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September 14, 1998

The New Value Chain

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But when these software products were combined with another technology product-debit cards-home-banking software suddenly became attractive. When you use a debit card, your bank lets you post any debit-card activities-a grocery bill, an ATM withdrawal, a telephone payment-directly to your home-banking software, via the Internet. And it automatically records the transactions in your checking account. Consumers are willing to pay for this real value. These two formerly separate businesses formed a value web-one that innovatively combined container and content.

Outdated Notions
In the 1980s, the conventional wisdom was that businesses should focus on their "core competency." In effect, to figure out what they did best, then to do it as well-and as efficiently-as possible. This was a good notion then, but it's outdated in the digital economy.

After all, it's not enough to be the best at something unless that something offers real value in the marketplace. For instance, why did the Sony Bookman fail? It was a flashy "container" that was colorful, portable, even cool. But it didn't offer more than a book does. Yet, another lower technology product is doing exceedingly well: books on audiotape or, increasingly, on CDs-because they add real value. People can drive their cars and absorb a book's information at the same time.

Lessons For The Digital Age
So what is there to learn from this? First, understand where your product or service fits into the existing value chain-and do a thorough and ruthless evaluation of what value you give to the end customer. If you don't, you have some tough choices to make.

Second, study your opportunities. Do you now offer container or content? What can you do? What sorts of value webs can you join or create to offer customers a truly valuable new combination of container and content?

Finally, consider whether your restructured product or service saves your customers time. Can you help them get their goods to market faster? Can you relieve some of the time pressure they face?

If you and your business can work out solutions for your customers in these areas, you're on your way to succeeding in the new digital economy.

Doug Aldrich, a VP and managing director of the strategic information technology practice at A.T. Kearney, is writing a book about how businesses must adapt to thrive in the new digital economy.

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