S. Amir Kohan

What are the Role of Value in Strategy?

The basic premise of strategic planning and management is to lead activities that yield great value. Understanding how an organization creates value with its mission is the first step. By value we are not talking about cultural values; we are referencing the value it brings to its end customer or stakeholder. What causes the organization to be successful for its customers/stakeholders—is its value. How well is it achieving its mission, and does its mission still serve its customers/stakeholders?

 

Value Chain

The value chain is another model by Michael Porter, which describes the process by which a business receives materials and then adds value to the materials through processes that create their finished product or service, which is then sold to customers.

Organizations will conduct their value-chain analysis by looking at the steps in their products that are employed to create their product or service and then identifying the way to increase the efficiency of the production chain. The end goal is to create maximum value for the least possible cost, which creates the organization’s competitive advantage. Porter’s concept of the value chain demonstrates the interconnections of various functions in delivering value to the end customer or the organization.

Primary activities, which will vary according to the type of organization’s activities, contribute directly to the value that is created for the customer. An example is a food manufacturer that uses distributors and retailers for its product. The value of the primary activities depends on the secondary activities that provide services to the primary functions. HR administration of most HR functions will fall within this area, as will finance and IT.

A strategist, be it an HR professional or an internal or outside consultant, needs to understand the flow of creating value. They need to know which activities in the organization are considered central to its mission, reflecting its core activities, and which ones are the
most profitable activities or could be profitably outsourced.


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