Business Value Chain and Industry Best Practices

Industry Best Practices

• Identified by consulting companies, research organizations, government agencies, and industry associations as the most successful solutions or problem-solving methods for consistently and effectively achieving a business objective.

Business Value Chain Model

• Primary activities:
  • Inbound logistics (receiving and storing materials)
  • Operations (transforms inputs into finished products)
  • Outbound logistics (storing and distributing finished products)
  • Sales and marketing (promoting and selling products)
  • Service (maintenance and repair of goods and services)
• Support activities:
  • Organization infrastructure (administration and management)
  • Human resources (employee recruiting, hiring, and training)
  • Technology (improving products and the production process)
  • Procurement (purchasing input)

Improving Operational Efficiency

• Ask at each stage of the value chain, "How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?"
• Benchmarking: comparing business processes against competitors or others in related industries and identifying industry best practices.

Synergies and Core Competencies

• Synergies: when output of some units used as inputs to others, or organizations pool markets and expertise
• Core competencies: activity for which a firm is a world-class leader, relying on knowledge, experience, and sharing across business units.

Network-Based Strategies

• Take advantage of a firm's abilities to network with each other
• Include use of:
  • Network economics
  • Virtual company model
  • Business ecosystems

Traditional Economics vs Network Economics

• Traditional economics: law of diminishing returns
• Network economics:
  • Marginal cost of adding new participant almost zero, with much greater marginal gain
  • Value of community grows with size
  • Value of software grows as installed customer base grows

Virtual Company Strategy

• Virtual company uses networks to ally with other companies to create and distribute products without being limited by traditional organizational boundaries or physical locations
• Example: Li & Fung manages production, shipment of garments for major fashion companies, outsourcing all work to more than 7,500 suppliers

Business Ecosystems

• Industry sets of firms providing related services and products
• Keystone firms: dominate ecosystem and create platform used by other firms
• Niche firms: rely on platform developed by keystone firm
• Individual firms can consider how IT will help them become profitable niche players in larger ecosystems.

The Digital Firm Era

• Requires a more dynamic view of the boundaries among industries, firms, customers, and suppliers, with competition occurring among industry sets in a business ecosystem.

This quiz assesses understanding of industry best practices and the business value chain model, identifying successful solutions and methods to achieve business objectives.