted the creation and delivery of value from products to relationships and enabled the creation of communities and networks upon networks of value-generating relationships.  It has also vastly expanded the impact a provider can make. The capability needed, though, is not the acquisition of technology itself but its creative deployment to bring people together in entirely new ways and open up new avenues for creating and exchanging value in all directions.

Finally, unlike product-based transactions, the value generated within communities is dynamic and endlessly renewable. Instead of the narrow benefit of a stand-alone programs or services, consumers are active contributors to, and beneficiaries of, the value creation. I have not visited Wiseman myself but can all conjure up a number of plausible scenarios for what life could have looked like after Amazon. Perhaps there was a new environment of more predictability and less fear. Perhaps villagers experienced a sense of control for the first time; developed relationships outside their community such as those with various suppliers and fellow consumers; asked and answered questions about products and compared experiences. Perhaps some discovered new product lines or usages of existing products and even uncovered opportunities for new lines of business through e-commerce.  The point is that value creation today is dynamic and constantly renewable with one source leading to another and another.

This means that most of our assumptions about core functions and practices so far can be thrown out the window. Instead of focusing on finite and quickly out-dateable, stand-alone products, we must learn to set up and manage value-generating, customer-centric architectures. In VIN, the virtual network for veterinaries I often use as an example, the value-generated architecture was a platform for discussion and collaboration around clinical cases. The association enhanced value creation through its model of virtual practice; the structure and management of discussion; the vetting, editing, archiving and making searchable of member-generated content; aggregation of resources and its culture of continuous learning, testing and innovating. Value, however, is generated through the insights members derive from interaction with each other and their innovative uses of VIN’s content assets. The more members contribute to conversations and share their insights and results of testing, the greater the value of the community.

As in the case of Wiseman, the new and mostly unpredictable value that is constantly enabled exceeds by far VIN’s products and services. Unless you create the architecture and relationships that generate value continuously, it is difficult to compete today.

Okay, so here are my 3 takeaways for new value creation:

  1. Focus on people—how they use your products and services and what they want to accomplish through them.

  2. Leverage technology to create multi-directional exchanges of value--not just through transactions between you and your members but also through interactions among members and with members’ customers, suppliers, employees and other stakeholders

  3. Craft community-based architectures and build relationship networks that generate, sustain and renew value by  themselves

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