Value Chain Mapping

The key to economic action is that producers seek market niches to maximize profit and minimize competition. As they do so, they base production decisions not only on anticipated costs from suppliers and anticipated demand from buyers, but also by looking at their competitors. Producers act less in response to actual demand than by anticipating it gauge where competitors have found demand and thus determine what they can do that is similar …..and yet different enough to give themselves a special niche.

Harrison White, Markets from Networks

There has been a lot written on positioning, market making, the relationship of a start up to a market etc. Some of the better writing refers to “markets” as frames of reference; the idea of “Blue Oceans” the innovation driven quest to define uncontested market niches. For entrepreneurs it is always a challenge, between explaining the potential of the market as is, the addressable market, and communicating the opportunity as it could be.

But the idea of a possible market itself is easy when compared to getting to market - execution. Getting to market requires moving from idea, to instance, to generalization. It requires an aligned and gelled team driving toward a goal. And, to realize market potential, it requires a bit of luck.

One of the more interesting approaches to help bring market aspiration, vision and execution together is that of value chain mapping originated by Simon Wardley

At first, it may not seem as the most intuitive approach, but once understood, the technique helps clarify a couple of key ideas vital to developing and executing a strategy to address a market as a network.

• first it situates an effort within an embedded value graph grounding decision not in theoretical business scenarios but in specific economic contexts
• secondly it forces one to consider modular organizational capabilities and the nature of the enterprise - your team
• third it helps surface execution clusters that align to teams that will drive an organic org chart.
• and perhaps most importantly, it helps identify key value creation activities to drive service or product priorities

Below are two models base on value chain mapping in order to help teams think through the market positioning and resultant product and organizational choices.

The first outlines the evolutionary space of a start-up and the interplay between market and organizational drivers.

The second is outlines the high level activities that infrom progression through the evolutionary cycle.

Here is a blank one template which you can duplicate to create your own value chain map.

You may want to take time to read this primer before you begin. And here is some more from the originator of the concept.

If you would like to learn more about this and other recipes, or would like to schedule an exercise, please drop a line.