A value chain is a sequence of activities that each adds value to a product, service or experience. Any activity that generates more valuable outputs than the cost of its inputs can be part of a value chain. Value chains are used to model economics at the level of an industry or firm. Any business model that is not part of a value chain can be considered rent seeking as it adds no value. The following are illustrative examples of a value chain.
At the highest level, the production of a product typically has the following value chain.
Services are based on various layers of intangible value.
|Supply||Inputs including energy, equipment and physical elements of a service, known as service tangibles, such as the food served by a restaurant.|
|Service Delivery||The operational work of delivering a service such as the logistics and kitchen operations of a restaurant. In many cases, information technology is viewed as a value added part of the service. For example, an airline would have no value without its systems for managing bookings, flights and other aspects of operations.|
|Marketing & Sales||The process of developing, branding, distributing, promoting, pricing and selling services. |
|Customer Service||Any touchpoints with the customer in the end-to-end customer experience adds value. |
EcommerceThe ecommerce value chain for sales of physical products. This differs from other ecommerce models such as Software as a Service.
Software as a Service, or SaaS, is a business model that offers software that is hosted on a cloud platform. This allows customers to access scalable software without investing in data centers, hardware and software installations. The value chain for SaaS is mostly about technology with a thin layer of marketing and customer service. Some SaaS products sell themselves with word of mouth while others employ large global sales teams.
|Supply||In some cases, a manufacturer or service provider sell their own goods by an ecommerce channel. In this case, they add value at the supply level.|
|Inbound Logistics||The process of purchasing goods, processing inbound deliveries and warehousing goods.|
|Marketing||The promotion, pricing and sales of goods using ecommerce channels or retail shops using a bricks and clicks model.|
|Outbound Logistics||The process of assembling the order and delivering it to the customer.|
|Customer Service||Handling customer inquiries and requests such as returns.|
|Cloud Platform||Foundational infrastructure and software services including the management of data centers.|
|Applications & Systems||Applications and systems for end-customers.|
|Service Delivery||The operations of applications, systems and cloud platforms for high availability. This is often highly automated and includes an escalation process for incidents and problems. |
|Marketing||Promotion, pricing and sales. Software as a service may be sold by a global sales team using personal selling methods. Alternatively, there may be an attempt to automate this layer of the value chain too with a combination of digital advertising and ecommerce capabilities.|
|Customer Service||SaaS firms may offer multiple levels of customer service with self-service tools at the lowest price level progressing to a personal account representative that you can get on the phone. In some cases, SaaS is sold with support for customization via a consulting practice that adds another layer of value. |
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