Getting Started with Value Chains

I used to think I understood value chains, now I actually do

Photo by Sonny Ravesteijn on Unsplash

It’s generally a good idea to understand how things work together. It doesn’t matter if you’re programming, practicing martial arts, or baking delicious bread. Frameworks are useful tools. In the case of business strategy, value chains are the poster child of frameworks.

I recently read some material from Nathan Baschez and Ben Thompson on the subject. This compiles everything I learned and aims to get you from zero to one as quickly as possible.

Defining Value Chains

When Michael Porter wrote Competitive Advantage, the business world was more focused on operational efficiency than strategy. Porter showed us that strategic thinking around what you do was more important in the long run than how you do it. In explaining this phenomenon, the concept of “the value chain” was born. Porter elaborates on this in his introduction:

At this book’s core is an activity-based theory of the firm. To compete in any industry, companies must perform a wide array of discrete activities such as processing orders, calling on customers, assembling products…