In the last post we covered a basic value chain as a means for identifying everyone involved in the process of bringing a product to market. The (not so epic) cliff-hanger was the internet changed something. That thing was distribution itself. The internet disrupted distribution, created a new type of value chain, and a new business model to link it together.
Alex Moazed’s book “Modern Monopolies” discusses what we now know as “platform” businesses. A platform business takes the supplier, distributor, consumer value chain and turns it into a creator, curator, consumer value chain. Distributor linked chains are linear. To the original necklace analogy, a product gets assembled piece by piece until it is presented and delivered. Imagine the jewelry counter at an ‘80s department store where your selection is limited by what’s in the glass case. A curator linked chain is non-linear. It doesn’t require a single supply chain, but a platform where multiple suppliers and consumers can connect with some form of guided curation, be it as broad as a Google search or as narrow as a trusted adviser. Imagine a teenager checking Instagram pictures for necklace styles/brands and then searching for them online. The internet is what enabled the curator phenomena by driving the costs of distribution into the floor.
If distributors earn profits by controlling supply costs, curators earn profits by creating a connection.
Now we’re edging closer to being able to judge intent. If the value chain is the body, then marketing is the soul. O’Reilly’s “create more value than you capture” can be thought of as one part “doing” and another part “saying.” Doing is pure Coase – it’s the transaction itself. Saying is pure marketing, because it’s the message that provides the desire to get the activity done. Curation enables a new type of “saying” with notable advantages to distribution.
Enter Scott Galloway. Galloway explains that companies have to appeal to our basic human biology. For this analysis we’ll focus on our brains, hearts, and reproductive organs. If you’re not familiar, the crux of his argument can be boiled down to this question: what basic need does the product fill? What biological function is being satisfied? Cheapest price? That’s an appeal to rationality, aka using your brain (example: buying pop tarts at Walmart). Need to feel good about yourself? That’s an appeal to sympathy/empathy, aka using your heart (example: liking your sister’s picture on Facebook). Need to look good to the opposite sex? That’s an appeal to your reproductive organs (example: driving a McLaren with the doors of a billionaire).
Most of the time, distributors compete on rational choices and price. Curators compete on appeals to emotional and reproductive intelligence. While there are successful mixed approaches, you need to know where you are in which type of value chain, and who else is involved before you craft your marketing message. It all comes back to intent and awareness.
Next, we’ll explore what approaches will and won’t work, and the messiness of the mixed value chains many of us find ourselves in professionally. Then we’ll be ready to start making some judgements.