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Value Chain Analysis
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Value Chain Analysis is a three-step process:
Activity Analysis: First, you
identify the activities you undertake to deliver your product or
service;
We follow these through one-by-one:-
Step 1 - Activity Analysis
The first step to take is to brainstorm the activities that you,
your team or your company undertakes that in some way contribute
towards your customer's experience.
At an organizational level, this will include the step-by-step
business processes that you use to serve the customer. These will
include marketing of your products or services; sales and
order-taking; operational processes; delivery; support; and so on
(this may also involve many other steps or processes specific to
your industry).
At a personal or team level, it will involve the step-by-step flow
of work that you carry out.
But this will also involve other things as well. For example:
How you recruit people with the skills to give
the best service.
Tip: |
Once you've brainstormed the activities which
add value for your company, list them. A useful way of doing this is
to lay them out as a simplified flow chart running down the page -
this gives a good visual representation of your "value chain". You
can see an example of this in Figure 1 below.
Step 2 - Value Analysis
Now, for each activity you've identified, list the "Value Factors" -
the things that your customers' value in the way that each activity
is conducted.
For example, if you're thinking about a telephone order-taking
process, your customer will value a quick answer to his or her call;
a polite manner; efficient taking of order details; fast and
knowledgeable answering of questions; and an efficient and quick
resolution to any problems that arise.
If you're thinking about delivery of a professional service, your
customer will most likely value an accurate and correct solution; a
solution based on completely up-to-date information; a solution that
is clearly expressed and easily actionable; and so on.
Next to each activity you've identified, write down these Value
Factors.
And next to these, write down what needs to be done or changed to
provide great value for each Value Factor.
Step 3 - Evaluate Changes and Plan for Action
By the time you've completed your Value Analysis, you'll probably be
fired up for action: you'll have generated plenty of ideas for
increasing the value you deliver to customers. And if you could
deliver all of these, your service could be fabulous!
Now be a bit careful at this stage: you could easily fritter your
energy away on a hundred different jobs, and never really complete
any of them.
So firstly, pick out the quick, easy, cheap wins - go for some of
these, as this will improve your team's spirits no end.
Then screen the more difficult changes. Some may be impractical.
Others will deliver only marginal improvements, but at great cost.
Drop these.
And then prioritize the remaining tasks and plan to tackle them in
an achievable, step-by-step way that delivers steady improvement at
the same time that it keeps your team's enthusiasm going.
Tip: |
Lakshmi is a software development manager for a
software house. She and her team handle short software enhancements
for many clients. As part of a team development day, she and her
team use Value Chain Analysis to think about how they can deliver
excellent service to their clients.
During the Activity Analysis part of the session, they identify the
following activities that create value for clients:
Order taking
Lakshmi also identifies the following non-client-facing activities as being important:
Recruitment: Choosing people who will work well with the team
Lakshmi marks these out in a vertical value chain on her whiteboard (you can see the first three client-facing activities shown in the "Step 1: Activity Analysis" box in Figure 1 below):

| Drawn using SmartDraw. Click for free download. |
Next, she and her team focus on the Order Taking process, and identify the factors that will give the greatest value to customers as part of this process. They identify the following Value Factors:
Giving a quick answer to incoming phone calls;
You can see these in the "Value Factors" column of figure 1.
They then look at what they need to do to deliver the maximum value
to the customer. These things are shown in the Figure 1's "Changes
Needed" column.
They then look at what they need to do to deliver the maximum value
to the customer. These things are shown in the Figure 1's "Changes
Needed" column.
They then do the same for all other processes.
Once all brainstorming is complete, Lakshmi and her team may be able
to identify quick wins, reject low yield or high cost options, and
agree their priorities for implementation.
Value Chain Analysis is a useful way of thinking
through the ways in which you deliver value to your customers, and
reviewing all of the things you can do to maximize that value.
It takes place as a three stage process:
Activity Analysis, where you identify the
activities that contribute to the delivery of your product or
service.
By using Value Chain Analysis and by following it through to action, you can achieve excellence in the things that really matter to your customers.
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