In this article, we define the Porter’s Value Chain Model for Software Products and What activities contribute to delivering more customer value in Software companies?
The business language has changed. Today, we use terms like:
- War rooms
- Ranks
- Targets
- Positioning
- Rivalry proposition
- Field force
- Strategy.
All these terms are adopted from the Military.
The truth is Every Business is a War and the objective of the Product Strategy is to deliver superior customer value than your competitors.
Today, we will see How to identify ways to create more customer value.
The book, Competitive Advantage written by Harvard professor Michael Porter in 1985 has proposed the value chain as a tool for identifying ways to create more customer value.
According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. However, Professor Porter created this Value chain model for Physical goods.
Here is the Value chain model for Software product companies.
Here is a list of Strategically relevant activities that create value and cost in a software business.
As per this model, the activities are divided into two sections.
1. Primary Activities include:
- Product Strategy and Management
- Product Development & Technology
- Product Design
- Marketing & Sales
2. The second section is Supporting activities, and this includes:
- The IT firm’s infrastructure which covers the costs of general management, planning, finance, accounting, legal, and government affairs
- The services offered and Customer support.
- Human resource management
- Today, Business runs on technology and hence leverages Technology across all functions. IT Team’s contribution to support the Business.
The firm’s task is to examine its costs and performance in each value-creating activity, benchmark against competitors, and look for ways to improve.
Product managers can identify the ‘best-in-class’ practices of the world’s best companies by consulting customers, suppliers, System Integrators, financial analysts, and media, to see who seems to be doing the best job. Even the best companies can benchmark against other industries if necessary to improve their performance.
The firm’s success depends not only on how well each department performs its work but also on how well the company coordinates departmental activities to conduct core business processes.
Lesson:
- Identify the activities that can be improved to deliver more customer value and contribute to the margin.
- Remember – The primary objective of the product strategy is to deliver superior customer value than your competitors.
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