The Value Chain Analysis is a helpful tool used to create value for customers in projects. In a simple example, value is added to raw materials before the product is sold. This is easy to calculate in the manufacturing industry. However, calculations get complicated when value needs to be determined in the service industry, as they require intangible inputs like knowledge, time and equipment to be assessed.
To know how much value the project team has put into a project, it is important to use the Value Chain Analysis tool. The tool helps the project team identify methods by which value can be created for customers, both internal and external. Further, it also helps to maximize this value.
The tool can be used in a three-step process:
Activity Analysis stage: The project members identify the activities to undertake to deliver the product or service.
Value Analysis stage: The project team adds the greatest value to each activity before the product or service reaches the customer.
Evaluating Changes and Planning of Action stage: The project team evaluates changes and decides whether it is worth making changes. Once done, they follow the set plan of action.
In the Activity Analysis stage, the project team brainstorms the activities necessary to undertake on the project to add value that eventually contributes to the end-user's experience. This step requires a systematic business process including marketing, sales, order taking, delivery, operational process, support, etc. that would help serve the customer. In simple terms, this stage involves a systematic flow of work to be carried out by the team. Apart from this, it would also involve other factors such as:
- How does the project motivate the team to perform more effectively?
- How to select and develop technologies and techniques?
- How to get feedback from customers on performance?
- How to keep up-to-date with effective technologies and techniques?
- How does recruitment takes place? Recruitment of effective individuals with the right skill would give best value.
Once the brainstorming is complete, list the activities in a simple flow chart running down the page. This gives a good visual representation of the value chain.
In the Value Analysis stage, the project team lists value factors for each of the activity identified in the first stage. Value factors are the things customers would value when an activity is conducted. These value factors vary with the nature of business. Right next to the value factors, note down what needs to be done or changed to provide great value to each activity.
In the final stage, the project team evaluates the changes and plans for action. By now, the team would have generated a list of ideas that would add value for the customer. Do not start working on all tasks at once. Instead, prioritize them and pick the quick and easy tasks to improve the team spirit. Next, move to the subsequent changes. Some may prove to be impractical and would give only marginal improvements at a great cost. Finally, tackle the most difficult tasks in a systematic manner to deliver steady improvement.