**Original Question “We need to deliver SuperiorValue to our Customers. How do we optimizethe Value Chain?”*The Correct Question - “The Entire Concept ofThe Value Chain needs to be relooked afresh.Lets rethink it starting with the EconomicDefinition of Value and build up a Framework.Shall we?”
**Was defined as*The Six business functions of the Value Chain:*Research and Development*Design of Products, Services, or Processes*Production*Marketing & Sales*Distribution*Customer Service*Analyzed at the level of the Industry or Firm(s)
*Hint* - Price is something you pay. Value is whatyou get. – Warren Buffet
**Beginning with Aristotle, economists believed that“value” was an objective quality such as size,weight, or material composition. This thinkingculminated with Karl Marx, who argued that “thelabor incorporated in the good” was what made itvaluable*One of the greatest revolutions in economics wasthe discovery that “value” is not an attribute ofthings per se but, rather, an assessment made bythe person for whom the thing appears to bevaluable.
** Value is not something that gets added as Goods or Services movethrough the Assembly line, which is the view taken by Prof. Porter‟sValue Chain Theory* The Real Value is made Manifest in the Value Net of the Customerupon Consumption or Prospective Consumption of Goods andServices…* The Real Value is a function of Customers purpose, success, ,ecosystem, relationships & business and individual context* Needs Wants and Desires are the Superficial Layer exposed by theFrontier of Customers Value Net.* E.g. When our customers ask us for a drill we dont ask „How Thick‟?We ask „What for‟?* That‟s the difference between Needs, Wants & Desires which theMarketing limits itself to dealing with versus the Real Value in theCustomers Context & Purpose in the Value Net
** Firstly I‟m still working on this Theory… so it‟s a W.I.P.* But we now know for sure Value isn‟t an intrinsic attribute of a GoodOr Service…. You can‟t build it up in Stages* We would need to model REAL VALUE as made Manifest by Assessmentin the Customer(s) Value Net* The Classic Concept of The Value Chain should probably be referredto as the AVP Chain – Anticipated Value Preparation Chain, tosegregate it from the concepts of Real Value and The Value Net* Even in the Absence of Quantitative & Qualitative Frameworks forREAL VALUE, even the concept has had a drastic impact on the waywe look at Value and run our Organizations.* We are slowly moving further and further away from Resource Basedand Factor Based approaches of looking at our Business‟s
** Business‟s Deliver Quality(s)* Benefit = f(Quality(s))* Customer Value Net‟s Capture Benefit and Make Value Manifest* Value = f(Benefit, Capture)* Segments = Clusters(Value Manifestations)* Doing this on Coarse Strategic Models can be very limiting* Delivery of Quality is not very Flexible* But yet Data Science helps us with matching Segments & Value (above)* And to a certain extent Broad Benefit and Quality Spectrum* It‟s a multi step process, and inefficient. Business Success lies in doing thiswell. QBV (Quality-Benefit-Value) Efficiency* Business Survival & Growth depends on continuing to do this well within adynamically changing environment where all of these variables changerapidly.
** The Framework for once doesn‟t show any Bias against Leaders like Steve Jobs who do theReal Value Analysis in their Heads and take 20 years to build the worlds most successfulorganization and deliver a Revolution* Versus, professional managers/leaders who use formal methods to arrive at Real Valueconclusions… with shorter performance time windows* Also this framework is consistent across the above two categories of people* It is understood that Professional Managers are better off with Formal Methods in a DistributedOrganization with Separation of Roles and Responsibilities. But if you can control the entireorganization then what the hell… you can very well do this in your mind and attribute it toyour Leadership Qualities, Vision and the Value you bring to the table.* I normally don‟t like words like Domain Expert or Industry Expertise, and the need forExperience beyond familiarity of being able to apply First Principles, I leave all thatspecialization to the Ph.D.‟s I also am a firm believer in Emergent Strategy and the need forGeneralists… But my own framework (this one) does indicate that Industry Experience can beleveraged to a reasonable degree in assessing Real Value and modeling the Value net. I hate tosay that at a high level the model DOES SEEM TO indicate that.* But the good part is that the reality is closer to my beliefs that First Principles and StructuredFormal Methods and not Experience or any Domain Expertise rule the game. The latter areseverely detrimental to success in a large global organization in a dynamically changingcomplex global environment.
**So What Happens to The Famous Value Chain/ValueStream Analysis?*Well!!! its just another Process Optimization Analysisfrom our perspective.*In a future presentation we would rename it to QualityChain/Stream Analysis perhaps because we proposethat what a business delivers is Quality(s) which getconverted into Benefit(s) which then gets Manifest asValue in the Customer Value Net.*The Value Chain/Stream Analysis remains the same asit was but now we DISCONNECT it from Value and linkit to Quality which has a 2 Degrees of Separation fromReal Value.
** Value isnt something that happens in between your suppliersand you before it reaches the customers.* Value isn‟t something that‟s intrinsic to the Good or Service* Value isn‟t something that can be incrementally built up indefinite stages in a definite and absolute fashion.* THE REAL VALUE IS MADE MANIFEST BY BENEFITS OR POSSIBLEBENEFITS IN ONE OR MORE CUSTOMER SEGMENT VALUE NETsUPON CONSUMPTION OR ANTICIPATION OF CONSUMPTION OFGOODS OR SERVICES.* Note: The Positioning, Resource, Capability & Value Chain Modelsand Frameworks are not very relevant today.