The Myth Of The Value Chain - Aditya Yadav

1. “Running an Agile Fortune 500 Company”
Aditya Yadav, aditya.yadav@gmail.com
in.linkedin.com/in/adityayadav76
*

2. *
*A Typical Global Company
*Fortune 500/1000
*200 Divisions
*40 Countries
*25000 Employees

3. @ Acme Inc.
*

4. *
*Original Question “We need to deliver Superior
Value to our Customers. How do we optimize
the Value Chain?”
*The Correct Question - “The Entire Concept of
The Value Chain needs to be relooked afresh.
Lets rethink it starting with the Economic
Definition of Value and build up a Framework.
Shall we?”

5. And The Philosophy Behind The Answer
*

6. *

7. *
*Was defined as
*The Six business functions of the Value Chain:
*Research and Development
*Design of Products, Services, or Processes
*Production
*Marketing & Sales
*Distribution
*Customer Service
*Analyzed at the level of the Industry or Firm(s)

8. *
Hint* - Price is something you pay. Value is what
you get. – Warren Buffet

9. *
*Beginning with Aristotle, economists believed that
“value” was an objective quality such as size,
weight, or material composition. This thinking
culminated with Karl Marx, who argued that “the
labor incorporated in the good” was what made it
valuable
*One of the greatest revolutions in economics was
the discovery that “value” is not an attribute of
things per se but, rather, an assessment made by
the person for whom the thing appears to be
valuable.

10. *
* Value is not something that gets added as Goods or Services move
through the Assembly line, which is the view taken by Prof. Porter‟s
Value Chain Theory
* The Real Value is made Manifest in the Value Net of the Customer
upon Consumption or Prospective Consumption of Goods and
Services…
* The Real Value is a function of Customers purpose, success, ,
ecosystem, relationships & business and individual context
* Needs Wants and Desires are the Superficial Layer exposed by the
Frontier of Customers Value Net.
* E.g. When our customers ask us for a drill we don't ask „How Thick‟?
We ask „What for‟?
* That‟s the difference between Needs, Wants & Desires which the
Marketing limits itself to dealing with versus the Real Value in the
Customers Context & Purpose in the Value Net

11. *
* Firstly I‟m still working on this Theory… so it‟s a W.I.P.
* But we now know for sure Value isn‟t an intrinsic attribute of a Good
Or Service…. You can‟t build it up in Stages
* We would need to model REAL VALUE as made Manifest by Assessment
in the Customer(s) Value Net
* The Classic Concept of The Value Chain should probably be referred
to as the AVP Chain – Anticipated Value Preparation Chain, to
segregate it from the concepts of Real Value and The Value Net
* Even in the Absence of Quantitative & Qualitative Frameworks for
REAL VALUE, even the concept has had a drastic impact on the way
we look at Value and run our Organizations.
* We are slowly moving further and further away from Resource Based
and Factor Based approaches of looking at our Business‟s

12. *
Value Net
NeedsWantsDesires
Business
Marketing
Quality
Benefit
Value
Context
Success
Ecosystem
Relationships
Purpose

13. *
* Business‟s Deliver Quality(s)
* Benefit = f(Quality(s))
* Customer Value Net‟s Capture Benefit and Make Value Manifest
* Value = f(Benefit, Capture)
* Segments = Clusters(Value Manifestations)
* Doing this on Coarse Strategic Models can be very limiting
* Delivery of Quality is not very Flexible
* But yet Data Science helps us with matching Segments & Value (above)
* And to a certain extent Broad Benefit and Quality Spectrum
* It‟s a multi step process, and inefficient. Business Success lies in doing this
well. QBV (Quality-Benefit-Value) Efficiency
* Business Survival & Growth depends on continuing to do this well within a
dynamically changing environment where all of these variables change
rapidly.

14. *
* The Framework for once doesn‟t show any Bias against Leaders like Steve Jobs who do the
Real Value Analysis in their Heads and take 20 years to build the worlds most successful
organization and deliver a Revolution
* Versus, professional managers/leaders who use formal methods to arrive at Real Value
conclusions… with shorter performance time windows
* Also this framework is consistent across the above two categories of people
* It is understood that Professional Managers are better off with Formal Methods in a Distributed
Organization with Separation of Roles and Responsibilities. But if you can control the entire
organization then what the hell… you can very well do this in your mind and attribute it to
your Leadership Qualities, Vision and the Value you bring to the table.
* I normally don‟t like words like Domain Expert or Industry Expertise, and the need for
Experience beyond familiarity of being able to apply First Principles, I leave all that
specialization to the Ph.D.‟s I also am a firm believer in Emergent Strategy and the need for
Generalists… But my own framework (this one) does indicate that Industry Experience can be
leveraged to a reasonable degree in assessing Real Value and modeling the Value net. I hate to
say that at a high level the model DOES SEEM TO indicate that.
* But the good part is that the reality is closer to my beliefs that First Principles and Structured
Formal Methods and not Experience or any Domain Expertise rule the game. The latter are
severely detrimental to success in a large global organization in a dynamically changing
complex global environment.

15. *
*So What Happens to The Famous Value Chain/Value
Stream Analysis?
*Well!!! its just another Process Optimization Analysis
from our perspective.
*In a future presentation we would rename it to Quality
Chain/Stream Analysis perhaps because we propose
that what a business delivers is Quality(s) which get
converted into Benefit(s) which then gets Manifest as
Value in the Customer Value Net.
*The Value Chain/Stream Analysis remains the same as
it was but now we DISCONNECT it from Value and link
it to Quality which has a 2 Degrees of Separation from
Real Value.

16. *
* Value isn't something that happens in between your suppliers
and you before it reaches the customers.
* Value isn‟t something that‟s intrinsic to the Good or Service
* Value isn‟t something that can be incrementally built up in
definite stages in a definite and absolute fashion.
* THE REAL VALUE IS MADE MANIFEST BY BENEFITS OR POSSIBLE
BENEFITS IN ONE OR MORE CUSTOMER SEGMENT VALUE NET's
UPON CONSUMPTION OR ANTICIPATION OF CONSUMPTION OF
GOODS OR SERVICES.
* Note: The Positioning, Resource, Capability & Value Chain Models
and Frameworks are not very relevant today.

17. *
Aditya!!!