Consumer Obsession: Vertically Integrating Your Company Around Unmet Consumer Needs

Direct-to-consumer (DTC) brands like Glossier are capturing a lot of attention as they march steadily from online into flagship retail. Their explosive success has spurred a mad rush of other brands mimicking this strategy by opening up their own DTC retail channels. But for Next-Generation companies, DTC isn’t simply a channel; it’s an organizational strategy. In our view, Next-Gen companies tend to be vertically integrated around unmet consumer needs rather than around a supply chain.

Next-Gen companies build new capability inward from the consumer, rather than outward from their own assets.

Tesla is the prime example of this action. Its mission is to “accelerate the transition to sustainable energy.” Their master plan lays out the sequencing very clearly: Start with a car that everyone wants to drive, but doesn’t yet exist, and build inward from that. This is a dramatically different approach than starting with a supply of grain, metal, oil, adhesive, etc., and building outward.

It also leads to very different organizational structures, which we’re starting to see gain more popularity and awareness. This kind of structure goes one step further than customer-centricity. Instead, it’s oriented around jobs to be done — building (or rebuilding) company operations around serving large, unmet needs.

Designed for innovation and constant progress, the jobs-to-be-done orientation promises these same benefits organization-wide.

Rather than using capacity or capabilities as a fixed point, this model places unmet customer need as its focus.

This ensures that the company never loses connection with its consumers and evolves constantly to stay with them.

For legacy companies, this is a radical restructuring that's almost certainly impractical to attempt. But it’s also why simply developing a DTC channel won’t be effective. For example, Glossier was built around the realization that beauty is too homogenous, and that standards are set by the fashion elite and pushed downward. They built the company to democratize and celebrate individual ideas of beauty. Glossier’s new flagship is simply one more place where this highly personalized approach to beauty can be accessed.

For legacy brands, by contrast, flagship stores are often places where technology and gimmicks try to graft personalization or other consumer-driven ideas onto an impersonal mass brand. Successfully introducing new approaches isn't impossible for existing companies, however; brands can pursue an emotional DTC strategy first, giving them the time to re-orient their operations enough to deliver substantive functional and transactional DTC approaches later.

Like Category Creation, we believe this organizational orientation is one of the factors that separate Next-Gen companies from legacy companies. It’s one more reason why legacy companies find Next-Gens so difficult to compete against.