Our marketing landscape has changed significantly with the rise of digital technologies. However, our marketing textbooks still teach the same marketing and management frameworks they have taught already 20 years ago. In the current issue of the Harvard Business Manager, the German version of Harvard Business Review, we introduce a new perspective on how modern companies should organize and structure value creation for their customers: the Market-oriented Value Creation Framework.
There are three universal drivers that create value in every B2C-company: the brand, its products, and the customer. Usually, the three corresponding departments – brand management, product management, and customer management (CRM) – are more or less disjoint entities in the firm, working with different data and different tools on different marketing goals. In a first step, the company should centralize these three sources of value creation in a strategic management hub to harmonize its planning and decision-making and to develop more powerful marketing activities based on common information from a joint database.
In a second step, the company should organize all other company departments as flexible functions, which help reaching the company’s strategic goals defined by the management hub (second ring in the framework). Different from traditional value creation models like Porter’s Value Chain, our framework does not distinguish between primary (inbound logistics, production, sales,…) and secondary organizational (HR, controlling, finance,…) functions. Instead, the importance of each function is dependent on the business model and the competitive situation of the individual firm. If it is an innovation driven company like Apple, R&D is a central department within the company. For BMW engine development is key. For an online retailer like Amazon, customer service important. These central functions, which contribute significantly to the company’s value creation, should be closely tied to the management hub.
For less central departments, the digitalization allows for more flexible organizational structures today. Not every function needs to be realized in-house. Today, digital information and communication technologies enable the firm to exercise the required amount of control over each function, even if it is not equipped with own employees. Apple does not build a single computer or phone itself. Automakers started using joint car platforms even outside the own group long time ago. Many B2B service provides enter the market right now and offer new outsourcing opportunities for HR, controlling, IT, or other company functions. Flexible workforce for smaller, non-repetitive tasks is available online via Amazon Mechanical Turk or other platforms. Innovative companies should think about how these new options could help them to allocate their resources more efficiently.
The outer ring of the Market-oriented Value Creation Framework consists of the company’s stakeholders (third ring in the framework). These are not only employees, but also suppliers, retailers, or cross-company data and infrastructure providers. These stakeholders or value creation partners are the people that execute the company’s functions depicted in the second ring of the framework. The most important value creation partner for each company is the customer. Successful digital companies try to integrate the customer in many company tasks. Via special platforms, customers help these firms to develop better products, fulfill after-sales service functions, leverage marketing activities, and even develop brand stories and other digital content for the firm. There are many ways how companies can leverage their own potential by including customers the right way. Furthermore, customer integration also helps building a more loyal, more engaged, and more enthusiastic customer base.
Read the full story in the current issue (09/2014) of the Harvard Business Manager, available at many kiosks in Germany until mid-September.