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Alibaba didn’t immediately pursue firm-side synergies. Its real win lay in achieving customer-side synergies.
By growing outward from its original business, aggregating adjacent CVC activities, Alibaba created multiple synergies for the shopper.
Alibaba is hardly the only company to grow opportunistically across the CVC.
Instead, Airbnb in 2016 launched a program called Trips, offering Airbnb renters a service to upgrade their stay and book local activities, from cooking classes in Florence to violin-making workshops in Paris.
The program expanded to include restaurant bookings, with flight and rental car bookings planned for the future.
Put differently, Airbnb was also breaking the rules of the traditional adjacency approach. It was following the money across the customer travel CVC, covering the activities of planning and booking, finding a room, and booking local excursions.
Airbnb had no special competence in handling restaurant reservations, and the space was highly competitive, dominated by apps such as OpenTable.
To compensate, Airbnb partnered with a specialist service pr...
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The beauty of leveraging customer-side synergies is that it reduces pressure on companies to try to find new customers for their new offerings.
As long as the service quality and prices remain roughly comparable, Airbnb becomes a more attractive alternative if it can offer an array of adjacent services to its current customers.
What makes the most sense is to organize your businesses around customers and the value you provide them.
Apple has attracted loyal customers across categories by deeply integrating its hardware, software, online, and offline services such as digital content, data cloud, and retail experiences.
You don’t need to be best-in-class in everything you do, nor should you initially aspire to that.
Just ensure that your original offering, which won over your customers in the first place, remains better than the rest. Finally, growth via coupling the customer value chain provides a vision for the company’s future direction,
“simplicity breeds ...
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In evaluating where to grow next, think methodically about each activity in the customer’s value chain.
determine possible growth directions, and to identify and bridge the possible skills gap in order to successfully couple
à la carte
In a sense, Netflix decoupled Comcast from the activity of viewing video content, leaving it with only the activity of providing internet connectivity
Shouldn’t a water park compensate the water company for the water its customers use? Shouldn’t a building pay the electric company for energy it uses to air-condition tenants’ units?
Neither would pay the other anything.3 Comcast’s attempt to arrest its growth slide by taking on Netflix had failed.
Comcast is hardly the first large incumbent to see its business stop growing and begin moving backward.
the list goes on and on.
precipitous
Sudden
In 87 percent of these cases, the authors contend, the growth stall didn’t stem from external factors beyond executives’ control.
Rather, the top three reasons for growth stalls included shifting customer preferences, lack of innovation, and failure to fully exploit the current business’ growth opportunities.
by the late 2000s, the internet was becoming the primary way to communicate and be entertained.
One corollary of decoupling theory is that companies will tend to stall not when they stop innovating per se but when they abandon the laser focus on the customer needs that fueled their early growth to begin with. In modern business parlance, stallers lose their customer-centricity.
Customer-centricity means putting a central focus on the customer when making important decisions, rather than focusing on competitors, business partners, employees, leaders, and the company itself. It’s a matter of prioritization and purpose, not blind obedience.
decoupling represents a form of specialization based not on customer type but on the activities of the customer value chain.
Blockbuster once reigned as the world’s largest video rental chain, with sixty thousand employees and nine thousand stores. But in 2003, after five years of nearly 10 percent annual growth under CEO John Antioco, its business came to a shrieking halt, and by 2010, Blockbuster had filed for bankruptcy.
This competing business model eliminated a value-eroding activity: going to a store to rent a movie, TV show, or videogame.
Antioco never abandoned Blockbuster’s model of requiring its own consumers to visit their stores to pick up and return physical media (first videocassettes and then DVDs). Why didn’t he spot changes in customers and adapt?
Traditional retailers perceive stores as drivers of their revenues. Add more stores, and see revenues grow.
Banks perceive their branches in local neighborhoods as drivers of revenues.
In general, incumbents regard revenue growth as a direct consequence of growth in their most valuable assets.
Because they lack significant resources to attract customers, disruptors approach their business with a different mindset.
For disruptors, revenue growth originates in one place, and one place only: customer acquisition.
Regardless of the means to get those resources, startups milk resources to get customers, instead of milking the customers. Their mindset isn’t resource-centric but truly customer-centric.
All major business decisions should enhance your ability to increase the number of customers and leverage them.
In 2011, Reid Hastings
Netflix’s decision reflects a deep and abiding customer-centricity on the part of Hastings and other company executives.
Netflix followed the evolving needs of its customers.
Comcast didn’t, opting to preserve its resources, and it paid dearly for that mistake.
Incumbents and disrupters often possess fundamentally different views of the same situation. Whereas Comcast saw the depletion of its resource, Netflix saw the upselling of customers.
If incumbents’ embrace of a resource-centric perspective constitutes the underlying culprit behind growth stalls, companies can’t avoid or mitigate these stalls simply by innovating more,
executives at incumbents must set aside their attachment to resources and redirect their company’s primary focus back to customers.
sign off on
Approve officially
“licking the cookie.”
Decision-makers didn’t want to invest time, money, and reputation on highly uncertain and unproven ideas when deploying resources toward the big moneymakers afforded a more certain payback.
