The 12 Building Blocks of Value

The 12 Building Blocks of Value: Part 2

As we discussed in Part I of this post, there are infinite ways to create marketing strategy.  If you’re reading this, you’re likely in a position for either creating or approving marketing strategies, and have found that the traditional textbook method for making these has now become shockingly out of date.

After many years of research and practical experience, I’ve found that there are twelve fundamental building blocks for creating products and services that offer true value to all five actors in the value equation (if you missed my previous post on these value actors, here’s my article on The Marketing Mindset which covers all five of them).  Going back to Part I of this article, the first six building blocks of value are Core Values, The Lightning Rod Target Customer (LRTC), The Problem Worth Solving (PWS), The Solution [S] Product, Story, and Communication Channels.  Let’s now move on to the last six to provide the complete picture.

Building Block #7: Distribution Channel
My favorite example of how the distribution channels, or those places where your customers acquire your products and services, are both critically important to marketing strategy and value comes from Nestle Japan and their work on expanding the popularity of Kit Kat chocolate bars.  Nestle first built a powerful story (building block #5) around their realization that the words “Kit Kat” when pronounced in Japanese sounded exactly like the phrase  “Kitto Katsu” which means “to win without failure”.  It is a phrase used to support someone who is facing a challenge, and one that resonates with a Lightning Rod Target Customer (LRTC) segment that is hoping to cheer on such a person.

Every year at the very beginning of Spring, junior and senior high school students in Japan take tests to pass entrance exams for high schools and colleges nationwide.  And friends and parents (here Nestle’s LRTC) cheer them on.  Nestle first positioned Kit Kat as a way to give each of these students a good luck wish to “win without fail”, which turned into a big initial success.

But then, they faced the challenge of distribution (building block #7), in that friends or family members from other towns and cities would also want to send “Kitto Katsu” messages bbut couldn’t easily do so.  The Kit Kat team then created an agreement both with Japan Post and the Japanese government, the result of which was “Kit Kat Mail” that became available in 26,000+ post offices across the country on the exact same day, and continue to be available in these post offices even today.

Here is a link that describes the marketing thinking behind this effort.  Here Nestle’s Kit Kat team found a distribution channel that has incredibly high trust and use in Japan, and one where the competition could not follow.  The results have been staggering, with current estimates that 1 in 5 students sitting in a college entrance exam are carrying a Kit Kat given to them by a caring friend or relative.  By building marketing strategy around this building block, Nestle’s Kit Kat has become deeply embedded within the Japanese culture, providing increasingly more opportunities for innovation and growth.  To confirm then, building block #7 is the distribution channel or channels used to deliver products and services to customers.

Building Block #8:  The Value System
NTT DoCoMo and its competitors within Japan’s mobile industry grabbed global attention at the turn of the 21st century with their walled gardens of mobile content.  I personally experienced the seemingly never-ending procession of overseas executives who came to Japan to experience the advanced mobile data services that had become a regular part of everyday life for tens of millions of Japanese mobile phone subscribers.

While Japan has now adopted a more globally-focused approach to mobile business and innovation, what Japanese mobile industry leaders taught the rest of the world was the power of this larger value system, encapsulated here in building block #8.  Rather than competing with content providers, handset manufacturers, and other key industry players, these executives famously placed customer delight at the heart of their strategies, and were willing to share 91% of mobile content subscription revenues to any content provider capable of delivering such delight, and offered high profits for hardware manufacturers able to deliver valuable solutions.

Similar examples can be found globally, for example Apple iOS versus Google Android, where competition to attract the best and most capable partners and allies has become a vital building block in the creation of value for the entire set of individuals and companies who join together within such systems.

Where and how you create your value system, or that team of partners who help you develop, deliver and amplify the value that you provide is a critical element of marketing strategy and because of this, the value system is our 8th building block of value.

Building Block #9: The Competitive Set
Believe it or not, who you choose as your competitors and how you choose to communicate the value of your solution product to your customers versus other existing solutions is also a vitally important building block of value. The competitive set provides a counter-point to your point, or an anti-hero (maybe even villain) to your hero.  Part of how Mark Benioff could lead Salesforce.com to become Salesforce.com was because of his deep understanding of this competitive set, and how the SaaS model could transform the discussions away from which stand-alone solution to buy, to which model worked best for actual human beings.  It didn’t hurt that he also had a clear and very big anti-hero, or “villian” against which to compete.  At the heart of the Salesforce.com story then, was a clear understanding of this 9th building block of value.

Building Block #10: The Force of Attraction
As Figure 1 below shows, that big, gaping hole in the Lightning Rod Target Customer (Building Block #2) is the Problem Worth Solving (Building Block #3).  And depending on the severity of this problem, the LRTC is exerting some amount of attractive force in an effort to find a solution to this problem.

Figure 1: 11 Building Blocks

Figure 1: 11 Building Blocks

In The Value Plan book, I walk through an elegant and riveting discussion about Coulomb’s Law of electrostatic forces.  If you don’t remember back to your high school chemistry class discussion of Coulomb’s Law (I unfortunately can’t, which means I must have been sleeping), Coulomb found that the force of attraction between two particles  is greatest when the charges between them are opposite (one positive, the other negative) and when they are closer rather than farther away from each other.

Although I won’t spoil the story that I outline in The Value Plan book here, Coulomb’s Law applied to value and marketing strategy would suggest that an effective marketing executive today must work to either (1) minimize the “distance” between your [S] Product and your LRTC, lowering the barriers to trial and experiencing your solution in a way that will enable them to come close enough to purchase, and/or, to (2) match the strength of this clear problem with an equal and opposite offering of a solution.

Building Block #11: The Ecosystem
While the Value System (building block #8) includes that system of partners that you personally organise around the creation, delivery, support, service and end-of-life practices around your products and services, the ecosystem is larger than this.  In essence, the Ecosystem is the overall macroenvironment within which all other  building blocks interact, and includes issues such as industry trends, government policies, laws, regulations, etc.

The ecosystem creates the underlying fabric within which your company and all other companies working to solve the Problem Worth Solving act.  Careful attention to subtle trends, new initiatives, government actions and the many other elements embedded within this ecosystem are vital for every marketing executive to understand, and makes this an underappreciated yet important 11th building block of value.

Building Block #12:  Service Flow
This last building block is the ultimate purpose for which all of its predecessors were listed.  This elusive building block only exists when your LRTC comes into direct relationship with your [S] Product.  As shown in Figure 2 below, once this relationship is formed, this creates a platform upon which you and your company can deliver outstanding service to your customer, and based on their feedback, revise, update and modify both the [S] Product and the service that you attach to it to create increasing levels of value.

Figure 2: The 12th Building Block

Figure 2: The 12th Building Block

In their 2014 book, Service Dominant Logic, Vargo and Lusch make a very strong argument for the fact that a product is simply a platform for service.  This mindset is a critical element of The Value Plan process as well, and is also an idea that I hope to strongly promote in my own work.  It may sound like a very small, subtle point, but recognizing that your products offer you a platform for communication, relationship and ultimately the flow of service is the key to unlocking breakthrough marketing thinking today.

Expanding this mindset to include some or all of the other value actors, this final building block, Service Flow, can also unleash unprecedented value gains for your customers, company, employees, partners, community and nature.

This then brings a close to my discussion of The 12 Building Blocks of Value, but if you’d like to learn about each of these in detail and how these can be organised into a winning marketing strategy (and if you don’t want to purchase my book, The Value Plan, I will continue to post articles and videos to help explain how to do so.  Please also feel free to join my growing mailing list of executives around the world interested in creating compelling, breakthrough products and services here.

As always, I hope that you will post your comments, feedback and ideas here, so that this post can be the start of a discussion, rather than the end.

About The Author

Philip Sugai

Dr. Sugai joined Doshisha Graduate School of Business in 2013 where he teaches Marketing, eMarketing, Marketing Research, and Sustainable and Responsible Marketing to Global MBA program students. Prior to joining the Doshisha University faculty, Dr. Sugai taught at the International University of Japan in Niigata since 2002, where he taught similar courses and served both as Dean and Associate Dean for more than 6 years. He received his Doctoral degree from Waseda University’s Graduate School of Global Information and Telecommunications Studies and his M.B.A. in Marketing and Operations Management from New York University’s Stern School of Business. He has worked as a marketing executive at American Express, Muze, Inc., and Lightningcast, Inc., and as a marketing consultant for Advantage Marketing Information.

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