Value Chain Reconfiguration
Lego bricks have fascinated generations of children. The wonderful thing about them is that the same bricks can be used to build new things. Value chain reconfiguration works along the same lines. The aim is to create flexible, intra-company structures to fulfill specific customer needs along the entire value-creation chain, from raw materials all the way to the end consumer.
Reconfiguring the value chain involves seven steps:
Defining and weighting the drivers of customer value and growth
Setting up a detailed value chain for the company
Identifying the dependencies of the customer-value drivers, and allocating them to the segments of the value chain
Allocating costs to the value chain
Breaking down the value chain into core and non-core activities
Screening various options: performing certain steps internally or out¬sourcing, omitting, or leapfrogging them, and / or networking more closely with suppliers
Choosing the best options and implementing them
When using this approach, sometimes major technological advances enable key steps in the traditional value chain to be re-designed or dispensed with altogether. Examples are Dell's simplification of sales by letting customers configure their own computers, or online selling by Amazon, which revolutionized retails sales. In some cases, consumers are no longer prepared to pay for process steps that they can do themselves. Additionally, because of reduced transport costs and shorter transport times companies have more flexibility in how they produce and sell products and services throughout the world.
The goal of value chain reconfiguration is to acquire or maintain maximum control over key steps and processes, thus internalizing core competencies as a competitive advantage. At the same time, the aim is to have the least possible ownership of capital or assets involved in the value chain.