Value Chain Analysis

To conclude the internal analysis, there is finally made a value chain analysis which aims to understand how the company achieves the growth and competitive strategies that are revealed in the previous two Chapters. In order to structure the value chain analysis, the analysis is based on Porters Value Chain. Porters value chain analysis methodology was published in 1985 in his classic book ‘’Competitive Advantage’’ (Mind Tools, 2021). The original analysis was targeted towards bigger production companies. As a startup working within the software industry in Denmark, the model is somewhat outdated and needs some tweaks in order to compare to the modern world. Following the McKinsey 7-S Framework and the following 12-Step Framework, which both analysis parts of the value chain, in the following analysis the purpose is to fill the gaps that has not been analysed as of yet, to create a complete view of the company. For the same reason, the following Value Chain analysis aims to be shorter but also more precise than a classic value chain analysis. For the adapted Value Chain analysis below, the primary activities are the main factors which has been updated to fit the technological software era befitting of tech startups.

72 of 87 6.4.5.1 Primary activities

The primary activities are the products and services that MyLoyal provides, as well as the value the company creates in relation to its customers.

Product Design

The first stage of the value chain for MyLoyal is the product design phase. Since the founding of the company in 2016, the product design phase has been the first stage of creating value for the customers. This is similar to sourcing the materials within inbound logistics from the original Porters Value Chain analysis. With the introduction of MyLoyal 1.0 it was clear that the first product design did not fit the customer or end-users needs, but the feedback and knowledge that was earned based on the experience is the main reason as to where MyLoyal is today, following the strategic change towards MyLoyal 2.0 with the creation of loyalty apps. The focus on product design as the first step in the value chain, is a strength for MyLoyal, as it enables the company to become more flexible to changes in the market and enables them to adapt faster to new user needs.

Marketing

The marketing of MyLoyal is today quite limited in scale. As the company is working within B2B and the optimal sales target is senior level employees or company owners, MyLoyal has decided to focus less within this space, as it is a very difficult group to target through advertising. As of 2021, MyLoyal has rebranded the company and has introduced a new website, which is a significant step towards creating a higher brand value associated to the company, and helps create authenticity when approaching bigger restaurant and retail chains. MyLoyal does a very limited amount of paid advertising at present, and the

advertising that is executed is mainly targeted through LinkedIn ads and through paid SEO optimization. The limited amount of resources allocated to marketing is based on the difficulties of creating high converting ads in the space that the company operates, and due to financial limitations. This very limited amount of resources spent on marketing is a weakness for the company, as the value of each new customer is very high, with a up-front payment of the loyalty apps of an average of 125.000 DKK, it is not required to have a very high conversion rate for the adds, for them to be profitable.

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The sales process is for many startups a big challenge. How to breach the market, and create brand-awareness can be a challenge, and MyLoyal is no exception to this. As explained in Chapter 6.4.1 The 7-S framework, the sales process is currently very

simplistic. The sales is based on networking through the team members of the company, or through cold canvas. Cold canvas is a difficult but necessary sales strategy for MyLoyal, as with limited financial resources, it is one of the only ways of reaching potential new customers. Cold canvas sales through LinkedIn works decently well for MyLoyal, as it is possible to directly reach out to decision makers within the potential new customer companies. The limitation of cold canvas sales is the amount of time that is needed in order for it to succeed. Furthermore the MyLoyal sales pipeline is very long. From the first point of contact with a new customer, it can take anywhere from 2 to 6 months to get a contract, and in few cases even longer. Then once the contract is made, the app

development takes between 2 to 6 more months. The cold canvas sales is today managed by the company CEO, Peter Bodskov, who reaches out to new customers through

LinkedIn. Once the meetings are booked, the author, Mathias L. Heide, will participate in all high potential sales meetings. The sales process from the point of contact is also divided into several meetings leading up to the contract, as there are several details and negotiations that must be completed prior to a signature. Within this process both MyLoyal CTO, Tadas, and the company CDO & CMO, Jurate, often joins some of the meetings, with the purpose of bringing their knowledge on the technical requirements of the loyalty apps we offer, and to provide marketing and data knowledge on the solution and as to how best to launch the app. The current sales setup is very limited, and the sales are coming in slowly, which is a weakness for MyLoyal. On the other side, the product design and back end development team inside the company is currently not capable to manage more sales than are currently created. This is also an indicator of where the company is in its history, as it is moving towards a size where there needs to be made strategic decisions as to what to do from here in order to continuously grow.

App Development

The app development process is explained in depth in The 12-Step framework, so the following section will be brief. There are some challenges within the app development

74 of 87 process with communication between app developers and backend developers. The

challenges as previously mentioned are based in the organizational structure of the company, with the team working both from Denmark and Lithuania.

Most of MyLoyal’s developers has zero contact with the customers, and many of the MyLoyal apps are only in Danish, which creates a language barrier in these cases. This MyLoyal tries to negate through writing clear business requirements within Asana, upon defining all features, where everyone must agree on what is written, in order to make sure that the team is aligned. This is a place of focus, where the company spends generally a lot of time in order to reduce communication errors.

Support

Once the loyalty apps are developed and live within App Store and Google Play Store, there is the need for end-user and still customer support. The support is structured in a simple hierarchy. The customer is the first line of support for the end-users. This means that within the apps, if a user has questions regarding the platform or are experiencing challenges, the users will reach out to MyLoyal customers, who has the responsibility of answering them. In the cases where the customer does not know how to answer the end-users question, the customer forwards the question to MyLoyal’s support system. MyLoyal support is divided into three hierarchies. The first line of support is the company product designer, who attempts to answer standard questions. If the product designer does not know the answer, the question is moved to the next line, which is one of the internal back end developers will take a look at the question. If the back end developer does still not know how to answer the question, then it moves to MyLoyal’s CTO, Tadas, who finds an answer and responds to the customer, who then responds to the end-user. With the current scale of MyLoyal, this structure is possible, as the amount of support requests are manageable. But within the near foreseeable future, this will become a significant

weakness, as the company can’t manage a higher load of requests.

6.4.5.2 Support activities

Support activities are the internal functions in the company, which mainly exists for supporting the primary activities. This is done with the aim of optimizing the processes

75 of 87 within the company, moving towards creating better products and services. In Porters Value Chain analysis we find four supporting activities, namely: Infrastructure, Human Resources, Procurement, and finally Technology Development. The first three has been analysed throughout the internal analysis up until this point, so for this analysis we only need to look at Technology Development.

Technology Development

Product and technology development includes, firstly, research and development activities aimed at developing new products. The company should have an appropriate mix of products that are well established in the market, as well as new and exciting products that has been or is about to be presented to the customers. Secondly, product and technology development is about ensuring that the company is at the forefront of technological

development, so that the company has a cutting edge development process. MyLoyal aims to have a strong technological development, through only partnering up with best-in-class suppliers. All customer data is stored within IBM Cloud, which has a premium price tag but also the highest security standards, which is a requirement when working with bigger retail and restaurant chains. For the Data Project that MyLoyal is building, it is built upon the infrastructure on Count.ly, here MyLoyal has full ownership of all in-app user data, which is a significant strength. When reflecting upon GDPR, MyLoyal is the data processor of the apps, and the customers are data controllers, meaning that the users are owned by the customers, but the user-data that is processed through the app is owned by MyLoyal, as long as it is anonymised.

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