Innovation and Porter’s Value Chain

First, let’s remind ourselves of the Value Chain Model. Portner’s insight was to identify all the primary functions of a business and all the support functions of a business and seek to understand what the firm did exceptionally well, and what it must do at least moderately well. While other strategists had thought and written about the linkages between internal operations, Porter was one of the first to create the concept of the Value Chain. Today we often think of the value chain as extending “upstream” to suppliers and “downstream” to distribution channels and even to customers or consumers. The tool is a powerful metaphor when thinking about where and how a firm adds value.

Primary activities are the ones we usually think of as distinct operations or departments and are the “direct” costs in a business – inbound and outbound logistics, “operations” which could be manufacturing or development, marketing and sales, and service. Support activities are those that we traditionally think of as “overhead” – Human Resources, Information Technology, Procurement, and what Porter called Firm Infrastructure – legal, financial, management and so forth.

The model, once again, does not explicitly call out innovation, and in this breakdown of the organization it is hard to decide where and how innovation should add value. Clearly innovation can play a role in any of the primary functions. Innovation can improve the way we make things, or the way we distribute products and services, or the customer support and service we offer. Conversely, innovation could be considered a “supporting” capability that improves all functions from an enabling perspective. It’s possible that innovation exists in both locations. However, there are two other items to consider when thinking about innovation and the Value Chain analysis.


Submitted by Blogging Innovation |by Jeffrey Phillips
http://www.business-strategy-innovation.com

Innovation and Porter's Value ChainI’m reviewing the relationship between a number of tried and true strategic management models and innovation, to see if those models and concepts hold up under the increasing importance of innovation. A few days ago I reviewed Porter’s Five Forces model and concluded that while Porter didn’t explicitly call out innovation, it was clear that the Five Forces model embraced innovation. Today, we’ll look quickly at another Porter model – the Value Chain Analysis – and investigate how it holds up innovation.

In the 1980s, Michael Porter wrote a number of books about corporate strategy that became the basis for much of the education of MBAs, at least where strategy was concerned. Few MBAs in the 80s and 90s failed to study Porter’s Five Forces or Value Chain Analysis. Since many of those MBAs minted in that period are now in leadership positions in their firms, it behooves us to understand the models they carry around with them, and whether or not those models are open and extensible where innovation is concerned, or whether they ignore or resist innovation. Leer más “Innovation and Porter’s Value Chain”

Innovation and Porter’s Value Chain

First, let’s remind ourselves of the Value Chain Model. Portner’s insight was to identify all the primary functions of a business and all the support functions of a business and seek to understand what the firm did exceptionally well, and what it must do at least moderately well. While other strategists had thought and written about the linkages between internal operations, Porter was one of the first to create the concept of the Value Chain. Today we often think of the value chain as extending “upstream” to suppliers and “downstream” to distribution channels and even to customers or consumers. The tool is a powerful metaphor when thinking about where and how a firm adds value.

Primary activities are the ones we usually think of as distinct operations or departments and are the “direct” costs in a business – inbound and outbound logistics, “operations” which could be manufacturing or development, marketing and sales, and service. Support activities are those that we traditionally think of as “overhead” – Human Resources, Information Technology, Procurement, and what Porter called Firm Infrastructure – legal, financial, management and so forth.


les cinq forces de porter

by Jeffrey Phillips

I’m reviewing the relationship between a number of tried and true strategic management models and innovation, to see if those models and concepts hold up under the increasing importance of innovation.  A few days ago I reviewed Porter’s Five Forces model and concluded that while Porter didn’t explicitly call out innovation, it was clear that the Five Forces model embraced innovation.  Today, we’ll look quickly at another Porter model – the Value Chain Analysis – and investigate how it holds up innovation.

In the 1980s, Michael Porter wrote a number of books about corporate strategy that became the basis for much of the education of MBAs, at least where strategy was concerned.  Few MBAs in the 80s and 90s failed to study Porter’s Five Forces or Value Chain Analysis. Since many of those MBAs minted in that period are now in leadership positions in their firms, it behooves us to understand the models they carry around with them, and whether or not those models are open and extensible where innovation is concerned, or whether they ignore or resist innovation. Leer más “Innovation and Porter’s Value Chain”

Las 5 Fuerzas de Michael Porter

Las 5 Fuerzas de Porter es un modelo holístico desarrollado por Michael Porter, para analizar cualquier industria en términos de rentabilidad. Según Porter indicó en 1979, la rivalidad con los competidores viene dada por cuatro elementos o fuerzas que combinadas crean una quinta fuerza: la rivalidad entre los competidores.

1. (F1) Poder de negociación de los clientes.
2. (F2) Poder de negociacion de los proveedores.
3. (F3) Amenaza de nuevos entrantes.
4. (F4) Amenaza de productos sustitutivos.
5. (F5) Rivalidad entre los competidores.


Las 5 Fuerzas de Porter es un modelo holístico desarrollado por Michael Porter, para analizar cualquier industria en términos de rentabilidad. Según Porter indicó en 1979, la rivalidad con los competidores viene dada por cuatro elementos o fuerzas que combinadas crean una quinta fuerza: la rivalidad entre los competidores.

  1. (F1) Poder de negociación de los clientes.
  2. (F2) Poder de negociacion de los proveedores.
  3. (F3) Amenaza de nuevos entrantes.
  4. (F4) Amenaza de productos sustitutivos.
  5. (F5) Rivalidad entre los competidores. Leer más “Las 5 Fuerzas de Michael Porter”