This exercise is optional–it will help you clarify key differences between analyzing a supply chain and researching a value chain.
A classic Harvard Business School case study–analyzing the value chain of the Crown Cork and Seal company–illustrates well the distinction between supply and value. Businesses purchasing corks and seals from the company are buying products made of metal, cork, and glass. But the materials are only a part of the value of the product. Value also resides in the innovation, design, durability, reliability, branding options, and customer support that differentiate the product from rival bottlecap-makers.
In analyzing a value chain, it can be tempting to think in terms of a supply chain–that is, the various materials that go into manufacturing the product. Effectively mapping the value chains of enterprises and industries in your region may mean researching the value (to buyers) that is layered into each stage of production and distribution.
Here’s what Crown’s value chain map looks like:
Adapted from: “Crown, Cork and Seal Company and the Metal Container Industry,” and “Crown, Cork and Seal Company, Inc.” Harvard Business School, 1978.
Exercise: Identify an industry that makes what you think of as a simple or straightforward product.
Go to clustermapping.us to research the clusters it is linked to, then visit the websites of two or three of the firms in that industry. Is the industry in your area selling products that are differentiated in some way? Consider sourcing, innovation, design, user experience, timing of delivery, and post-sale support. What other industries are linked at each of these stages?
Using Porter’s template (below) as a guide, take a few minutes to brainstorm as many links in the product’s value chain as you can think of.