How do you analyze a client's value chain?

1 Understand the business

The first step is to understand the client's business model, value proposition, and strategic goals. You need to know who their customers are, what they offer them, how they deliver it, and how they make money. You also need to understand the industry context, the competitive landscape, and the external forces that affect the client's performance.

2 Identify the value chain activities

The second step is to identify the main activities that the client performs to create and deliver value to their customers. These activities can be grouped into two categories: primary and support. Primary activities are directly related to the production, marketing, sales, and service of the product or service. Support activities are indirectly related to the primary activities and provide the necessary resources and capabilities. Examples of primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Examples of support activities are procurement, human resource management, technology development, and infrastructure.

3 Assess the value added by each activity

The third step is to assess how much value each activity adds to the final product or service. Value added is the difference between the revenue generated by the activity and the cost incurred by the activity. You can use various methods to measure value added, such as benchmarking, customer surveys, financial analysis, or qualitative assessment. The goal is to determine which activities are the most valuable and which are the least valuable for the client and their customers.

4 Identify the linkages and interdependencies

The fourth step is to identify how the activities are linked and interdependent. Linkages are the relationships between activities that affect their performance and efficiency. Interdependencies are the dependencies between activities that require coordination and integration. For example, a linkage between marketing and sales and service is that the quality of service affects customer satisfaction and retention. An interdependency between operations and procurement is that the availability and quality of raw materials affect the production process and output.

5 Evaluate the strengths and weaknesses

The fifth step is to evaluate the strengths and weaknesses of the client's value chain. Strengths are the activities that provide a competitive advantage, differentiation, or cost leadership. Weaknesses are the activities that create a competitive disadvantage, vulnerability, or inefficiency. You can use various tools to evaluate the strengths and weaknesses, such as SWOT analysis, VRIO framework, or Porter's five forces. The goal is to identify the opportunities and threats that the client faces in their value chain.

6 Recommend improvements and solutions

The sixth and final step is to recommend improvements and solutions to enhance the client's value chain. Improvements are the actions that can increase the value added by each activity, reduce the costs, or improve the linkages and interdependencies. Solutions are the strategies that can leverage the strengths, address the weaknesses, exploit the opportunities, or mitigate the threats. You can use various techniques to recommend improvements and solutions, such as brainstorming, best practices, or cost-benefit analysis. The goal is to provide actionable and realistic recommendations that align with the client's goals and resources.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?