Every business leader understands the importance of a sound strategy to take their business to the next level. Developing this strategy requires a close analysis of the business and a keen understanding of the key drivers. But knowing what to analyze is sometimes tricky. Michael Porter of Harvard Business School developed a number of very useful frameworks, one of which, Porter’s Value Chain Analysis.
The strength of Porter’s Value Chain Analysis is the focus on the systems and activities, with customers as the central principle, rather than on departments and expense categories. It links systems and activities to each other and demonstrates what effect this has on costs and profit.
To manage, monitor, and leverage for optimal value creation, all these linkages across the supply chain requires a comprehensive business system like an ERP (Enterprise Resource Planning) system. Although an ERP system cannot mitigate incorrect strategy, it will ensure full integration across the organization, improving the linkages and, ultimately, enhancing the flow of critical information.