Diagnose & Map method guide
Value Chain Analysis
Value Chain Analysis decomposes primary and support activities that contribute to cost or differentiation.
Beginner-friendly guide · 4 min read
What Value Chain Analysis does
Value Chain Analysis decomposes primary and support activities that contribute to cost or differentiation.
Value chain analysis breaks an organisation or offering into the activities through which it creates and delivers value. It helps connect a broad strategy to operational choices about cost, differentiation, capability and sourcing.
The map is not an organisation chart. Activities should describe work that changes inputs into something customers or the organisation value, supported by enabling activities such as technology, people and procurement.
Porter’s value chain connects strategic positioning to the activities through which value is created. It is especially useful when abstract strategy needs to become operationally specific.[1]
Read the lower chain from input to customer outcome. The upper layers enable several stages.
InnovationFlow explanatory schematic, synthesised from the method sources[1].
Understand the method
The parts in plain language
Primary activities
Primary activities directly contribute to creating, selling, delivering and supporting the offer. Their labels should fit the business rather than being copied mechanically.[1]
Illustrative example
Diagnose a factory, configure the solution, install it, verify savings and provide ongoing support.
Support activities
Support activities enable several parts of the chain through infrastructure, people, technology and sourcing.[1]
Illustrative example
A common data architecture supports diagnostics, installation and reporting.
Linkages
Advantage often arises from how activities reinforce one another. Show where quality, speed, information or cost in one activity affects another.[1]
Illustrative example
Better installation data reduces later support cost and improves evidence for sales.
When to use it
- When examining cost, differentiation, sourcing or operational capability.
- Before make-or-buy, maturity or circularity analysis.
A practical workflow
- 1
Set the business or offering boundary.
- 2
Map primary and support activities at a useful level of detail.
- 3
Assess contribution to value, cost, differentiation and risk.
- 4
Promote important activities into sourcing, capability or roadmap decisions.
Fictional worked example
Example: an energy-management service
This example is illustrative rather than a reported case. A provider examines where its service can create distinctive value.
Observation:Installed-base knowledge makes site assessment faster.
Implication:Protect and codify this advantage.
Observation:Local service teams reduce disruption.
Implication:Treat service coverage as a core activity-system choice.
Observation:Customers need credible evidence of savings.
Implication:Invest in measurement and reporting capability.
From analysis to decision
How to interpret the result
- 1Identify activities that drive cost, differentiation or risk.
- 2Examine linkages before optimising one activity in isolation.
- 3Use the result to frame capability, sourcing and roadmap decisions.
The interpretation guidance is an InnovationFlow synthesis of[1].
What a useful output looks like
Common pitfalls
- Do not confuse an organisation chart with a value chain.
- Choose a level of detail that supports action rather than exhaustive documentation.
References and method basis
- [1]Harvard Business School Institute for Strategy and Competitiveness (n.d.). The Value Chain. Harvard Business School. Source ↗Originating institution
This guide synthesises the named sources into practical questions for strategy and innovation work. It does not claim that using a tool by itself produces a successful decision.