At the beginning of 2020, all industries have been impacted dramatically by the Covid-19 pandemic, which changed the way we work, the way we create value for our society, and the way we create and deliver services and products.
This impact shifted the industries to reimagine their business resilience in crises time and brought new innovations and business models that disrupted all industries. The disruption is continued with the current Russian & Ukrainian war, the food shortage, climate change, and the need for more sustainable and conscious business.
If you have not analyzed how your industry has shifted, this article will help you understand and visualize that shift using a simple tool called the Industry Value Chain.
You can consider the Industry Value chain as a tool to visualize how the value of an industry is created, who are the players that generate the value, and who receives that value.
The value chain is important not only to visualize the current chain but to understand the industry shifts, and who the new players are disrupting the chain by creating new value. This new value can either impact your business negatively or positively.
I would consider it a great tool to identify the existing capabilities and the required essential new capabilities that your business may be missing.
In this article, I will discuss how to visualize the value chain and create a value chain for the industry, and what are the use cases that can benefit your business from that.
How to visualize the Industry Value Chain?
Let us visualize the industry value chain using the manufacturing industry as an example.
The traditional industry value chain starts with the main player which is the manufacturer, it is simply an input and output equation, the input is a raw material and the output is a product, similar to the graph below.
The input mainly is provided by different partners in the business ecosystem, those who can provide important goods or services that are critical to the value chain. The main player here is the manufacturer needs to have a set of capabilities to transform this input into products with a set of different activities.
In manufacturing, it is not only about raw material being provided as input, when we analyze the ecosystem more, you will also see more is added to that, for example, but you will also need real estate to have the factory land, you will need manufacturing equipment, such as machines and robots. In the figure below, I added other important players to the value chain to show who can be the main players on the partner side.
Accordingly, the manufacturer needs additional capabilities, for example, acquiring talents to operate the machines, product design, manufacturing operations management, research and development, customer relationship management, and lots of other capabilities that are important to have a successful production and sales to generate the end value which is ready to ship products. The below graph shows those capabilities.
Moreover, when we look at who receives the value, it is also getting bigger over time, for example, businesses, consumers, distributors, and maybe the government.
This was a representation of the traditional value chain that most manufacturers are doing. While any industry has been disrupted by many factors which introduced new players to the industry. Those players have added additional capabilities to simplify how the value is generated, managed, and captured.
For example, 3D printing is one of the important changes that distributed the manufacturing value chain, the IoT devices, and its important role to enable connected factories and connected products. The cloud service providers deliver powerful computational resources that can ingest huge data and generate more powerful insights.
Other disruptions can be generated from outside the industry, for example, the impact of Covid-19 on business, which creates new consumption and working habits, the rise of AI, and talents war, when we think about specific manufacturing industries like Automotive, the electrical vehicles has distributed the combustion engine and brought new players, like vehicles charging services and batteries industries.
The graph below shows the different distributors on the manufacturing value chain and how they influence the value creation, for example, the immersive design with the enablement of Data & AI can build new capabilities through Digital Twins, and this can lead to various use cases to manage the supply chain, observe operation performance or create new digital showrooms.
This was just a snapshot of the value chain shifts in one of the industries, you can imagine it when creating a new service or product in any industry and understand the surrounding environment around it and how the megatrends and innovations in this industry impact that value chain.
This snapshot can be enhanced more by adding the influencers layer and putting the actual players’ names in your region or globally that impact that industry, for example, who are innovators in Mixed reality or Digital Twin, who are the key providers for IoT devices and edge solutions, and so on.
Why visualizing Industry Value Chain is critical to your business?
I will list here a few essential benefits of building and visualizing your industry value chain
Understanding the industry landscape
It is a navigation map to who are the current and new players in the industry, how value is created and who captures this value, and how different changes and shifts in the value chain can impact your business.
Discover the different ecosystems that your business has today and what are the missing ecosystems that you may need to build. This will make you aware of the changes and key industry shifts and sense the new trends early so you can change your transformation strategy and vision before it is too late.
Develop your Partnership Strategy
No company can implement its transformation alone, and you cannot build all capabilities in-house, you need to envision who are the essential partners that you need to work with to realize and achieve your strategy.
For example, many companies are struggling to build Data & AI capabilities, how can those companies partner with AI vendors? then they can bring their expertise and help them achieve their AI strategy.
Mergers and acquisitions
You may have a vital capability that cannot be outsourced. It will be hard and time-consuming to rebuild from scratch.
Building innovation can be achieved in different ways; buying through mergers and acquisitions is one of them.
Visualizing the value chain and depicting the new players who are bringing new inventions to create unique value to the chain will help you in acquisition decisions.
Shifting to new Industry and New Market Entry
Some companies that use conventional ways of operations and production may discover that they need to shift their industry before it is a shock transformation for them.
Returning to the automotive industry example, most Automotive leaders started to shift their production to electric vehicles and strengthen their capabilities as new revenue streams that can even replace their current core traditional manufacturing.
Unrealizing the industry shifts through the value chain can lead to cases like many companies who were leaders and lost their market positions and some of them are bankrupted, such as Nokia, Blockbuster, and Kodak as the most famous examples.
Moreover, this can help you analyze if it’s appealing to join a new market, where is the missing value that your business can create, and who can help you create this value in that market. And if this market has sufficient players and capabilities that facilitate investment over time.
In conclusion, the industry value chain has lots of benefits. I have mentioned the most important ones while there are lots of other benefits that can help your organization understand the industry shifts, empower you to make better strategic decisions, enhance your existing capabilities, and build new ones that create additional value for your customers & your business in the current competitive market.
Looking forward to knowing your thoughts on how the Industry Value Chain can help your business and industry and what other benefits you can have from it.
Also published on Medium.