A Value Chain Map shows the path to deliver value.

A Value Chain Map shows the path to deliver value.

Value is generated through the transformation of raw materials into a new form, which is represented by a value chain. The value chain concept is generally applied to whole organizations, but can be applied to an individual business unit or can be extended to the whole supply chains and distribution networks.  As with many popular analysis techniques are there are myriad variations on a core set of steps. The steps I use are:

  1. Define the goals of the Value Chain Mapping exercise.
    Defining the goals serves several purposes.  First, it sets the goal posts for defining when the analysis is done.  Second, the definition identifies any modifications that are required in the process. The reason that variants on the core steps exist is address specific questions.  For example, if we are interested in the speed of the flow we will need to capture measurement data specific to step duration.
  2. Define the core process categories.
    Develop a list of the core processes from the entry of raw material through the final consumption of the end product.  For simple products the process should be represented in six or seven steps that are directly involved in the creation of the product.  Remember that the Value Chain Map is a high level view of the transformation process.  More complex scenarios that need to represent multiple products or multiple transformation channels will more steps.
  3. Map the main actors.
    Actors are the groups of people that are involved in the process.  In our ongoing example of publishing a book, the main actors might include authors, editors, proofreaders, printers, marketers, distribution personnel, sales people and consumers (not a complete list). I generally suggest creating a second, actors map that is presented either as an overlap or directly below the map of the processes (step 2).  I have also seen actors shown as swim lanes overlaying the process map.

    • Variant: A table could be developed showing a breakdown of the core processes into the specific activities for each of the classes of actors.
  4. Identify the products for each set of the core process.
    Identify the outputs of the process steps as they are transformed from raw materials, to intermediate materials and to final products. Integrate the outputs identified into the core flow. The goal is to refine the Value Chain Map to show how the product is handled, transformed and transported at each process stage.

    • Variant: Identify the information and knowledge capital flows that are generated and integrate those flows into the Value Chain Map. Information flows are often bi-directional.
  5. Optional: Map process measures and metrics.
    Information like step duration, product volumes, counts of actors (five editors) are often needed to address the goal of Value Chain Mapping exercise. The measures and metrics required will be a reflection of the goals identified in step one.
  6. Map the linkages between steps and actors.
    Map the linkages (how the steps and the actors are related) then classify the linkages (temporary, network or long term and influences). Show each type of relationship differently.
  7. Identify and map support activities.
    Add supporting steps to the core map.  In the publishing example, IT and HR would be examples of supporting activities.

    • Variant: Add influence from the environment surrounding the organization.  Examples might be industry associations, government departments or other organizations that exert an influence on how the product is transformed.
  8. Optional: Identify constraints for each step.
    All steps will have constraints. I generally present these in a matrix appended to the map.
  9. Develop a solution that satisfies the goal of the analysis.

Developing a Value Chain Map requires an investment of time and effort, however the formal process of generating the map provides a substantial amount of structure to identify bottlenecks and areas for further investigation.  The first step of process, defining the goal of the exercise, is critical, as it will help you determine how to craft the value chain so that you know when you are done and so that you ensure that there is value in the Value Chain Map that you document.