Apologies up front for the photo – if this doesn’t make your mouth water nothing will.
How do you make a cup of tea? Piece of cake! Bags in a pot, throw in the water. You just have to decide whether you pouring for a MIF or a TIF and everyone is happy.
But how do you make Chocolate Forest Floor? Different Story! A glance at the recipe will tell you have to know what you are doing.
So how do you create value for your clients, and margin? What is going on inside your organisation? What is your value chain? As you execute your strategy you will hit unforeseen obstacles. An internal analysis will give you an idea about whether the obstacle arises from inside your organisation. And you will know what resources to focus on the obstacles. Internal analysis highlights your ‘Intangible assets’ which account for 70 to 90% of the value in your organisation.
The standard Value Chain Analysis from Michael Porter is usually presented like this:
Documenting the components within each cell of the value chain shows how you create and deliver value to your customers and how your margins are built up. You define processes for creating value as well as some standardised support processes.
- Linking the components in a cause and effect diagram will provide hints about the core-competencies on which you build your differentiation.
- Stepping back you may see the gaps in your delivery process.
- The model provides insight into how your processes fit together and where the bottlenecks form.
- You may also see where you can improve processes.
OK you can learn how to make a masterpiece. It can be duplicated. Value Chain is a linear, industrial age view of the organisation. In the 2011 Masterchef Australia programme Chef Rene Redzepi, Head Chef at Noma Copenhagen, voted the best restaurant in the world, showed the team how to make his dessert called ‘The Snowman’.
But where are masterpieces dreamed up? Where do your smashing ideas come from for your business? Where did Chocolate Ethereal come from?
The world of competition has progressed way beyond the realm in which sustainable advantage could be generated through cranking the handle on a linear process supported by a functional organisation, if indeed this were ever possible. You need other insights to define and sustain a differentiated value proposition.
Sustainable advantage is rare. It is rare because the resources, process and events required to produce this advantage are complex and usually poorly understood at best and always impossible to emulate. ‘Value’ is created through attitude, imagination and action.
Here are five processes which should happen concurrently to build your competitive offer. This list from Tony Manning is easy to rattle off to ‘Tick the boxes’. But pause, this list is excellent to carry out a challenging ‘value creation’ self-reflection.
- Scanning: Knowing what is going on in your business environment and in your organisation.
- Sourcing: Knowing where and how to access raw materials, equipment, skills and finance to keep your business running.
- Serving: Defining a target market and delivering what they need and want. Delivering value is the heart and soul of your value proposition. How well you do this depends on who you choose to serve and how well you do it.
- Symbiosis: Win-win relationships with your stakeholders creates a foundation for competitive endeavour. The strength of these relationships determines whether your stakeholders vote ‘for’ you rather than ‘against’ you.
With these four processes in place you will be able to engage in the most valuable process of all:
- Synthesis: Synthesis is what sets organisations apart in the post-information age. This is excelling at turning connections into concepts and concepts into products. This goes well beyond coordination. This is about focussing what you have and what you can create for opportunities.
Is your value chain energised? Are you ready to make your Chocolate Ethereal?
