The Value Chain: One of my favorite business concepts

'There is nothing as practical as a good theory' Lewin (1951).

I really like Porter's Value Chain. It is a simple way to understand what you do (primary activities) and what are the support systems (secondary activities). Importantly, it helps identify where a company does or can add value through co-ordinating its activities.

For example in the case of Nike the majority of their primary activities are outsourced; but the secondary activities such as brand development and advertising are where Nike adds value to its customers. Whereas, a company like Apple controls both the primary activities (the high quality manufacturing of its products) as well as the secondary activities (Research and Development, brand management, etc). Both companies are in competitive industries but using a value chain analysis you can start to assess what differentiates them through their value chain compared to their competitors.

In the service sector, Porter's model, I feel needs to be changed; for example with primary activities - inbound logistics becomes talent attraction. Operations becomes performance, and outbound logistics becomes relationship management. Whereas, two important features of secondary activities which are vital for service providers as 'culture' and 'leadership'. These play vital roles in adding value to service based companies.

The importance of Porter's Value Chain is not just to commercial companies but also government and charity sectors. Although their purpose may be clear it is striking how many organisations in the these sectors don't know how they presently operate or could improve their value offer when providing a service. By using a value chain analysis this may help make explicit what such organisations do well and where they need to co-ordinate more effectively to improve their value chain.

#Performance #Business #Concept

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