423: Value chain mapping (Strategy Skills classics)

For this episode, let's revisit a Strategy Skills classic where we discuss value chain mapping.

We have seen many value chain mapping examples. We have seen good value chain mapping, bad value chain mapping, and incomplete value chain mapping. Ultimately, given the nature of how value chain mapping will work, it can and cannot do a few things. So if value chain mapping is presented to do things it cannot do, then it is flawed.

When you do value chain analysis, 1.) it is far more useful to see where profits will shift over time. 2.) assign some probabilities of what are the odds of this happening. And 3.) what influences those probabilities?

You are analyzing the entire sector, the entire industry. A lot of things influence a sector. Consumer spending can change with the recession. Recession can change things. Different legislation could cause profits to move from point x to point y. Competitors making a misstep could cause it, new competitors entering, and competitors going bankrupt. So whenever someone says "I am certain this will happen", you should question their business judgement because you cannot predict the future.

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