It is all about perspective

It is all about perspective

Developing a Value Chain Map can provide substantial value. It is a profile of how raw materials are transformed into a product and delivered to the organization’s customers. The structured process used to develop the map helps to identify bottlenecks that can be removed to increase efficiency, or at least areas for further investigation. Unfortunately developing a Value Chain Map represents an investment of time and effort and problems can occur on the path to development. I generally see three basic problem areas.

  • Approaching Value Chain Mapping as a single pass effort
    • Developing a Value Chain Map is generally done as an iterative process, much like peeling an onion.  While this might sound like a style issue, I have found that a more complete map is generated if the person or team developing the map gets through the entire process once and then goes back to debate and fill in the gaps. It is easy to get bogged down on a specific step or topic and then rush to generate an overall view.  The only step in the process described here that I would obsess over is setting and understanding the goals.
  • Pursuing the wrong perspective
    • The greatest potential error is that of perspective. The focus of a Value Chain Map needs to be on the creation and delivery of an external product. A service delivered to clients is equivalent to a development and development of a manufactured product. Focusing on an internal or intermediate product, for example on an internal data warehouse of client information, shifts the focus off improving and understanding the flow of the ultimate product. Therefore improvements may or may not improve the amount of delivered value. You often see this problem if a support process has been mistaken for a core process, or the goal of the Value Chain Mapping exercise is too restrictive (too narrowly focused) so that you can’t examine the whole process.
  • Complexity
    • The examples of Value Chain Maps in textbooks and articles are generally not overly complex. Explaining complexity is difficult, so the examples (like our publishing model) tend to be simple. Real life value chains tend to be more complex, because organizations tend to have more than one product causing parts of the Value Chain to intersect and interact. A comprehensive map needs to describe interacting and competing channels. You must take care to ensure that any simplifying assumptions do not simplify away the value of the exercise.  You need to validate all simplifying assumptions against the goals of the exercise.

Value Chain Mapping provides value by exposing the direct product flow, how indirect process support delivering value and bottlenecks. I am not sure it is an overstatement to say that the value that understanding your Value Chain is incalculable.  But only if done correctly. Approach the process iteratively, focus on real products and respect complexity and it will be difficult to miss the mark.

Advertisements