Research Library
Monthly Research
& Market Commentary


Mapping the Value Chain for Your Organization

Throughout history, maps have been essential to just about every form of strategy. They help us understand why we need to take action, how we can outmanoeuvre rivals and where our escape routes are if things go wrong. While today’s maps are highly accurate, even a rough picture (such as those of the New World) can be very useful if it is better than what others have available.

Mapping the Value Chain

Business competition can also be viewed as a landscape, and thus your company’s value chain of customers, suppliers, activities and processes can be broadly mapped.

Most maps are, of course, rooted in geography. But business competition can also be viewed as a landscape, and thus your company’s value chain of customers, suppliers, activities and processes can be broadly mapped. We think that business mapping is especially useful today. Information technology is radically changing the competitive landscape, and those firms that see the playing field clearly will be more likely to develop and sustain effective strategies.

Throughout his career and in his three years with the LEF, Simon Wardley has been developing a set of models and frameworks that can help companies visualize and communicate how their particular business/ IT value chains are evolving. In this commentary, we will provide an introduction to Simon’s mapping research, and show how clients can start to apply these ideas to their own situations. Value chain mapping is now an important area of LEF advisory support, and we strongly encourage clients to engage with us in this process. Many already have.

A lifecycle approach to value chain mapping

Figure 1 provides the starting point of our thinking. Just about every product and service can be viewed in terms of its lifecycle – from uncertain beginnings (genesis) to eventual standardization (commoditization), typically following an s-curve pattern. As markets evolve through these stages, their associated business practices, activities and sourcing often change radically. For example, in the genesis phase, agile development practices are often required, whereas Six Sigma and similar techniques are much more appropriate in commodity markets.

Value chain mapping provides a way of viewing particular business challenges through this lifecycle lens. As we shall see, once you have an overall picture of an area of your business, it becomes much easier to determine how each business activity is likely to evolve, and how it should best be managed. In our experience, this type of visualization helps clients make better strategic and tactical decisions, while greatly enhancing shared understanding. It also provides a powerful alternative to the traditional view of the firm based on hierarchical (and static) organization charts. The key steps in our value chain mapping process are introduced below.

Mapping your value chain

After you have chosen a particular business area to examine, break it down into its key value chain activities along the dimensions shown in Figure 2. First, characterize each activity in terms of its current lifecycle stage (on the x-axis). Then place it at the proper height along the y-axis, with market-facing activities at the top, and lower-level components and services at the bottom. We put particular emphasis on distinguishing between those parts of the value chain that are visible and invisible to the customer.

Even a rough map will help your firm see the relative lifecycle stages of particular company activities. Typically, this perspective will make it clear that one management style won’t fit all, and that different strategies and practices are needed for different business functions. By adding connecting lines and various forms of coding, you can depict additional relationships and commonalities. An example is provided in Figure 3, which was developed by the UK government for a complex engineering initiative.

In this example, breaking down a large project into its components not only enabled the most appropriate management methods to be applied but also encouraged the acceptance of general principles such as the FIST (fast, inexpensive, simple and tiny). Mapping also enabled a different type of conversation between IT and other departments. For example, the HR department was considering commissioning a custom solution but after seeing the map above and discussing it with IT, it became clear that HR systems are largely a commodity, and thus a cloud-based solution is more appropriate.

Mapping co-creation and implementation

While the LEF is usually closely involved in the early stages of mapping initiatives, our aim is to build a tool kit that firms can learn to use for themselves.

We can’t stress enough that value chain mapping is a co-creation process that requires a high level of client engagement. While the LEF is usually closely involved in the early stages of mapping initiatives, our aim is to build a tool kit that firms can learn to use for themselves. To use our own lifecycle language, value-chain mapping is now in its custom-built phase, and we hope to move to more of a product (as-a-service) model over time. Several clients are already running mapping exercises independently. The results have been encouraging.

However, seeing the competitive landscape accurately is only the starting point. Once a mapping framework is in place, companies must then use it effectively. Strong leadership and cultural support are required if the mapping process is to be more than an intellectual exercise.

Additionally, the map of your business can be used to support a variety of specific strategic plays such as reducing/increasing barriers to entry, exploiting ecosystems, using open technologies, anticipating rivals, and many other goals and tactics. These competitive manoeuvres will be explored and expanded upon in future LEF research.

The bottom line is that information technology is significantly altering the value chains of just about every industry sector. Forward-thinking CIOs and other business leaders can use our mapping process to develop a fresh perspective on their firm’s opportunities and challenges. We encourage you to test-drive our mapping models, and we look forward to working with you in the months and years ahead.

JOIN THE CONVERSATION

*{{ error }}
*{{ error }}
*{{ error }}
captcha
*{{ error }}
*{{ error }}
*{{ error }}

DOWNLOADS

Research Commentary

PDF (1.4 MB)

AUTHORS

David Moschella
Research Fellow
David Moschella, based in the United States, is a Research Fellow for Leading Edge Forum.  In this position, he is responsible for research into the Digital Business Strategies domain, focusing on industry disruptions, machine intelligence and related business model strategies.  David is the project lead for our 2017 research into Disrupting ‘The Professions’ – Scenarios for Human and Machine Expertise. David was previously Research Director of the programme. David’s key areas of expertise include globalization, industry restructuring, disruptive technologies, and the co-evolution of business and IT.  David is the author of multiple research reports.  His most recently published reports include Embracing 'the Matrix' and the Machine Intelligence Era (March 2016) and The Myths and Realities of Digital Disruption (September 2015). An author and columnist, David’s second book, Customer-Driven IT, How Users Are Shaping Technology Industry Growth, was published in 2003 by Harvard Business School Press.  The book predicted the shift from a supplier-driven to today’s customer-led IT environment.  His 1997 book, Waves of Power, assessed global competition within the IT supplier community.  He has written some 200 columns for Computerworld, the IT Industry’s leading publication on Enterprise IT, and has presented at countless industry events all around the world. David previously spent 15 years with International Data Corporation, where he was IDC’s main spokesperson on global IT industry trends and was responsible for its worldwide technology, industry and market forecasts.    
Simon Wardley
Researcher
Simon Wardley, based in the UK, is a Researcher for Leading Edge Forum and the lead practitioner for Wardley Maps advisory service helping clients anticipate market and ecosystem developments. Simon’s focus is on the intersection of IT strategy and new technologies, and he is the author of multiple reports including Clash of the Titans – Will China Dethrone Silicon Valley?  where he assesses the hi-tech challenge from China and what this means to the future of global technology industry competition. His previous research covers topics including Of Wonders and Disruption,  The Future is More Predictable Than You Think - A Workbook for Value Chain Mapping, Beware of Geeks Bearing Gifts: Strategies for an Increasingly Open Economy, Learning from Web 2.0 and A Lifecycle Approach to Cloud Computing. Simon is a seasoned executive who has spent the last 15 years defining future IT strategies for companies in the FMCG, Retail and IT industries.  From Canon’s early leadership in the cloud computing space in 2005 to Ubuntu’s recent dominance as the #1 Cloud operating system. As a geneticist with a love of mathematics and a fascination in economics, Simon has always found himself dealing with complex systems, whether it’s in behavioural patterns, environmental risks of chemical pollution, developing novel computer systems or managing companies.  He is a passionate advocate and researcher in the fields of open source, commoditization, innovation, organizational structure and cybernetics. Simon is a regular presenter at conferences worldwide, and has been voted as one of the UK's top 50 most influential people in IT in Computer Weekly's 2012 and 2011 polls.    

CATEGORIES

Business / IT Convergence
Consumerization & the IoT
Digital Business Strategies
Learning from Silicon Valley
The Changing Nature of Work

ALSO IN THIS CATEGORY

Designing for constant evolution: Pioneers, Settlers and Town Planners
13 Feb 2017 / By Simon Wardley
21st Century Organizations Behave Like a Drone Swarm
09 Feb 2017 / By Dave Aron
BRMs Must Lead Digital Conversations and Demystify Tech-driven Innovation for their Business Partners
27 Jan 2017 / By Ibrahim Jackson
Organizational Politics – Developing Political Acumen is Imperative for BRMs
19 Jan 2017 / By Robina Chatham
Leading Edge Forum’s 2017 Research Agenda
11 Jan 2017 / By Dave Aron