Reversing the Value Chain

Successful companies no longer just add value, they invent it. To invent value, managers must reverse the traditional value-chain thinking (inside-out-models) by which business define themselves in terms of the products they produce. In the traditional model, managers concentrate on being effective and competitive by putting well-understood products on the market. In the new world, however, the business design is outside in.

In an outside-in approach, the strategy revolves around the customer. Why is this crucial? From time to time, conditions suddenly change direction, causing industries to completely rethink the way they do business. Often, a business-condition change is due to new entrant that does not play the game by the understood rules. The challenger reconfigures the offering and suddenly starts running away with the business.