No matter how many times you see the numbers, they are still mind bending. In today’s digitally paced landscape, 80% of the B2B buying process occurs without any human interaction. There is a lot to unpack in that statement. What are buyers doing if they are not interacting with your sales team (or anyone else for that matter)? Why is this happening? And what can you do about it?
Thales Teixeira has spent a considerable amount time dissecting the ins and outs of this equation. As a former Lumry Family Associate Professor at Harvard Business School, he has consulted, advised or educated top executives of more than 15 of the Fortune 100 companies, oftentimes digging deeply into what makes today’s buyers and brands tick. Today, as co-founder of the digital disruption consultancy Decoupling.co., he continues to take his research further into the enthralling market dynamic.
The easy answer is that buyers go online and research potential solutions to specific problems. They pore over reviews of what company is selling what and why. They pore over the backgrounds of the people selling the products or services.
But there is more to it than that. What Teixeira’s research has uncovered about today’s ever-evolving, oft disrupted business landscape and sales process is as interesting as it is groundbreaking. The process is known as decoupling, by which a disruptor breaks the links between the customer’s value chain—the sequence of activities that customers go through in order to procure and use goods and services. “Decouplers steal one or a few activities to execute themselves, as opposed to stealing the customer,” he says.
Take subscription-based beauty startup, Birchbox, which did not technically go head-to-head with the brand leader, Sephora. Instead of going to the store and trying a beauty product and buying it, customers are conducting a trial run of their selections with Birchbox. The bottom line: Birchbox is in essence pilfering customer activity from Sephora, not the entire customer.
Decoupling is the third major wave of business model disruption, after unbundling,
which happened in the late 1990s, and disintermediation, which happened in the early 2000s.
Teixeira is quick to point out that what Birchbox (and others like it) is doing comes from a place of a customer’s need for convenience. Birchbox is not disrupting Sephora, the consumer is. It is the same with insurance. Instead of going to Liberty Mutual, choosing an insurance plan, signing up, paying the premium, and then canceling it later, consumers are going for on-demand insurance like Trov.
In his recent book, “Unlocking the Customer Value Chain,” Teixeira shows that across a variety of seemingly unrelated industries like retail, fashion, transportation, media, telecom and financial services, to name a few, the decoupling process is causing disruption. The list of decouplers is a who’s who of brands, including Twitch, PillPack, Uber, Airbnb, Dollar Shave Club, Klarna, Pandora, Mint.com, Rebag and Turo.
“The process does not necessarily involve very innovative technologies, counter to what many are saying is the reason for disruption,” Teixeira says. “It involves breaking traditional business models. Think of it as using LEGO building blocks to reconfigure the pieces. To be precise, it is the changing needs and wants of customers, and consequent changes of behavior in everyday life that is bringing down 100-year-old behemoths like GE, GM, Coca-Cola, Hilton, Sears, and many others.”
Decoupling and you
Decoupling is the third major wave of business model disruption, after unbundling, which happened in the late 1990s, and disintermediation, which happened in the early 2000s.
In the second part of Teixeira’s book, he shows how companies should respond to this new wave of disruption. The defense is not about fighting new competitors and/or adopting new technologies. He says it lies in better understanding and catering to your customers with associated changes to business models. As it turns out, this, in practice, is hard to do for a variety of reasons.
Take Best Buy. Customer centricity is what helped the brand successfully respond to Amazon’s attack. Today, the retailer is doing quite well, even partnering with its one-time disruptor. But Best Buy is an anomaly of sorts. As Teixeira admits, there are not many examples of incumbents successfully responding to disruption in their industries.
“The reason is that traditional organizations are too focused on competitors and technology to see what is really disrupting their businesses,” Teixeira says. “As an incumbent business, you can’t innovate yourself out of a digital disruption threat. Product or technology innovation by itself is not the answer. Customer-centric innovation is the answer.”
“Decoupling allows customers to get the best product or service in each activity,
whatever ‘best’ might mean for each one.”
— Thales Teixeira, Decoupling.co.
At its core, decoupling is a form of specialization. With the rise in specialization in products in both consumer segments and countries, decoupling has become a specialization in the customer value chain (CVC). Essentially, this means that customers no longer want all activities they engage in to be done by the same large company. Teixeira says that they prefer to “hire” different companies for different activities in the process.
For example, in travel, people visit Trip Advisor to learn about hotel and leisure options because the site is viewed as unbiased. Upon selection, people book activities and flights with Expedia because it is judged to be comprehensive and low cost. Then, they fly with Delta, stay at an Airbnb and get around town in an Uber.
“Decoupling allows customers to get the best product or service in each activity, whatever ‘best’ might mean for each one,” Teixeira says. “Today, my research shows that people are interested in reducing the monetary, time, and effort costs involved in procuring goods and services. Decoupling allows for these cost reductions to be achieved by consumers at each stage of their purchase and consumption process.”
Recoupling and you
Faced with a disruptive startup peeling away pieces of the consumer purchasing process, most brands end up trying to prevent this by gluing back what the startup is breaking apart. Teixeira calls this “recoupling.” When Tivo invented the DVR to enable TV viewers to decouple watching ads from watching shows, TV networks initially tried lawsuits to ban the device. When mobile communication applications like Skype and WhatApp allowed users to decouple cell phone connectivity from communication exclusively through cellular connections, Telefonica and other European telecoms tried to lobby their governments to block them.
Across a variety of industries, incumbent companies that have been decoupled by tech startups more often than not initially respond by attempting to block the attacker. What they do not realize is that, by doing so, they are also inadvertently going against the wishes of their own customers.
“Consumers are the ones who want to skip ads, consolidate financial statements across accounts of different banks and communicate with social apps,” Teixeira says. “In the long term, no strategy that goes against the natural desires of its own customers (monopolies notwithstanding) can be sustainable.”
To be sustainable, brands today need to evolve their business models. Doing so enables them to coexist in a world where customer behavior is forever changing.
So, the question becomes if attempting to recouple what has been decoupled is not the right path to take, then what is? Teixeira says the answer is simple: If your customers what to decouple you, let them. If a large company is offering to fulfill multiple activities in the customer’s value chain and a large portion of them want to let another company, a disruptive startup, fulfill one or more of these activities, let the scenario play out.
“This is the only truly customer-centric way to deal with disruption,” Teixeira says. “Second, the incumbents should only offer to their customers the activities they wish to be delivered. This I have termed ‘preemptive decoupling.'”
Finally, and what Teixeira says is the most challenging part, some companies may not be viable businesses if they preemptively decouple and allow consumers to do what they want. “If people want to come to your store and shop around, but buy elsewhere online, let them. The solution is to rebalance the business model. Rebalancing requires capturing some value at each activity or CVC stage in which the company also creates value for its customers.”
To be sustainable, brands today need to evolve their business models. Doing so enables them to coexist in a world where customer behavior is forever changing.
