The Value Chain

The layout of a value chain provides a visual and transparent representation of all the processes that lead to a particular product or service. It shows you HOW the promised products/services are delivered.
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Why is it important? We know lots of people have very good ideas and are strongly motivated by their purpose. But, as a venture capitalist in part one told us: “We investors don’t invest in ideas, we invest in the execution of ideas.” And to execute ideas you have to make a plan and ask some concrete questions about:

Internal resources

What resources are essential to ensure that you deliver your value proposition?
How can you allocate the resources efficiently?

Activities and competencies

What activities are essential to ensure that you deliver your value proposition?
What activities are you equipped to carry out with your existing competencies?
What new activities and what competencies do you need in addition?

Partners

Who are your most important partners?
Who are your main suppliers?
What activities can your main partners undertake or what essential competencies do they have?
What do your main partners get out of working with you?

When you know all processes needed to deliver your product, and you know which people with what qualities will perform them, you have an overview of your value chain. This value chain is an ideal preparation for making up your financial budgets. Let’s start once again with a concrete example:

A social entrepreneur wants to offer a solution for educational drop-outs from the age of 15 years, by providing a ‘learning place’ for these young people, where various forms of support are present. Condition is that the initiative must be open (read: affordable) to all young people. This does not mean that the offer will be free for those who are less financially strong, but the business model will ensure that every young person is supported to earn the “enrollment money”. Plotting the value chain starts right, at the completion of the secondary education diploma. Then all the steps of the process are identified that are necessary to achieve this ‘outcome’.

The following are cited as key processes: getting in touch with the target group of drop-outs, offering the learning material, coaching on personal challenges, an environment where participants can learn and find inspiration and, of course, an intake and follow-up. In parallel with the ‘learning support’ an extra business model should be set up to guide every participant who wishes to do so to paid work. Tasks that are defined here are:  building a network of potential employers, mapping competencies, matching people and competencies, and follow-up of the assignments

To do this exercise for your own organization, take a large sheet of paper and some markers, and follow the instructions below.

  • Write the product or service you want to realize on a post-it. Stick this on the right side of the whiteboard.
  • Describe each step to be taken in the realization process on a separate post-it. Stick the post-it’s on the whiteboard.
  • For each step, ask the following questions and write down on a post-it:
  • What action will be performed?
  • How many people are needed for this action?
  • Who can perform this action?
  • What activities are associated with the startup?
  • What investments are associated with it?
  • What is needed to make the step run smoothly?
  • Place supporting activities that do not directly value to the product or product or service (accounting, management,...) above or below the flow of the previously formulated activities. Refine each step on the basis of the questions above.