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July 24, 2023

How To Create a Value Chain Ecosystem

In today's highly competitive business landscape, companies are constantly looking for ways to enhance their capabilities and maintain their edge. With so many competitors in the market, how can a company stand out and reduce customer churn? In this article, Brian Matthews, CEO at ITEL, discusses his value chain ecosystem approach that can drive business stability and growth. 

“If you can increase what you’re doing with your customer and reduce friction for them, it will make you more valuable, and it will also support your exit.” – Brian Matthews

The Value Chain Ecosystem Approach

Brian’s value chain ecosystem approach in M&A is about making the company more valuable to customers by increasing its capabilities through partnerships or acquisitions. This can be done by analyzing the customer's needs with the goal of reducing friction in their daily operations. The goal is to drive customer retention and increase wallet share.

Benefits of the Value Chain Ecosystem Approach

Aside from customer retention, one of the biggest benefits of the value chain system approach is opening up the total addressable market of the business. It allows the company to explore other potential markets and channels, increasing its growth potential. 

Also, by understanding the market and customer’s needs, it gives the company a better understanding of its road map and acquisition strategy. It helps identify the perfect target company to deliver maximum value to the customers.

Lastly, a growing company will always have a stronger position in the industry, leading to a better exit. In Brian’s experience, they bought five companies in 24 months and were able to double their size, leading to a very lucrative exit.  

Creating the Value Chain Ecosystem Approach

1. Map Out The Value Chain

Understand each step of the customer’s value chain ecosystem. Identify the platforms that they are using, what their workflow is, and what their problems are. This can be achieved by asking the customers and talking to bankers who understand the industry very well. 

2. Identify Water Cooler Opportunities

Go to places where customers and partners come together to talk and learn about what's happening in the industry. This can include LinkedIn groups, conferences, customer advisory councils, and thought leaders' blogs or newsletters.

3. Document the Value Chain

Write down each step of the ecosystem, together with the name or logo of the respective companies that could possibly be a target for partnership or acquisition. 

4. Reach out to Target Companies
Talk to competitors or companies in adjacent spaces. Reach out and ask how both companies can work together to reduce friction and accelerate value for customers.

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