Leonard Greenhalgh | Examining the Value Chain

National Community Reinvestment Coalition 2012National Community Reinvestment Coalition 2012

High-Revenue Positions in Value ChainsHigh-Revenue Positions in Value ChainsLeonard Greenhalgh, PhDLeonard Greenhalgh, PhD

Professor, Professor, andand Faculty Director, MWBE Programs, Faculty Director, MWBE Programs, Tuck School of Business at DartmouthTuck School of Business at Dartmouth

What business has What business has high revenue potential?high revenue potential?

• Growing industryGrowing industry• Central value chain positionCentral value chain position• Ability to deliver valueAbility to deliver value• PortfolioPortfolio

Are you in a growth industry?Are you in a growth industry?

• AutomotiveAutomotive • HousingHousing


• AutomotiveAutomotive• Geriatric careGeriatric care

• HousingHousing• IT staffingIT staffing


• AutomotiveAutomotive• IT staffingIT staffing• GiveawaysGiveaways

• HousingHousing• Geriatric careGeriatric care• Green solutionsGreen solutions

Even if you’re in a growth industry: Even if you’re in a growth industry: Are you in a good part of the value chain?Are you in a good part of the value chain?

• What is your place in the value chain?What is your place in the value chain?

• What actual value is being added?What actual value is being added?

• Are you getting your share of total Are you getting your share of total value-chain revenue? value-chain revenue?

• Can someone take over your position?Can someone take over your position?

How do you fit into the value chainHow do you fit into the value chain??

End-UseEnd-Use

CustomerCustomer After Market

DistributionAssemblyComponentsRawMaterials

Who is taking the profits in the value chain?Who is taking the profits in the value chain?

High

Low

Level of

Profit

End-UseEnd-Use

CustomerCustomer After Market

DistributionAssemblyComponentsRaw

Materials

An entrepreneur’s mission statement An entrepreneur’s mission statement that limits his value-chain positionthat limits his value-chain position

““We We traintrain sewage-treatment facility employees sewage-treatment facility employees to operate the local water treatment plants”to operate the local water treatment plants”

NeedsAssessment

DesignTreatmentFacility

Build TreatmentPlant

TrainTrainWorkersWorkers

Operate Facility

Maintain And UpgradeFacility

NeedsAssessment

DesignTreatmentFacility

Build TreatmentPlant

TrainTrainWorkersWorkers

Operate Operate FacilityFacility

Maintain Maintain And UpgradeAnd UpgradeFacilityFacility

Another Entrepreneur’sAnother Entrepreneur’s Limiting Mission Statement Limiting Mission Statement

““We provide high-quality We provide high-quality janitorial services”janitorial services”

Workspace Needs Assessment

LocationsRent or Build

Building Mgmt.

Clean Clean PremisesPremises

Determine Maintenance Needs

Repair and Refurbish

TenantServes

Customers



Building Building Mgmt.Mgmt.


Determine Determine Maintenance Maintenance NeedsNeeds

RepairAnd Refurbish

TenantIs

Customer

Strategic growth:Occupying more of the value chain

• Strategy is to grow in scope and to move into Strategy is to grow in scope and to move into higher-profit domainshigher-profit domains



Building Building Mgmt.Mgmt.


Determine Determine Maintenance Maintenance NeedsNeeds

RepairRepairAnd And RefurbishRefurbish

TenantIs

Customer

Strategic growth:Strategic growth:Leveraging strategic relationshipsLeveraging strategic relationships

• Strategy is to grow in scale and scope—through strategic business relationships

Think about the sustainable agriculture Think about the sustainable agriculture value chainvalue chain

Do you need to understand it?Do you need to understand it?

Can you grow into areas of Can you grow into areas of greater long-term opportunity?greater long-term opportunity?

Avoid having blinders on:Avoid having blinders on:

Consider your core competenciesConsider your core competencies

What are their What are their core competencies?core competencies?

• Amazon.com Amazon.com andand eBay? eBay?



• Wal-Mart Wal-Mart andand The Gap? The Gap?



• Wal-Mart Wal-Mart andand The Gap? The Gap?

• PayPal PayPal andand American Express? American Express?

What are the core competencies What are the core competencies of a small of a small

hotel/motel owner?hotel/motel owner?

What are What are youryour core core competencies?competencies?

Are they applicable to business Are they applicable to business opportunities that will make opportunities that will make

more money?more money?

Even in a high-revenue business…Even in a high-revenue business…

You must not You must not

““put all your eggs in one basket”put all your eggs in one basket”

All products, services and All products, services and customers have a life cyclecustomers have a life cycle

TIMETIME

Why a portfolio?Why a portfolio?It’s better from a cash-flow perspectiveIt’s better from a cash-flow perspective

++

(-)(-)

Cash Cash FlowFlow

BREAKEVENBREAKEVEN

TIMETIME

A portfolio allows you to grow and be resilientA portfolio allows you to grow and be resilient

+

(-)

You lead with your value propositionYou lead with your value proposition

• Do it Do it betterbetter– Lower-cost, higher-quality, superior delivery, Lower-cost, higher-quality, superior delivery,

more-flexible, etc.more-flexible, etc.– Operational excellence strategyOperational excellence strategy

• Do it Do it differentlydifferently– Segment, target, and position; or innovateSegment, target, and position; or innovate– Differentiation strategyDifferentiation strategy

• Gain Gain customer loyaltycustomer loyalty– Repeat vs. conquest purchasersRepeat vs. conquest purchasers– Customer relationship management strategyCustomer relationship management strategy

Operations strategy falls into four Operations strategy falls into four categoriescategories

Operational Operational excellenceexcellence

QualityQuality

CostCost

DeliveryDelivery

FlexibilityFlexibility

Operations strategy depends on Operations strategy depends on key customer needskey customer needs


Wal-MartWal-Mart

QualityQuality

CostCost

DeliveryDelivery


Operations strategy depends on Operations strategy depends on customer needscustomer needs


Wal-MartWal-Mart

Quality 33

Cost 11

Delivery 22

Flexibility 44



Wal-MartWal-Mart Red CrossRed Cross

Quality 33

Cost 11

Delivery 22

Flexibility 44



Wal-MartWal-Mart Red CrossRed Cross

Quality 33 33

Cost 11 44

Delivery 22 22

Flexibility 44 11



SchoolSchool

constructionconstruction

QualityQuality

CostCost

DeliveryDelivery




SchoolSchool


QualityQuality 33CostCost 22

DeliveryDelivery 11

FlexibilityFlexibility 44



SchoolSchool


Luxury homeLuxury home


QualityQuality 3CostCost 2

DeliveryDelivery 1




SchoolSchool


Luxury homeLuxury home


QualityQuality 3 1

CostCost 2 4

DeliveryDelivery 1 3

FlexibilityFlexibility 4 2



EmergencyEmergency

DepartmentDepartment

QualityQuality

CostCost

DeliveryDelivery




EmergencyEmergency


QualityQuality 44

CostCost 33

DeliveryDelivery 22




EmergencyEmergency


Methadone Methadone ClinicClinic

QualityQuality 44

CostCost 33

DeliveryDelivery 22




EmergencyEmergency


Methadone Methadone ClinicClinic

QualityQuality 44 33

CostCost 33 22

DeliveryDelivery 22 11

FlexibilityFlexibility 11 44

Leonard Greenhalgh | Examining the Value Chain

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