The story goes that in the 60s, after John F Kennedy stated his goal “to put a man on the moon and return him safely to earth,” a group of people were touring NASA when one of them asked a janitor what he did for a living. His reply was: “I’m working to put a man on the moon.” That man knew what value he brought to the organisation. In today’s commoditised world, working together to achieve an objective is a more difficult task to accomplish. One way to move towards that goal is through value chain development.
The value chain is a systemic approach to the development of competitive advantage that was devised and conceptualised by Michael Porter in the early 80s, in his book Competitive Advantage: Creating and Sustaining Superior Performance. It categorises the activities of an organisation that create and build value, dividing them into primary activities – inbound logistics, operations, outbound logistics, marketing and sales, and service, and secondary activities – procurement, technology, human resources and infrastructure. Today, the concept has been extended beyond individual organisations and can apply to whole supply chains and distribution networks.
Derek Hendrikz, of Derek Hendrikz Consulting, says value chain development begins with a statement of purpose, a definition of the intent of your business.
This is followed by a vision of your desired reality. “Once you know where you are and where you want to be, you can design your strategic objectives,” he says. “This is followed by defining your operational processes, which consist of both action and structure. The value chain is what links action and structure. You need to know what adds value to what, and to organise your business around that. Most importantly, you cannot design an organisational structure without first understanding your value chain.”
On the downside, value chain development tends to be a linear process, something which Hendrikz says is difficult to achieve in today’s distinctly non-linear world and is more suited to the manufacturing environment. Porter’s focus on “either or” strategies and competition as the main driving force in any industry, are not that well suited to the complexity of most industries today, particularly service industries. Collaboration, competition, differentiation and low cost are more common drivers.
The Big Picture.
The major benefit of value chain development, says Hendrikz, is that it organises organisational thinking. “When a company’s management consists only of engineers, or accountants, or lawyers, all other aspects of the business – such as human resources, marketing and operations – tend to be neglected to the detriment of the business. Value chain development forces a company to consider and develop all aspects of the organisation. It enables big picture thinking.”
For more information call +27 12 567 2824, firstname.lastname@example.org, www.derekhendrikz.co.za