OPPapers.com

Occupying The Sweet Spot

Introduction
A detailed analysis of the value chain is often the starting point in Business Model innovation. The value chain is nothing but the set of value adding activities that any business has to perform and coordinate. Based on Michael Porter’s framework, we can categorise a firm’s value chain activities into two groups: - Primary and Support. Primary activities include inbound logistics, manufacturing, outbound logistics, sales and service. The support activities include firm infrastructure, human resource management, technology development and procurement. A thorough analysis of all the activities that make up the chain, extending from the basic raw materials suppliers to the final customers, becomes necessary to identify the scope for improvement and remove inefficiencies where they exist. Indeed, this is the essence of what has come to be known as Supply Chain Management, i.e. managing the activities that stretch from the “suppliers’ suppliers to the customers’ customers.” While analysing the value chain, not only is it important to examine each activity to see if it is being performed efficiently, but also to see how the activities together add value for the customer. In other words, we need to look at both local efficiency and overall effectiveness, when we study the value chain.

Understanding the company’s business
Thanks to the availability of new technologies like the Internet, activities that companies have always believed to be central to their business are suddenly being handled by new, specialized competitors better, faster and more efficiently. So, asking the fundamental question, what business the company is in, is the starting point in the transition to a better business model.

According to John Hagel III and Marc Singer in most companies, there are three kinds of businesses - a customer relationship business, a product innovation business, and an infrastructure business. These businesses have very different critical success...