Describing What You Do
You’d think that it would be easy to describe what your company does, summarizing your key business activities in a few well-chosen sentences or a clear diagram or two. It’s not. From the inside of your business looking out, it’s much more complicated than you may think to push away the everyday details to get at the core of what keeps you in business from one day to the next.
Constructing a typical value chain
Your company constructs its value chain from the sequence of activities that it engages in to increase the value of your products and services in the eyes of your customers. The chain connects you to the marketplace, ensuring that you don’t stray too far from the customers you serve.
Comparing different value chains
You can find out a great deal about a company by checking out its value chain: where and how it creates customer value. The value chain is a relatively good way to compare and contrast competitors in your industry. You may even want to use this information to revisit your strategic groups of competitors.
Forging your value chain
To develop your company’s value chain – the sequence of activities that you go through in the process of adding customer value to your products and services – you need a list of your company’s capabilities and resources. Take a look if you need help.
You can construct a framework for your value chain by creating a grid that divides your business into value-creating areas. Then you place activities in the grid based on whether they’re part of your primary business functions or are associated with supporting sites.
Focusing on core competence
Your competitive advantage is created in the marketplace. That advantage has everything to do with your customers, with the relative value that they place on your products and services, and with the purchase decisions that they finally make. But what is it about the company that allows you to achieve this competitive advantage? What internal capabilities and resources do you have, and what business activities do you engage in that lead directly to your competitive advantage?
You probably already have the answer. Go back to your company’s value chain and focus on the links most responsible for your competitive advantage. When you do, you come face to face with something that the gurus call your core competence. So defined, core competence is your company’s exceptional capability to create a competitive advantage for itself in the marketplace.
Sustaining an advantage over time
Every company that manages to stay in business from one month to every company that works to stay in business from one month to the next has some competitive advantage and core competence to draw upon; otherwise, it simply wouldn’t be there. But the million-dollar question has to do with how to renew and sustain that competitive advantage over years and even decades. Customers and their needs shift over time, the competition gets more intense, and industries evolve, so your competitive edge and the core competence that supports it aren’t guaranteed to stay around. You rent them; you don’t own them. So you want to make sure that you keep a long-term lease on both.
Betting on the horses is a serious business for these committed professionals. Maybe those punters can tell you something about how to divvy up working assets. Is it sensible to spread your company’s limited resources equally among all the areas that make up your business? Probably not. Each time you set aside time and money for particular business activity, you’re placing a bet. What you’re betting is that the resources you commit are going to contribute to your business, add value to what you do, and eventually come back around to generate revenue and profits.