Value Chain Innovation

The notion of value chain transformation gained widespread currency after author and Harvard Business School Professor Michael E. Porter coined the term in his seminal 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance.

Porter’s idea was that companies should operate as more than isolated collections of people, resources, equipment, and functions, each independently pursuing its own activities and goals.

Instead, Porter said, companies could gain sustainable competitive advantage by transforming their traditional supply chains into value chains, in which the supply chain is seen as one integrated piece of a broader set of processes that add value through each phase of the product lifecycle.

Whereas traditional supply chains are optimized around the transactions that enable the efficient flow of physical supplies and products and also reduce costs, value chains emphasize the enhancement of customer and enterprise value.

That enhanced Transforming Traditional Supply Chains To Achieve Superior Financial Performance Value Chain Innovation value is typically achieved through business strategy alignment and tight collaboration between the supply chain team and other functions such as new product development, engineering, production, quality, supply chain, and service management inside the enterprise, and suppliers, customers, and partners on the outside.