Organisational behaviour
The value chain
According to Porter (1985), competitive advantage can only be understood by looking at the firm as a whole.
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The value chain vs Value chain
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Close overlapFinanceFinanceFramework / model
Operations
Value chain
Identify product or service value during the manufacturing process.
Read articleChoice logic
Use this when.
Use the model to diagnose sources of competitive advantage, understand how activities reinforce one another and decide where to reduce cost or increase customer value.
Identify how product or service value is created through the operating system.
Extracted signals
Strengths, limits, and pitfalls.
The value chain
- Analyse each strategically relevant activity for customer value, cost and linkage effects rather than optimising it in isolation.
- Define the customer and unit of analysis, then decompose work far enough to reveal different cost drivers, capabilities or sources of value. Compare performance and linkages with competitors rather than documenting only the internal process.
- Inbound logistics: receiving, handling, storing and scheduling inputs, including supplier and inventory management.
Watch for
- Do not mistake subjective activity ratings or an exhaustive process map for evidence of competitive advantage.
Value chain
- Map one customer journey across functional boundaries and quantify cost, delay, quality and customer impact at each activity and handoff. The most valuable opportunity often sits between departments rather than inside one of them.
- Starbucks provides an illustrative application. Founded in Seattle in 1971, the company expanded to roughly 24 thousand coffee shops. When growth slowed in 2007, founder Howard Schultz returned as chief executive and examined how the whole system needed to respond to higher input costs and stronger competition.
- Operations: In February 2008, Starbucks closed 7 thousand US stores for 3 hours to retrain baristas. Stores returned to grinding beans locally and discarded brewed coffee after 30 minutes. Schultz invited ideas from employees and customers, receiving 93 thousand suggestions, and redesigned stores to restore a coffeehouse atmosphere.
Watch for
- Do not treat Porter’s categories as a static organisation chart. Digital products, partners and ecosystems may distribute activities differently. Follow the actual flow of value and examine linkages, external dependencies and customer outcomes.
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Application bridge
Related templates.
Benefits Realization ReportBenefits Realization Report Purpose. Use this report to show which programme benefits were realised during a defined period, which expected benefits were delayed or missed, and which new benefits have emerged. Each entry should trace to the business case and benefits-realisation plan so decision-makers can distinguish delivered value from completed activity. Application. Benefits become meaningfulKnowledge Management PlanKnowledge Management Plan Purpose. Use this plan to connect programme participants with useful knowledge, subject-matter expertise and the information created across components. Effective knowledge management reduces reinvention and duplicate work, helps people find proven answers quickly and reserves scarce expert attention for problems that genuinely require new thinking. Application. Prepare thProcurement Management PlanProcurement Management Plan Purpose. Use this plan to decide what the programme should obtain externally and how each acquisition will move from need to an awarded agreement. It covers facilities, goods, materials and external resources, together with the sourcing, solicitation, evaluation and contractual methods appropriate to each requirement. Application. Prepare the plan early because procuremProgram Benefits Sustainment PlanProgram Benefits Sustainment Plan Purpose. Use this plan to maintain the conditions that allow programme benefits to continue accruing after transition. It turns the handover commitments in the benefits transition plan into enduring operational mechanisms, measures, responsibilities and responses. Application. Treat it as a living document. Customer demand, operating capacity, technology, regulati