Evolving From Value Chain to Value Grid

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The term “value chain” suggests an orderly progression of activities that allows managers to formulate profitable strategies and coordinate operations with suppliers and customers. Using examples from the telecom, pharmaceutical, steel and auto industries, the authors argue for a more complex view of value — one that is represented by a “value grid”. The grid approach allows firms to move beyond their industry lines to identify opportunities and threats. It pushes managers to understand the power balance between suppliers and manufacturers. The new pathways to value can be vertical (as firms explore opportunities upstream or downstream from the adjacent tiers in their value chain); horizontal (as firms identify opportunities from spanning similar tiers in multiple value chains); and even diagonal (as firms look more integratively across value chains and tiers for prospects to enhance performance and mitigate risk).

Frits K. Pil is an associate professor at the Katz Graduate School of Business and a research scientist at the Learning Research Development Center, both at the University of Pittsburgh. Matthias Holweg is a senior lecturer at the Judge Business School at the University of Cambridge, United Kingdom, and a research affiliate at the MIT Center for Technology, Policy, and Industrial Development.

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