Prime Value Chain Analysis (PVCA) – A crucial strategic and operational tool

Traditional thinking like “always the way we have done it” self-limits strategic and operational options.

Prime Value Chain Analysis (PVCA) is about understanding and managing an organizations critical path to value. PVC analysis enable companies to redefine its core business and align functions & roles to support business goals. It is a starting point for strategic transformation. It anchors improvement efforts in the highest level company objectives. It helps create the key set of activities that represent the company’s core value proposition.

What PVCA is; impact and benefits

-          Focuses on the evolving needs of target customers; centers on the company’s core competencies and relentlessly pursues execution excellence.

-          Identifies and addresses all functions, capabilities and inputs that either support or impede business goals.

-          Charts the transaction paths to deliver value and depicts the way work gets done in terms of interrelated values stream traversing the business.

-          Offers a current state, structured consolidation of all activities and capabilities associated with a given business outcome; provides single view of organization.

-          Helps establishing a “true north” for reaching strategic objectives beyond bureaucratic constraints and organizational boundaries.

-          Helps understand the relationship between operating model and execution; helps leverage both structural and execution advantages.

-          Helps plan the product portfolio and optimize product development & life cycle.

-          Helps identify optimal portfolio of cross functional improvement opportunities

-          Serves as a catalyst toward becoming a performance-oriented organization. Helps remove ambiguity about how value is created, delivered and by which accountable groups or individuals.

-          Sets direction for continuous process improvement.

-          Works on an enterprise level rather than on a limited, local process step level.

-          Allows to understand the entire journey rather than only individual activities

-          Advises on where accountability and ownership must be imbedded

-          Guides on updating operating model, systems and performance management practices

How you can do a PVCA

Begin top down with the focus on key vital business outcomes to help align processes, systems and capabilities, overcome functional silos and prioritize improvement efforts.

Key objectives should include:

-          Improve/ perfect total customer experience

o   Accelerate time to market

o   Deliver perfect order

-          Improve operational productivity and excellence

o   Reduce costs with increasing risk or reducing quality, agility, etc.

In the first phase of the PVCA, evaluate strategic objectives vs. current process and organizational capacity; redefine the core business activities; identify key improvement opportunities.

In the second phase, prioritize strategic gaps and develop a transformation roadmap.

-          Gain a clear understanding of the company’s strategic objectives, process capabilities, culture, organizational roles and performance systems to identify strategic gaps.

-          Get the business definition right and understand real value contributors (and the three to five critical activities) to align structure and execution.

-          Separate the critical from the organizational noise

-          Identify a PVC champion to oversee and drive the planning and execution of both assessment and implementation.

Analyze and map the value creation journey

Map out all activities and identify the true value contributors in the value creation journey. For example, the following chart shows 96 activities associated with product development, but only 11 activities directly move the new product from brand strategy to launch and then retirement.

It is important to categorize each activity then into Customer Value, Business Value and Low Value category. The last two values are only enablers and can be often simplified and rationalized. Low Value activities with high costs should be the focus of deep dive analysis and process reengineering. PVC and data analysis can help.

Put your focus and resources where it matters most

Overall goal is to simplify & harmonize activities that add little value through standardization and other efficiency approaches. Then move investments and people to opportunity innovation areas that create customer/ Consumer value.

Various challenges:

-          Business policies drive increased complexes in offerings and processes. This complexity drags down productivity, speed to market, clouds overall performance issues.

-          Executives and managers only carry responsibility for narrow slices and lack a holistic view.

-          Company culture and traditional ways of doing things hinder innovation and creativity.

-          Resources are spread across the organization, rather than focused on true value contributors.

-          Traditional bottoms-up, reactive or isolated process improvement efforts cannot deliver on strategic objectives.

 

Credits & special thank to Mark George, Managing Director and Global practice leader for Operations and Process Strategy at Accenture Strategy for his content and  related thought leadership.



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