Lecture Notes: Digital Disruption and the Customer Value Chain

Introduction

• Speaker: Talas Tashira
• Background: Former Professor at Harvard Business School, now at University of California
• Focus: Understanding digital disruption, engineering high-growth startups

Common Approach to Digital Disruption

• Observed similarities across various industries (e.g., Facebook, Airbnb)
• Process of digital disruption can be engineered with structured tools and approaches

Key Concepts

The Customer Value Chain

• Definition: Series of activities customers perform to acquire, use, and dispose of goods/services
• Example: Opening a bank account involves researching banks, visiting a branch, applying, etc.

Decoupling

• Definition: Breaking links in the customer value chain, often by digital players
• Example: Uber decoupled ride-sharing by matching drivers with riders efficiently

Types of Decoupling

1. Value Creating Activity Decoupling

   • Example: Twitch allows watching others play games, creating entertainment without direct game play

2. Value Eroding Activity Decoupling

   • Example: Steam allows streaming video games, eliminating the need for physical store visits

3. Value Capturing Activity Decoupling

   • Example: Freemium models like Fortnite, where playing is separate from purchasing

Impact and Investment

• Startups focusing on value-creating decoupling are favored by investors
• Impact on customers: targeted activities performed better than established companies

Process of Decoupling

1. Map the Customer Value Chain

   • Example: PillPack mapped the complex process of medication management

2. Classify Activities

   • Identify as value creating, capturing, or eroding

3. Identify Weak Links

   • Activities customers are dissatisfied with

4. Break the Chain and Steal the Activity

   • Example: PillPack's prescription management system

5. Anticipate and Pre-empt Responses from Incumbents

Case Studies and Examples

• PillPack: Simplified medication management, bought by Amazon
• InsurTech: Simplified comparison of insurance policies

Identifying Opportunities

• Recognize changes in customer behavior or unmet needs
• Look for expensive, time-consuming, or high-effort activities

Application of AI in Decoupling

• AI as a Tool: Can be applied to enhance value by reducing costs, time, or effort

Final Advice

• Start by applying decoupling methods to industries you know well
• Use the book and frameworks to understand and apply concepts effectively
• Experiment and recreate existing business models before venturing into new areas