What's your contribution to a solution's value chain? Where does your solution fit into the broader market? By understanding how you fit and what your primary value is to the market, you can better position yourself for long term value.

Requirements

• None

Estimated time

1 hour (could be a lot shorter, or a LOT longer depending on where your business maturity is)

Goals: why are we doing this?

• To identify our true value contribution—because understanding where we fit, and what our core contribution is, to a solution's value realization is how we maximize our own profitability and the value of our solution in the market.
• To determine the value chain structure, and which affects the long term profit potential of the industry.
• To identify who our business will be dependent upon—who will be a part of our overall tribe.
• To identify who the real competitors are in a broad "space"—which further defines our profit potential.
• To educate, or remind ourselves, about the structures of markets and how a market turns an idea into realized value.
• To make it easier for our buyers to understand what we are doing for them.

Discussion

As discussed in We have a responsibility as marketers, what we do as marketers is help our society take innovations (solutions) and determine which of these innovations are valuable to society through the process of marketing.

Bringing this down a level, as a business, we take a set of inputs, do something, and produce a set of outputs. The amount of money you make = the value THE MARKET PLACES on the work you did with those inputs. This is all your company does. Everything else is inefficiency.

<aside> 💡 Value created & captured - Cost to create that value = margin

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In Michael Porter's book "Competitive Advantage", he introduced the concept of a "value chain." In the book, he defines a general purpose value chain with a set of primary activities that a business performs.

Sales, marketing, human resources, even product development or engineering are considered support activities to the primary activities that a business performs, which are:

Inbound Logistics

The activities to get your source inputs that you operationally transform into outputs.

Operations

The transformational activities you do to inputs to change them into outputs that are sold (i.e. why you exist).

Outbound Logistics

The activities you do to deliver your value to customers.

Marketing & Sales

The processes to persuade customers to purchase from you instead of your competitors.

Service

The activities related to maintaining the value of the product once it's been purchased.