Strategies in a Digital Economy

Changes in Strategic Assumptions for Customers

The shift from treating customers as a passive mass market to treating them as dynamic, connected networks that communicate with businesses and each other, influence brands, and participate in creating value.

Mass → Network | Broadcast → Two-way | Firm → Customer | Persuade → Inspire | One-way → Reciprocal | Firm scale → Customer value

The Marketing Funnel

A model showing the progression of a potential customer from Awareness → Consideration → Preference → Action → Loyalty and ultimately Advocacy.

Consumer Networks Behavior and impact in the Marketing Funnel

Customer network behaviors are the ways customers access, engage, customize, connect, and collaborate through digital networks. These behaviors influence customers at every stage of the marketing funnel and can turn loyal customers into advocates who bring new customers into the funnel.

Customer Strategies

Five strategies businesses use to create value with networked customers: Access, Engage, Customize, Connect, and Collaborate.

Organizational Challenges of Customer Networks

The The three major challenges are enabling the internal network, adding new skills and replacing old habits, and bridging organizational silos.

Changes in Strategic Assumptions for Competition

Competition is no longer limited to traditional industry rivals. Digital businesses may compete with companies from other industries while also cooperating with competitors, and competitive assets increasingly come from networks of partners.

Platform Business Model

A business model where a company creates value by connecting different participants through a platform, often allowing partners or other businesses to create much of the value.

Platforms and Types of platforms

A business that creates value by facilitating direct interactions between two or more distinct types of customers. Four types: Exchange, Transaction System, Ad-Supported Media, and Hardware/Software Standard.

Competitive Benefits of Platforms

Platforms create competitive advantage through network effects, economic efficiency, lower transaction costs, and large networks of participants, which increase the value and usefulness of the platform.

Changes in Strategic Assumptions for Data

Data has shifted from being an expensive, siloed tool for optimizing operations to being a continuously generated, interconnected strategic asset used to create value.

What is Experimentation

A process of rapidly testing ideas, validating assumptions with real customer/market feedback, and iterating based on what is learned.

Two types of experiments

Divergent = exploratory learning → generates and develops new ideas.

Convergent = confirmatory learning → verifies, refines, and optimizes those ideas.

Changes in Strategic Assumptions for Value

Businesses must move from maintaining a fixed value proposition to continuously evolving and adapting their value proposition as customer needs, technology, and competitive opportunities change.

The model “Three Routes Out of a Shrinking Market”

A model showing three ways to escape a declining market: (1) New Customers with the Same Value, (2) Same Customers with New Value, and (3) New Customers with New Value. The model helps businesses identify new sources of growth when their existing product-market position is declining.

Five Concepts of Market Value

1. Product, 2. Customer, 3. Use Case, 4. Job to Be Done, and 5. Value Proposition. They represent different ways of understanding what a business offers and the value it provides to customers.

The Organizational Challenges of Adapting The Value Proposition

Short-term leadership, allocating talent and financial resources to new opportunities, and avoiding organizational myopia. These challenges can prevent companies from adapting their value proposition to changing customer needs and new technologies.

Definition of Disruption

The result of a clash between asymmetric business models, where a challenger creates a dramatically greater value proposition for customers through differences in its value proposition and/or value network.

Disruption = Different business model + Greater customer value.

Schumpeter’s Theory

Capitalism progresses through cycles of innovation and creative destruction, where new industries are created while older industries and business models are destroyed or replaced.

Christensen’s Theory

Disruption begins when a challenger enters a new market with a cheaper or more accessible but initially inferior product, improves over time, eventually becomes good enough for mainstream customers, and causes customers to leave the incumbent.