The elements of the map are the value chains of organization (which describe the organization) and the state of evolution of components (which describes change). Both these elements will need to be combined (see figure 47)
Figure 47 – Components of a Map.
Step 1 - How to write a value chain.
The value chain itself can be determined first by asking the question “what is the consumer need” and then determining the components and subcomponents required to meet that need.
For example, in the case of Fotango's photo service the user need was for an online service to store, modify and retrieve digital photos (the Fotango site). One these needs are known, the visible components of the service can be described from a web site, to image manipulation, to image storage to payment. Once visible components are determined then underlying components can be drawn from CRM to compute resource to power.
For example, in the case of Fotango's photo service the user need was for an online service to store, modify and retrieve digital photos (the Fotango site). One these needs are known, the visible components of the service can be described from a web site, to image manipulation, to image storage to payment. Once visible components are determined then underlying components can be drawn from CRM to compute resource to power.
The best way of doing this, from practice, is to get a group of people together with some post-it notes and write down every consumer need. These should be placed on a huge whiteboard (ideally a wall) in fairly random order. It’s quite common for new unmet needs to be described at this point, don’t add them to the wall but instead take a note as these represent new opportunities.
Then for each need, using a different colour of post-it notes, the group should write down the top-level components that meet the need. From this list any subcomponents that the top-level component will use including any data or practices or activities should be written down. For each subcomponent further subcomponents should be identified until a point is reached that the subcomponents are outside of the scope of the company. For example power as a subcomponent doesn’t need to be broken down any further for a company that consumes power from a power company.
Hence for example, to store digital photos requires some sort of digital photo storage component that in turn requires compute resources, storage resources, an operating system, network, power etc. There is no need to break down an operating system further for most companies as this is something that is acquired from others.
These components will make the value chain and any component needs only to be written once. When the group is satisfied that the components for all needs have been written, then take the needs of the wall and discard them.
Now write on the wall, a single vertical line and mark it value chain. The top-level components should now be added to the wall at the top of the value chain and the subcomponents placed underneath with lines drawn between components to show how they are linked (see figure 48)
Figure 48 – Needs to Value Chain
More components maybe discovered during this process, they should added to post-it notes, added to the wall and links drawn. Once the group is satisfied that they’ve successfully described the value chain then take a picture of the wall and remove everything.
Step 2 - Adding Evolution
On the wall, now draw two lines - a vertical line for value chain and a horizontal line for evolution, marking on lines for genesis, custom built, product and commodity. Start to add the value chain that you previously created beginning with the top-level components. For each component the group should ask itself the question of how evolved is this activity?
In practice the best way to do this is to examine the characteristics of the component, hence ask yourselves:-
• How ubiquitous and well defined is the component?
• Do all my competitors use such a component?
• Is the component available as a product or a utility service?
• Is this something new?
Once you’ve determined, add the component to wall, positioning it along the evolution axis in what the group agrees is the right place. Keep on repeating the process, moving down the value chain, drawing links between components as you go. What you’re aiming for is a map like the one shown in figure 49 (NB the map provided was used in Fotango in 2005, obviously the components have evolved since then)
Figure 49 – A Map
From experience, the writing of a map for a single value chain (area of customer need or line of business) starting from writing down the needs to finishing the map, should take between 30 minutes to an hour once you get the hang of it.
Once you have a map, write another. For every line of business that the company has then a map should be written. In this case, more is better.
Maps should then be compared for common components and a list created for what should be shared i.e. do we really need 15 different CRM systems or would one do? If there is a delta in how components are treated between maps, for example one group says CRM is a commodity but another says CRM should be a custom-built system then this needs to be challenged and the question “why?” asked.
Often it is the case that where there is disagreement over a component then it can be broken into two or more subcomponents, many of which are actually commodity. Alternatively it can be a simple case of inertia. It’s not uncommon for companies to mistreat components (whether activities, data or practices) and to overspend on customizing something that should really be a commodity. Where there’s just a plain disagreement between groups on an identical component always treat it as the more evolved. These deltas are useful in determining areas of efficiency, so keep a note of them.
With enough maps, you should now have an idea of what should be shared components across business, new opportunities and areas of efficiency to investigate. Given a company with say forty different value chains of reasonable size, even if you assign a small group to do this in a serial fashion it should take around a week to complete.
Once you have the maps, I’d recommend sending one team to examine the opportunities, shared components and areas of efficiency whilst you turn your attention to look at the components in more detail.
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Post 20 on the Management and Strategy series.
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