Sep 032011


My friend Annie Shum has drawn my attention to prosumers and their effect on the value chain. According to Annie, three things are happening in an interlinked manner:

Consider, for example, a keep-the-memories photo storing, sharing, processing and printing service like Snapfish. The company must have hundreds of millions of customers, many of which are obviously creative. A creative customer who prepares a photo album of her son’s wedding, might design a template she will use to produce the album. This template could be posted and sold on the Snapfish web site for the benefit of other Snapfish customers. Some of these customers might again cross the line between consumer and producer, enhancing the original template and offering it as yet another template for sale. These templates become part, possibly quite a significant part, of Snapfish’s whole product.

The implications in terms of both Agile methods and customer satisfaction are far reaching. Run of the mill prosumers do not typically have the opportunity to directly put stories in the backlog of a company like Snapfish. If the aggregate output of these prosumers constitutes a significant part of the whole product, a challenging alignment problem might arise between the prosumers and the company. If the prosumers happen to code to Snapfish APIs (instead of or in addition to “just” developing a template), aligning the company with its prosumers could necessitate combining Agile software methods with open source techniques [1].

More important, perhaps, is the challenge of ensuring the quality of the output (and concomitant customer satisfaction) through the composite value chain. The composite value chain poses a particularly tricky challenge with respect to the output for the very same reasons pointed out by Deming with respect to the “internal value chain” of the company:

… interactions (i.e., feedback) between the elements of a system can result in internal restrictions that force the system to behave as a single organism that automatically seeks a steady state. It is this steady state that determines the output of the system rather than the individual elements. Thus it is the structure of the organization rather than the employees, alone, which holds the key to improving the quality of output.

Moreover, composite value chains are susceptible to echo chamber effects of very particular nature. Consider the {JetBlue –> Orbitz –> Me as a traveller} value chain described in my recent post It’s Morning in San Francisco. The JetBlue rep who told me I was not their customer was correct in the technical sense – the transaction by which I purchased my flight tickets was indeed between Orbitz and me. However, the rep, or more probably the superiors of his superiors, completely failed to realize that I am a de facto prosumer. Like it or not, my experience, and my blogging and twitting about it, are part of JetBlue’s whole product.

The approach to ensuring quality of the output adopted by companies such as Amazon, is to weed out prosumers who do not perform satisfactorily. It is not clear at the time of writing this post whether such approach could be applied broadly [2]. The recent listing debacle between Expedia and American Airlines is indicative of how difficult such approach might be.

The irony, of course, is that precious few companies in this solar system are as good as JetBlue is in creating outstanding user experience. As the episode mentioned in my other post indicates, even JetBlue’s exceptionally high levels of operational excellence and customer pampering might not suffice in the face of the transformed value chain.


[1] See  Hassinger, Sebastian and Gat, Israel, Open Source Software and Agile Software Development: Parallels and Lessons for Enterprise IT, Cutter Executive Update Vol. 10, No. 20, 2009.

[2] It should be pointed out that third party sellers in the Amazon eco-system do not own the customer accounts – their customers are in fact Amazon’s customers.



Israel Gat

Israel Gat served as Cutter Fellow and the Director of the Agile Product Management & Software Engineering Excellence practice from 2008 until 2015.


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