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Value Chain Analysis

July 10, 2012

This updated chart shows the trend in spending for IT and related support activities to current and forecast to 2016. Notice the slight drop in 2008 to 2012. There was also a slight drop in the 2000 to 2012 period. Compared to other expenses (i.e. payrolls) IT spending held up relatively well.

Value Chain as presented by M E Porter positions Technology within the support category of business activities. As the chart above confirms this support activity is becoming increasingly more important by virtue of the spend.

Charles Schwab a brokerage company realized they were becoming more of a technology company than a brokerage company based on the amount of resources IT was consuming. They began to quickly address and seize upon this differentiator. A software client of mine insisted they were a product manufacturer primarily. Until we showed them the value chain analysis breaking down their spend in each area of the value chain.  They realized, the primary activity was customer service and support. Then realigning the focus of the company to support their primary activities the company began to unlock the value within the enterprise.

Using the value chain analysis and allocating the resource and time spend in your organization, what is your primary activity and is your enterprise? Is this a competitive advantage (meaning, can you quantify that you outperform your competitors in this activity)? Is your business aligned with this activity?





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