Breaking the Weak Link in the Value Chain

In the lean way of thinking, the value we deliver to the customer increases in proportion to effort when we connect processes and keep the activities moving along smoothly. Instead, Harvard Business School professor Thales Teixeira writes that “decoupling” is what has helped many startups succeed by disrupting established businesses. In Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption Teixeira gives examples of how these startups target a single element of a business, decoupling it from the existing customer value chain, and do it better. In one sense, the idea of decoupling through IT solutions is the latest iteration in a tradition of technological innovations such as SMED and JIT production that have made it easier for humans to produce and consume one need at a time, rather than in batches. On the other hand, it is a radical departure in how we might address problems across a value chain.

What does uncoupling, as done by disruptive startups, look like in practice? It not a change in what we consume but how we consume it. Familiar examples are hailing and paying for a ride via app vs. calling a human dispatcher and paying a human driver directly, buying insurance for discrete items that you stop or start on-demand, removing transaction through e-commerce instead of physically going to a store, or being able to buy one digital song or one book chapter rather than physical albums and books. So-called disruptive innovation is often a matter cutting out entire steps in the consumption process or delivery model, rebuilding it via IT, and reinserting it between the customer and the incumbent product or service provider.

The process Teixeira describes for arriving at a disruptive innovation through decoupling is a familiar one. He suggests we first map out the customer value chain, look all of the steps involved in the customer’s consumption activity. Next, he explains that we categorize the customer activities into value creating, value charging and value eroding activities. Whether we are observing production or consumption, this is current state value stream mapping.

For envisioning the future state, Teixeira advises us to find the weak link, an activity in the value chain that consumers are dissatisfied with. So far so good, but this is where his approach diverges from lean thinking. Instead of fixing what is broken about the process, and mending the weak link in the consumption chain, his approach is to break it. The weak link in an incumbent’s value chain becomes the opportunity to steal away customers. By using new business models and technologies to invade an existing market, the startup business has the opportunity to gain customers by deliver a comparable experience at reduced cost, effort or time. The lean bias is to examine the problem, understand the context and causes, experiment to remove the causes and build a better process. Decoupling is IT-driven, seemingly less concerned with causes and context and more interested solution-oriented thinking. Which does a better job to develop our ability to think scientifically, look for causes of customer dissatisfaction and solve problems with empathy?

Successful businesses and business models are often committed more to maintaining the bureaucracy than disrupting themselves for the sake of customers. Even when willing, many are unable to reinvent their value chains to be more customer centric. They are at risk of disruption from smaller, nimbler companies that have nothing to lose and everything to gain. When disruption delivers improved customer experience, that is a good thing. On the other hand, massive disruption to existing business models and employment has real human and social costs. These costs are not captured on these value chain maps, and taxpayers bear much of the burden. There are also unintended consequences such as the sale of compiling and profiling of personal data, foreign political influence via social media, and existential threats to fundamental industries such as retail and news print. Disruption will no doubt continue to deliver positive innovations for society. But it is yet to be seen whether we can “decouple and disrupt” our way out of practical problems, or even from the very problems that disruption creates.

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