Value Chain Strategy

• Exhibit 19-2 shows the six main requirements of a

successful value chain strategy: coordination and
collaboration, technology investment,
organizational processes, leadership,
employees, and organizational culture and
attitudes.
COORDINATION AND COLLABORATION
For the value chain to achieve its goal of meeting and
exceeding customers’ needs and desires, collaborative relationships
among all chain participants must exist. Each partner must identify
things he or she may not value but that customers do. Sharing
information and being flexible as far as who in the value chain does
what are important steps in building coordination and
collaboration. This sharing of information and analysis requires
more open communication among the various value chain partners.
TECHNOLOGY INVESTMENT
Successful value chain management isn’t possible without a
significant investment in information technology. The payoff from
this investment,
however, is that information technology can be used to restructure
the value chain to better serve end users.
ORGANIZATIONAL PROCESSES.
Value chain management radically changes organizational
processes—that is, the ways that organizational work is done. When
managers decide to manage operations using value chain
management, old processes are no longer appropriate. All
organizational processes must be critically evaluated from beginning
to end to see where value is being added. Non-value-adding activities
should be eliminated.
LEADERSHIP
Successful value chain management isn’t possible without
strong and committed leadership. From top organizational levels to
lower levels, managers must support, facilitate, and promote the
implementation and ongoing practice of value chain management.
Managers must seriously commit to identifying what value is, how
that value can best be provided, and how successful those efforts
have been. A culture where all efforts are focused on delivering
superb customer value isn’t possible without a serious commitment
on the part of the organization’s leaders.
EMPLOYEES/HUMAN RESOURCES
Employees are an organization’s most important resource. Without
employees, no products are produced and no services are delivered—in
fact, no organized efforts in the pursuit of common goals would be
possible. So not surprisingly, employees play an important role in value
chain management.
The three main human resource requirements for value chain
management are flexible approaches to job design, effective hiring
process, and ongoing training.
Flexibility is the key to job design in value chain management.
Traditional functional job roles—such as marketing, sales, accounts
payable, customer service, and so forth— won’t work. Instead, jobs
must be designed around work processes that create and provide
value to customers. It takes flexible jobs and flexible employees.

In a value chain organization, employees may be assigned to work

teams that tackle a given process and may be asked to do different
things on different days depending on need.The organization’s
hiring process must be designed to identify those employees who
have the ability to learn and adapt.
Finally, the need for flexibility also requires a significant investment
in continual and ongoing employee training. Whether that training
involves learning how to improve the flow of materials throughout
the chain, how to identify activities that add value, how to make
better decisions faster, or how to improve any other number of
potential work activities, managers must see to it that employees
have the knowledge and tools they need to do their jobs efficiently
and effectively.
ORGANIZATIONAL CULTURE AND ATTITUDES
The last requirement for value chain management is having a
supportive organizational culture and attitudes. From our extensive
description of value chain management, you could probably guess
the type of organizational culture that’s going to support its
successful implementation! Those cultural attitudes include sharing,
collaborating, openness, flexibility, mutual respect, and trust.
Obstacles to Value Chain Management
• The obstacles to value chain management include
organizational barriers(refusal to share
information, reluctance to shake up the status quo,
or security issues), unsupportive cultural attitudes,
lack of required capabilities, and people or
employees unwilling or unable to do it.
(see Exhibit 19-3).
ORGANIZATIONAL BARRIERS
Organizational barriers are among the most difficult obstacles to
handle. These barriers include refusal or reluctance to share information,
reluctance to shake up the status quo, and security issues. Without shared
information, close coordination and collaboration is impossible. Finally,
because value chain management relies heavily on a substantial
information technology infrastructure, system security and Internet
security breaches are issues that need to be addressed.
CULTURAL ATTITUDES
Unsupportive cultural attitudes especially trust and control
also can be obstacles to value chain management. The trust issue is a
critical one, both lack of trust and too much trust. To be effective,
partners in a value chain must trust each other. A mutual respect for,
and honesty about, each partner’s activities all along the chain is
essential. When that trust doesn’t exist, the partners will be
reluctant to share information, capabilities, and processes. But too
much trust also can be a problem.
REQUIRED CAPABILITIES
We know from our earlier discussion of requirements for the
successful implementation of value chain management that value
chain partners need numerous capabilities. Several of these
capabilities—coordination and collaboration, the ability to configure
products to satisfy customers and suppliers, and the ability to
educate internal and external partners—aren’t easy, but they’re
essential to capturing and exploiting the value chain. Many of the
companies we’ve described throughout this section endured critical,
and oftentimes difficult, self-evaluations of their capabilities and
processes in order to become more effective and efficient at
managing their value chains.
PEOPLE
The final obstacles to successful value chain management can
be an organization’s people. Without their unwavering commitment
to do whatever it takes, value chain management won’t be
successful. If employees refuse to be flexible in their work how and
with whom they work—collaboration and cooperation throughout
the value chain will be hard to achieve. In addition, value chain
management takes an incredible amount of time and energy on the
part of an organization’s employees. Managers must motivate those
high levels of effort from employees, which is not an easy thing to
do. Finally, a major human resource problem is the lack of
experienced managers who can lead value chain management
initiatives.
Technology’s Role in Operations Management

• As we know from our previous discussion of value chain management,

today’s competitive marketplace has put tremendous pressure on
organizations to deliver products and services that customers value in a
timely manner. Smart companies are looking at ways to harness technology
to improve operations management. Many fast-food companies are
competing to see who can provide faster and better service to drive-through
customers. With drive-through now representing a huge portion of sales,
faster and better delivery can be a significant competitive edge.
Although an organization’s production activities are driven by the
recognition that the customer is king, managers still need to be
more responsive. For instance, operations managers need systems
that can reveal available capacity, status of orders, and product
quality while products are in the process of being manufactured, not
just after the fact.
Managers who understand the power of technology to contribute to
more effective and efficient performance know that managing
operations is more than the traditional view of simply producing the
product. Instead, the emphasis is on working together with all the
organization’s business functions to find solutions to customers’
business problems.
 Quality Initiatives
• We’re going to define quality as the ability of a product or service
to reliably do what it’s supposed to do and to satisfy customer
expectations.
• How is quality achieved? That’s an issue managers must address.
A good way to look at quality initiatives is with the management
functions—planning, organizing, leading, and controlling—that
need to take place.
PLANNING FOR QUALITY - Managers must have quality
improvement goals and strategies and plans to achieve those goals.
ORGANIZING AND LEADING FOR QUALITY - Because quality
improvement initiatives are carried out by organizational
employees, it’s important for managers to look at how they can best
organize and lead them.
CONTROLLING FOR QUALITY - Quality improvement initiatives
aren’t possible without having some way to monitor and evaluate
their progress. Whether it involves standards for inventory control,
defect rate, raw materials procurement, or other operations
management areas, controlling for quality is important.