"In any value delivery chain, to the left of an organization may be suppliers, to the right an immediate customer, then their immediate customer, and so on. At the end of the chain resides some last relevant customer; this is the last level in the chain that is important for an organization to understand.
In reality, levels may extend indefinitely but are only relevant if they could influence an organization's Value Delivery System (VDS).
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Entities at each level deliver value to customers at the next level. Each entity in a chain, except consumers, is thus a value delivery system.
At each level there may be many other comparable entities, which are often in competition.
In addition to these levels, there are often entities of importance to an organization that do not buy or sell that organization's product. They are not in line with the main levels in the chain, but they may be crucially important.
Such off-line entities include regulators, legislators, governmental services, various politicians, the local community near a plant, standard setting bodies, various kinds of thought-leaders, suppliers of non-competing products to entities in the chain, consultants, or third-party payers such as insurance companies. Usually these off-line entities are also VDSs in their own right and may be very important to understand.
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For each business, the customer entities at some level in the chain will be the most essential for the organization to understand. The proposition delivered to these customers will determine the business's success, even if the organization is only indirectly involved in its delivery and even if other customers in the same chain are more immediate customers. These most essential customers are primary entities. The more immediate customers between the organization and these primary entities are best understood as supporting entities; in this case, they are intermediaries. Other supporting entities may include suppliers, off-line entities, or customers of the primary entity, for example.
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Entities (organizations or individuals) which are at the most distant level in the chain where these criteria are still met should be considered the primary entity. For, it is the choice of value proposition to these customers that must shape the design of the business.
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Primary entities are furthest from the organization where potentially:
1 they use product the organization makes or contributes to making
2 the organization's profit is significantly impacted by decisions they make
3 the organization could affect the value proposition delivered to them, even if only indirectly through others in the chain.
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When a chain is long and complex, with entities between an organization and the consumer playing important roles, the inability to see the key significance of the consumer is not surprising. Sometimes this inability reflects not the chain's subtlety but simply an organization's greater comfort with immediate customers. It's certainly easier to deal only with immediate customers, which are frequently more like the organization, itself. That is, these customers understand the organization's products, technologies, and processes. They, unlike the consumer, talk the organization's lingo. Consumers, by contrast, can even seem a bit exotic from the insulated perspective of an industrial-business organization."
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