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From Value Chain to Value Constellation:

Designing Interactive Strategy

Group 6:

Jia Qiong Wang Tao

Wang LushaSohail Safdar

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The traditional thinking:

Every company occupies a position on a value chain:

- Upstream, suppliers provide inputs;

- the company then adds value to these inputs, before passing them downstream to the next actor to the chain

- the customer

Value is grounded in the assumptions and models of an industrial economy.

Inbound Logistics

Operations

Outbound Logistics

Marketing & Sales

Service

Value

Value

Value

Value

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Strategy of traditional thinking

Is primarily the art of positioning a company in the right place on the value chain:

---the right business ---the right products ---the right market segments ---the right value-adding activities

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Today

Strategy is no longer a matter of positioning a fixed set of activities along a value chain.

Successful companies tend to not just add value, they also reinvent it.

The value creating system itself, within which different economic actors – supplier, business partners, allies, customers – work together to co-produce value.

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The key points from this article are:

Strategy is the way a company defines its business and links together the only two resources that really matter in today’s economy: an organization’s competencies and customers.

The key strategic task is the reconfiguration of roles and relationships among this constellation of actors in order to mobilize the creation of value in new forms and by new players.

The underlying strategic goal is to create an ever-improving fit between competencies and customers.

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Supportive Examples from the article:

IKEA wants its customers to understand their role is not consume value, but to create it.

IKEA itself is not so much a retailer as the central star in a constellation of services, goods, design, management, support, and even entertainment.

Both of the two companies’ core competence is not water or even utilities but rather the financial, social, legal, managerial, and technical engineering that ensures the smooth operation of public infrastructures.

The secret of value creation is building a better and better fit between relationships and knowledge, in other words, the ever-improving fit between competency and consumers.

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The New Media Firm:

Slogan: Broadcast Yourself

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History of

YouTube, like many Internet startups, did not have a viably implemented business model since its foundation in the Feb. of 2005.

Advertisements were launched on the site beginning in March 2006.

In April, 2006, YouTube started using Google AdSense.

In Oct. 2006, YouTube was acquired by Google.

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How achieves success?

Advertising is YouTube's central mechanism for gaining revenue.

YouTube has always been trying to prove to its customers the tremendous popularity of its website among its users.

Appealing people to use its service becomes its primary task.

But how?

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Supplier Viewer

Value

Value

Value

Value

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New Business Models

The value creation is increasingly based onharnessing open source/content,

networking,sharing, peering, and acting globally.

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Associations:

Content accessibility

• On Apple TV• On mobile• On TV• On iPhone and iPod touch

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• Internet celebrities and breaking boundaries• Band and music promotion --- YouTube has also become a means of promoting bands and their music.• Sharing revenue with popular users• YouTube gatherings --- YouTubers periodically hold public gatherings to celebrate the video sharing community.

Social impact:

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Social impact:

The Economy of YouTube YouTube Video Awards --- Video rankings --- YouTube awards the most popular

videos with honors "Invite Your Friends" feature --- build a bigger community using

YouTube

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YouTube tries its best to let its users understand that their role is not a web page content viewer, but a content creator. This is why YouTube is so popular among its users, and also why Google is willing to spend 1.6 billion USD to acquire it.

This is also an obvious evidence that YouTube is adopting the interactive strategy that always makes its user feel a sense of creating value rather than purely acquiring value. On the other hand, YouTube could think out of the traditional media industries boundary, and taking the risk to change the industry curve. Because of doing so, YouTube becomes the pioneer who can drive important changes in its industry and rewrite the rules of competition.

In the example of YouTube, the successful reconfiguration of roles and relationships among the constellation of actors (viewer, content supplier, customer & itself) in order to mobilize the creation of value in new forms and by new players, is just the presentation of an ever-improving fit between its competencies and customer, which is created by YouTube.

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Thank you!

Questions?