Digital Value Chains
Digital transformation improves customer experience and business operations. It also supports the deployment of new business models that were previously too costly or technically infeasible. Porter’s Value Chain provides a framework opportunity to explore new opportunities for digital transformation in a business.
The Value Chain separates business activities across primary and supporting activities. Primary activities are those that relate to the manufacture, marketing, sales and support of a product or service. Support activities, do as the label implies, they support the primary activities. A great example is Human Resources supporting the staff working on the help desk.
The Digital Value Chain
Digitisation can work across both the primary activities and the supporting ones. For instance the primary activities can be connected end-to-end through digital to speed up the transition from sales to manufacturing. Dell were once the leaders in this space, enabling customers to customise design their systems via the website. Similarly, Uber are using digital to provide an immediately link the customer with the driver
Vertically, digital can serve to improve efficiency but also to better connect supporting activities with primary ones. For instance internal micro-blogging can give HR and Accounting visibility of new project wins or spikes in workload that may have a downstream effect.
Creating the Digital Value Chain
Creating a digital value chain first requires a mapping of the business process as the customer sees it. Typically this process should look messy as you identify the different touch-points, departments and people the customer goes through.
When mapping this out, I will personally look at what information is being provided or uploaded by the customer. With the interaction mapped out redraw the process as a hard system relating to the stages a customer goes through. With this drawn out, it’s easy to create the primary activities list for the value chain. From these primary activities one can quickly draw out the supporting activities that are required throughout each stage of the chain.
Some strategic questions that can then be asked:
- How would the primary activities run without human support? Can they be automated?
- Where are the customer moments of truth? What can be done to replicate this experience online or using a mobile device?
- How does information transfer between the primary activities and supporting activities? How can digital make this more efficient?
- What would the experience look like as an iPhone app? What would it be like if email was banned?
Digital Strategy Series
For more on digital strategy you should read these other posts from the series: