Definition: What is the value chain?
The value chain is a model developed by Michael Porter in 1985 that systematically represents the totality of all value-creating activities of a company. Each activity contributes to the creation of the final product and adds value—or incurs costs.
The concept is based on a simple idea: if you understand how value is created in your company, you can strategically build competitive advantages—either through cost leadership (making activities more efficient) or differentiation (making activities better or different).
In the context of modern business model innovation, the analysis extends beyond the company itself: examining the entire value chain of an industry reveals opportunities for disruption, platform models, and digital business models.
Primary and support activities
Primary activities
Directly involved in creating and delivering the product:
- Inbound logistics: Procurement, receiving, and warehousing of raw materials and intermediate products
- Production/Operations: Transformation of inputs into the final product or service
- Outbound logistics: Storage, distribution, and delivery to the customer
- Marketing & Sales: Go-to-market, pricing, customer journey, and sales
- Service: Customer service, maintenance, training, and after-sales support
Support activities
- Firm infrastructure: Management, planning, finance, legal
- Human resource management: Recruiting, development, compensation
- Technology development: R&D, IT systems, digitalization
- Procurement: Purchasing of resources, negotiation with suppliers
Conducting a value chain analysis
- Identify activities: List all primary and support activities of your company
- Allocate costs: Which activities incur which costs?
- Identify value drivers: Which activities create the most customer value? Where is your USP?
- Find optimization potential: Where can you reduce costs without destroying value? Where can you increase value?
- Analyze the industry chain: What does the entire value chain of your industry look like? Where can you skip or redefine stages?
Digital disruption of the value chain
Digital transformation fundamentally changes value chains:
- Disintermediation: Intermediaries become obsolete—direct-to-consumer models bypass retail stages
- Platformization: Platforms orchestrate entire value chains without producing themselves (Airbnb, Uber)
- Automation: AI and robotics automate individual chain links
- Servitization: From product to service—value creation shifts from production to ongoing operations
- Data-based value creation: Data becomes an independent value creation link
Optimizing the value chain for SMEs
For SMEs, value chain analysis is particularly valuable:
- Focus on core competencies: Identify the 2-3 activities in which you are truly better than the competition—and invest there
- Outsourcing potential: Non-differentiating activities can often be performed more efficiently by specialists
- Digitalization levers: Which chain links benefit most from digitalization?
- New revenue models: Can you unlock new revenue streams by shifting positions in the chain?
Rethinking your value chain?
We analyze your value chain and identify potential for innovation and digitalization.
Frequently Asked Questions
What is a value chain explained simply?
The value chain shows all the steps a company goes through to create a product or service and deliver it to the customer—from procurement through production and sales to customer service. Each step adds value and incurs costs.
Why is value chain analysis important?
It helps companies understand exactly where competitive advantages arise and where optimization potential exists. Through analysis, you can strategically reduce costs, strengthen differentiation, and identify innovation opportunities—especially in the context of digital transformation.
How does digitalization change value chains?
Digitalization enables disintermediation (elimination of intermediaries), platformization (orchestration instead of in-house production), automation (AI and robotics), servitization (from product to service), and data-based value creation. Entire industries are being redefined as a result.