Value Chain Mapping

Value Chain Mapping

Purpose

Structures a business's activities according to Michael Porter's value chain model into primary and support activities, in order to see where value and margin actually arise in the organization, and in which activity competitive advantage — cost leadership or differentiation — is genuinely built.

Anchored in research

• Porter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance — the value chain model. Primary activities: inbound logistics, operations, outbound logistics, marketing & sales, service. Support activities: firm infrastructure, human resource management, technology development, procurement.
• The extended view: the value chain doesn't stop at the organization's boundary but extends into a value system, from suppliers all the way to the customer's own customers — competitive advantage can also arise from optimizing links outside your own chain.
• Same theoretical family: Porter's Five Forces, see ../../../opportunity-recognition/skills/competitive-and-five-forces-mapping/SKILL.md.

Method

1. List the organization's primary activities across Porter's five categories: inbound logistics (receiving and storing inputs/raw materials), operations (converting inputs into the finished product or service), outbound logistics (delivering the product/ service to the customer), marketing & sales, and service (post-sale support and maintenance).
2. List the support activities: firm infrastructure (management, finance, quality, legal), human resource management, technology development (R&D, IT, product development), and procurement.
3. Assess each activity's cost against the perceived value or differentiation it creates for the customer — which activity brings the most value in the customer's eyes, and which is a pure necessary cost with no differentiation attached?
4. Identify the source of margin: in which activity does most of the margin actually arise, and in which activity is competitive advantage really being built — cost leadership (the cheapest execution) or differentiation (the best perceived value), per Porter's generic strategies? An activity can look cost-heavy without being where the advantage lives — trace margin to the activity, not just to the category it sits in.
5. Map the linkages between activities — how does improving one activity affect another (e.g. better quality control in operations can reduce service costs later; tighter procurement terms can compress inbound logistics costs)? Porter's chain is explicit that competitive advantage often comes from optimizing a linkage, not a single activity in isolation.
6. Extend to the value system where relevant: how does your own value chain connect to suppliers' value chains upstream, and to the distribution channel's/customer's value chain downstream? A cost or differentiation advantage that shows up only inside your own chain can still be captured by a supplier or channel partner if the system-level linkage isn't examined too.
7. Use the result as the basis for a competitive-advantage analysis: which activities are worth optimizing and investing in, which should be outsourced, and which should be discontinued entirely — and does the chosen generic strategy (cost leadership or differentiation) match where the analysis actually located the advantage?

What this skill does NOT do

• Doesn't calculate exact cost or margin figures for you — it structures which activities they should be attributed to and where they should be sourced.
• Doesn't make the final competitive-strategy choice (cost leadership vs. differentiation) — it produces a structured basis for the decision.
• Doesn't replace industry-specific deep analysis — the generic model always needs to be adapted to context.

Refinement notes

Areas to keep deepening with real practice:

• your own rules of thumb for where in the value chain hidden competitive advantage most often turns up in different industries
• concrete templates (into ../../references/, e.g. a value-chain-map template)
• reference cases / your own examples
• what this skill deliberately does not do (guardrails, common mistakes) — add to the list above

Once this section is filled in and validated in practice, update the maturity field in skills_index.json to draft, validated, or canonical (see ../../../meta/maturity_levels.md). Don't add new fields to the frontmatter — name and description are the only ones allowed (see ../../../meta/frontmatter_schema.md).

Continue from here

• Preceding skill in the same pack: ../layer-based-business-structuring/SKILL.md — an alternative, layer-based way to structure the same business.
• Next in this pack: ../category-definition-and-modeling/SKILL.md — models a product or business relative to market categories.
• Related skill in another pack (same theoretical family): ../../../opportunity-recognition/skills/competitive-and-five-forces-mapping/SKILL.md
• This pack's shared guardrails: ../../CLAUDE.md

References

• ../../references/ — the pack's shared background material
• ../../CLAUDE.md — the pack's shared guardrails