Deconstructing Value Chains

When firms set about continuous improvement, they usually apply their efforts to legacy value chains. These are the set of processes that the firm has “grown up with” – the process chain that has evolved to serve the firm’s current customers.

Yet, because value chains are the means through which the firm creates and delivers its products and services, they become tied to the product life cycle. This means that value chains, like products, have lifespans.

When improving value chains, firms should always test whether the current chain would benefit from deconstruction – altering the pattern of activities that deliver value to customers. In many cases, legacy value chains can be deconstructed and reconstituted to provide different value to customers – value that is differentiated, commands a price premium, and which allows the firm to meet needs which are currently being under-serviced or ignored by rivals.

Opportunities for deconstruction often abound when fresh insights into customer needs and behaviours are obtained. One firm we at Anderson Lyall worked with found that integrating the customer service and sales processes opened up new revenue opportunities – service personnel were the ones most close to, and intimate with, the customer’s issues and problems. Integrating these separated functions into a unified process allowed this firm to leverage new sales opportunities and identify new product development initiatives.

Deconstructing often means de-averaging. Where a firm has an “average” competitive advantage obtained through value delivered from a single value chain, this advantage can often be multiplied and compounded by deconstructing the chain into multiple discrete chains focused on specific customer needs.

Improving legacy value chains is great, but deconstructing legacy chains based on new customer insights can be tremendously valuable.

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