Generic Value Chain

There’s one marketing tool I go to when working with clients that assists me in quickly understanding where products and services fit into the larger buying cycle ecosystem. I actually see the value chain as a window into a market. The idea of a value chain originates from business management theories and is first described by Michael Porter in his 1985 best seller titled, “Competitive Advantage: Creating Sustaining Superior Performance.” The concept is that you have a chain of activities for products that they pass through and often gain value at each level. I traditionally look at external value chains vs. those that deal with internal operational functions, much like Porter’s model.

The definition I like is:
A value chain is a string of companies or players working together to satisfy market demand for a particular product.

As an example, I build external value chains through researching markets to better understand who buys from whom, who builds the components that get put into a product that then gets distributed or sold by someone else that finally reaches the end user or customer. That’s a mouthful but in essence, the chain extends from how the product originates to the buyer. Note: chains can take on different forms for different industries so, don’t get caught up on thinking they must look a certain way.

When I evaluate value chains, I look for opportunities along the way. Partnership ideas can form and gaps can be recognized where there are few companies filling certain parts of the chain. It is also easier to see what a whole product looks like based on how others have added value or enhanced the offering along the way. And, finally, you see what you have to do from a push/pull sales and marketing standpoint after learning who holds the power in the chain.

Value chains evolve over time as technology advances so, be sure to update yours periodically to ensure you don’t miss hot opportunities. And, if you don’t know where to start in putting one together, give me a ring!