BPI Technique - Value Chain Analysis - VCA

Description

• A method to present graphically the relationships between business functions by grouping them into high-level core and support processes which, taken together, add value to a client organization’s customers. The value chain concept was originally developed by the renowned management theorist, Peter Drucker. Any use of the value chain should be attributed accordingly.

• Assists  management in visualizing the core processes in the organization that create value for customers and their interrelationships with other support processes.    

When to Use

• The value chain is a subset of the Holistic Business Model and is completed during the creation of that deliverable. It is used to represent the functions of the organization in a standard diagram which serves as a unifying focal point for the organization, and during analysis and selection of Focus Areas for improvement.

• It is particularly useful in organizations that have been exposed to the concept, are familiar with the format and are eager to develop a process-focused organization.
• The value chain is also used to illustrate the relationship with suppliers and customers in what is known as a value system. The value system consists of multiple value chains for organizations     that purchase, or provide goods and services to each other.

Approach

The activities performed in creating an Entity-level Business Model will often generate enough information to develop a client’s value chain. If sufficient detail is not gathered, a decision may be made to do further, more detailed business modeling. Various modeling techniques may be utilized to diagram the business system and organizational linkages. (Business Modeling) At a minimum, they must be able to connect the different functions (objects) of the organization, with the ability to depict work and information flows between them.

Once sufficient detail is collected, the value chain is completed by grouping the functions of the Business. Model into logically related core and support processes.

1. Collect and organize information.
1. Use Entity-level Business Model
2. Collect organizational charts, procedures and other information about the flow of information and processes through the organization
3. Interview department and area managers to learn more about the application of procedures and co-ordination aspects with other areas of the organization.
2. Determine if secondary Business Modeling is necessary
1. If previous activities and experience  do not provide enough information to create a draft business model, workshops and individual interviews may be conducted. Material from  these sessions, along with client-provided information should allow the consultant to develop a pictorial representation of the value chain. Multiple sessions may be required to finalize the business model. In most cases, it is desirable to start with a high-level model and add detail.
3. Develop the draft value chain.
1. Logically thread functions of the business together to reflect the client's view of how "work gets done".    
2. Group the value-adding functions together, since they are the core processes.
3. Group the remainder into logically-related support processes.
4. Isolate the strategic management process as a stand-alone.
5. Delineate the business into not more than 15 major process names and 45 subcomponents.
6. Realize that the relationships between the 15 are the point of focus while the others are merely named.
4. Validate and revise the value chain model
1. Review the completed models with the selected workshop participants to confirm their validity.
2. Resolve the discrepancies and make adjustments as required.

Guidelines

Tactics/ Helpful Hints

• Isolating and naming business processes is often a demanding process. Using conventional names may be easier, but it will reflect the industry and not a value chain specifically customized for the nuances of the way the client views the business (this is drawn out of the client through creative workshops). Always declare the start and end points (or events) of a process first, then describe the things that happen between these two ends. This will allow you to identify and group the various business functions/departments together into a final discrete process.
• Since value chains are intended to be high-level models, it is too early to define processes in detail at this time.
• Know that client staff involvement may be extensive, depending on the size and complexity of the business model. This involvement may include participation in workshops, individual interviews and validation of the consultant's interpretation of the process relationships. The duration of this activity will depend on the number of processes, the number of functional areas in the organization involved, and the depth to which the analysis is taken.

Resources/Timing

• Ensure that consultant skill sets include interviewing skills and an ability to work at multiple levels of the organization, and excellent workshop leadership and facilitation skills.
• Guide client team members toward organizational structure, information flows and processes, and away from identifying organizational problems. Problems can be associated with the model later.

Templates