How to Use Value Chain Analysis to Maximize Profits

Whether your business develops a product or delivers a service, it should never stop considering how to create more value. In the end, maximized value translates into maximized profit and that benefits both the consumer and the business. Follow these steps to begin maximizing profit through value chain analysis.

Instructions

1. Plan a meeting of senior level management. Tell the managers that the meeting will address the subject of creating more value in the company's product or service. Each manager must bring a written analysis of his department's specific contribution to that product or service.

2. Introduce the subject of value chain analysis at the meeting. Solicit input from each manager and write these on a presentation slide or white board for all the attendees to view. Do not limit managers to analyzing their own departments. Invite them to brainstorm ideas on how other departments might increase the company's product or service.

3. Create a value chain analysis. Identify the main components of the business. This should include manufacturing and operational activities, order-taking, marketing, sales, delivery and customer support. Next to each component, list the crucial elements to improve.

4. Distribute this analysis to the individual departments. Have them describe their department's current operations. Then charge them to create at least one strategy they believe can improve department activities. For example, the Human Resources department might devise a strategy for bettering recruitment and hiring.

5. Advise the managers to investigate from the customer's perspective. They should identify which "Value Elements" of each business activity customers consider critical to their needs. For example, if the activity is order taking, most customers would regard getting a swift answer to their request as a top priority.

6. Merge the managers' improved strategies with the customers' preferences into a master value chain analysis. Distribute the document to senior level management. Charge them to revise their suggested strategies for improving business operations so that they fulfill customers' expectations. Complete the value chain analysis process by deciding which redesigned procedure to implement first.