Steven Gedeon: Value Chain Management

Summary

In this insightful lecture, Professor Steve Gideon delves into the strategic importance of value chain management for businesses. He explains the concept as a tool for identifying core competencies and sustainable competitive advantages, distinguishing essential customer-focused activities from those that may be outsourced. Gideon uses real-world examples like Nike and FedEx to illustrate how marketing can either add value or be merely a necessary business function, depending on the industry. He encourages strategic thinking to tailor or even reinvent the value chain to align with a company's unique strengths and customer perceptions.

Takeaways

• 📚 The value chain is a strategic development tool used to design and understand a business's operations and competitive advantages.
• 🚀 It's essential to differentiate between activities that are part of the value chain and those that are not, focusing on what the customer values.
• 💡 The value chain helps identify what a company should excel at and what can be outsourced to others with better expertise.
• 🔍 Examples are given to illustrate how different companies, like Nike and FedEx, have different value chain components based on what adds value to the customer.
• 👕 Nike's marketing adds value because it enhances the perception of the product, whereas FedEx's marketing is more about brand awareness and does not directly add value to the customer's experience.
• 🛍️ For fashion brands like Tommy Hilfiger, certain elements like inbound logistics might not be part of the value chain since customers are less concerned with how products arrive in stores.
• 🛠️ The value chain can vary significantly between industries; for instance, automotive manufacturers may need to consider the entire production process to ensure quality perception.
• 💼 Professional service firms like consulting companies have a different value chain focused on problem-solving and customer service rather than physical product delivery.
• 🌐 Value networks, such as social media platforms, require a different approach, emphasizing network promotion and size to increase value.
• ✂️ Companies can redesign their value chain by eliminating, modifying, or creating new components to gain a strategic advantage.
• 🤝 When implementing the value chain, especially for new companies working with larger partners, managing the relationship is crucial due to the potential imbalance in importance.

Q & A

Who is Steve Gideon and what is his professional background?

Steve Gideon is a professor of entrepreneurship at the Ted Rogers School of Management in Ryerson University, Toronto, Canada. He is also a docent at the Australia Hawk and has affiliations with institutions in Germany. He has experience in coaching and has started several companies.

What is the main topic Steve Gideon will discuss in his lecture?

Steve Gideon will discuss value chain management, focusing on how to design and implement a value chain effectively.

What is the purpose of a value chain in strategic development?

A value chain is a strategic development tool used to help design a business, determine what a company does and should not be doing, and identify its sustainable competitive advantage.

How does the value chain relate to a company's customer delivery?

The value chain includes everything a company delivers to the customer, from raw materials to the final packaged product, and helps a company focus on what aspects of the delivery are truly valued by the customer.

What is an example of a task that a company must do but does not add value to the customer?

An example is ensuring that the lights turn on in a company's building when an employee flips the switch; customers do not care about the internal operations that ensure the lights work.

Why is marketing considered part of Nike's value chain but not necessarily FedEx's?

Marketing is part of Nike's value chain because it adds perceived value to the customer's product experience, enhancing the brand's image. For FedEx, marketing is necessary for brand awareness but does not directly add value to the customer's product experience.

What is the significance of understanding what customers care about in the context of the value chain?

Understanding customer preferences helps a company identify which parts of the value chain are essential and which can be outsourced, focusing resources on areas that contribute to competitive advantage.

How can a company determine what parts of the value chain to outsource or keep in-house?

A company can evaluate which activities are core to its competitive advantage and customer value, and outsource those that are not, leveraging the expertise of others while focusing on what it does best.

What are some issues a new company might face when trying to work with larger partners in the value chain?

New companies may be seen as an annoyance due to their smaller size and the effort required to accommodate their needs. Managing this relationship involves developing close ties, having backup vendors, and incentivizing the partner.

What is the importance of strategic thinking in value chain management?

Strategic thinking helps a company to innovate and differentiate its value chain from competitors, potentially leading to a more efficient and effective operation that better meets customer needs.

Can you provide an example of how a value chain might differ between industries?

Yes, the value chain for a fashion clothing company like Tommy Hilfiger might not include inbound logistics, while for an automotive manufacturer, the sourcing and processing of raw materials like iron ore are crucial parts of the value chain.