How do you Identify Value-Creating Activities for Customers and Stakeholders with Value Chain Analysis?

1 What is a value chain?

A value chain is a visual representation of the sequence of activities that your business performs to deliver a product or service to the market. It includes both the physical and intangible aspects of your value proposition, such as design, production, marketing, distribution, and after-sales service. Each activity adds value to the final output and influences the willingness of customers to pay for it.

2 Why is value chain analysis important?

Value chain analysis is important because it helps you understand how your business creates and captures value in relation to your competitors and customers. By analyzing each activity in detail, you can identify your strengths and weaknesses, as well as the opportunities and threats in your environment. You can also find ways to optimize your resources, reduce costs, enhance quality, differentiate your offerings, and increase customer loyalty.

3 How to conduct a value chain analysis?

To conduct a value chain analysis, you must first define the scope and objective of the analysis, as well as what level of detail you are aiming for. Then, identify your primary and support activities and analyze the value and cost of each. After that, evaluate your linkages and interdependencies between activities, as well as your competitive position and performance. Defining the scope and objective will help you decide what to achieve with the analysis, such as improving efficiency or customer satisfaction. Identifying primary and support activities will enable you to use either a generic or customized value chain model. Analyzing the value and cost of each activity will require various methods, such as customer surveys or benchmarking. Assessing linkages and interdependencies will allow you to examine how activities are connected and influence each other. Lastly, evaluating your competitive position will help you identify sources of advantage and disadvantage, as well as gaps and opportunities in your value creation and capture.

4 How to use value chain analysis for strategy formulation?

Value chain analysis can provide insights and recommendations on how to improve value creation and capture, which can be used to define a value proposition that is aligned with your vision, mission, and goals. It can also be used to choose a competitive strategy, such as cost leadership, differentiation, or focus. Additionally, it can help develop an action plan that identifies key initiatives and projects needed to enhance value creation and capture. This includes allocating resources, assigning responsibilities, setting timelines, and monitoring progress.

5 What are the challenges and limitations of value chain analysis?

Value chain analysis is a useful tool, but it also has some challenges and limitations that you need to be aware of. It can be complex and time-consuming, as you may need to collect and process a lot of data from various sources. This process can also be subjective and biased due to the methods and criteria used to measure value and cost. Additionally, value chain analysis can be dynamic and uncertain due to changes in your environment, requiring regular updates and revisions. You may also face some risks and uncertainties that affect your value creation and capture.

6 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?