[Editor’s note: This installment is part of an ongoing series. You can start at the beginning in order to follow its logical sequence.]
Configuring a value chain is remarkably similar to what an individual does with a smartphone, tablet or personal computer.
Only difference is, it’s done at the enterprise level and it aims to leverage customer-centric marketing in a manner that satisfies the outside-in objective.
Modular design strategically combines specialization with systemization.
At the module or input level, there’s a reliance on specialization.
For example, an enterprise requires specialized skills (people), activities, processes, technologies and facilities at different points along the value chain.
At the system or framework level, marketing strategy and business culture dictate how these specialized inputs get interfaced or plugged together, with the earnest intent of fostering a synergy among them.
Some inputs might be loosely coupled or perhaps afforded a significant amount of wiggle room, while others may be more exacting or require greater discipline.
The larger architecture or framework of the value chain will change only to the extent that the individual modules or inputs get tweaked or replaced, whether to make them more robust, more compliant, or fine-tune their response to shifting market conditions and strategy adjustments.
This kind of flexibility broadens the horizon for creating and sustaining customer value.
Modular Thinking Example
As you read it, regard the store floor space as the working architecture or framework, and the product displays as modular pieces.
Also note how this effort involves the distribution channels component of the value chain for the sellers upstream of the store.
‘Everything in a grocery store is pre-designed to take as much money from you as possible. The bread and milk will be in locations where you have to walk through or around the entire store to get both. The more expensive brands are at eye level, they pay for this privilege. Cereal box characters look “down” right at children which connects at a psychological level to make them want more cereal. Checkout lines have candy bars at child reaching level intentionally. New floor designs are even consulting casinos to no longer have rows and be more maze-like to keep you in the store longer. Flyers mailed to you with your name and address are [sic] tailored based on your points card buying patterns. Good smells are intentionally pumped in to make you hungry. The list goes on.’
For instance, beverage manufacturers modify the packaging of a standardized product to accommodate different size and price preferences. There’s a single can, six packs, 12 packs, 24 packs, different sized bottles and vending options.
This notably primitive approach to modularity — as compared to others we’ve observed — has been aptly categorized as Cosmetic Customization.
In addition to serving various consumer desires, a big part of its utility value rests with the effect it has on product exposure as companies vie to maximize their allotment of display space within the layout of the store — hence, the notion of modularity within modularity.
Notice how this attempt at strategic alignment involves the product attributes component, the distribution channels component and the market characteristics component of the value chain.
Dueling Value Chains
Also note how the overall push for mass customization, along with the help of modular thinking, ratchets up the overall competitive fervor to build a better value chain.
As you may recall, competition is a noteworthy external force in the generic value chain for marketing diagram.