The products and service an organisation produces can gain value through specific activities if they are run efficiently at optimum level and done effectively.

Originator: Michael E. Porter

Michael Porter suggested that through specific activities, the products and service an organisation produces can gain value. In order to gain a real competitive advantage these activities need to be run efficiently at optimum level and, done effectively, the increased value should outweigh the running costs. The activities are split into two categories:

Primary activities

Inbound logistics – receiving, storing, inventory and transportation of goods

Operations – all processes involved with transforming the inputs into the final product

Outbound Logistics – collection, storage and distribution of products

Marketing and Sales – any activities involved with informing buyers of the available products and facilitating their purchase

Service – any support service offered after sale of product maintaining its value

Secondary activities

Procurement – the acquisition of raw materials or resources at the best price and quality

Technology Development – any technology used to support the primary activities such as research and development

Human Resource Management – personnel related activities such as recruiting and training

Firm Infrastructure – departments involved in serving the companies needs such as legal, finance, general management etc.

Example of a value chain

How to use it

Begin with a generic value chain and then develop it to include the relevant activities for your organisation. Mapping process flows allows you to identify the individual activities and the linkages between them. It then becomes important to optimise and co-ordinate these linkages.

What do I need?

A flip-chart and workshops with all the different teams involved in the process