The management achievements brought by the thought of value chain are enormous. First of all, you begin to see every action not only as "expenditure", but as a step to improve the final added value of the product. Over time, this view has changed many organizations' understanding of their own business. For example, 25 years ago, if you wanted to trade stocks, you had to pay a high commission to your broker. Brokers undertake a whole set of activities, including researching and analyzing stocks, completing transactions, and submitting financial statements to you regularly every month. All the expenses of these activities are included in the commission.
Charles Schwab founded a stock brokerage company, charles schwab Company, and began to implement commission rebate around another value chain. Because not all customers need investment advice, why pay commission? Cancel those activities that need advice and focus on completing the transaction, and you will create another low-cost stock trading model, so that more customers can participate in the stock trading. Corresponding to the fact that the value chain pays attention to what is happening inside the company, it is only a new method to define the value of products or services by customers 20 years ago. Now, this has become the traditional wisdom.
Secondly, the idea of value chain requires people to regard economic activities as a whole, no matter which link or position you are in. If you want to open a fast food company with good French fries like McDonald's, then you can't apologize to customers, because buying potatoes from farmers without proper storage facilities affects the taste of French fries. No matter which link and who has a problem, the customer only cares about the quality of the French fries he wants. Therefore, McDonald's has to work hard to ensure that all the potatoes provided to them must meet McDonald's quality standards under any circumstances.
This interdependence has a far-reaching impact, and the boundaries of management have been quite blurred. No matter between the company and its own customers, or between the company and its own suppliers or business partners, it has become as important as the internal management of the company.
In 2000, news about automobile tires emerged one after another, and the biggest news was that Flint recalled its tire products on a large scale. The company is not celebrating its centenary birthday, but is involved in a public-private relationship disaster. Firestone tire failure has caused dozens of deaths and hundreds of accidents. Millions of recalled tires, a series of bad news, and more and more lawsuits almost flooded the whole company.
However, firestone is not the only company facing this dilemma. The same trouble befalls Ford Motor Company, because many Firestone tires with quality problems are installed on Ford Explorer series cars. In fact, Ford Motor Company itself does not produce tires, which seems to have no direct relationship with customers who own the Explorer series cars. However, Firestone is actually an important part of Ford Motor Company's value chain. In the summer of 2000, Firestone destroyed the value of Ford customers and the value of Ford shareholders.
Another little-known story is still the story of car tires. This is a story about the normal operation of an enterprise without crisis. Toyota Motor Corporation found that a small tire company in Japan adopted a new technology and began to persuade some large tire companies to follow suit. The headline of the Wall Street Journal is "Toyota Motor Corporation urges tire companies to adopt new designs to reduce costs and weight". Why does Toyota pay attention to this? Because they understand that their customers always want cars with low prices and low fuel consumption. If this means urging suppliers to adopt new technologies and create more value for customers, then Toyota will definitely do so. In fact, the success of Toyota Motor Corporation is largely due to their ability to manage suppliers.
In the past 20 years, through the further understanding of how to create value and how management needs to go beyond the organization itself, management itself has also undergone tremendous changes. For example, 10 years ago, purchasing was a matter that was not paid much attention to, and its goal was nothing more than to get things booked in advance on the most favorable terms. Now, purchasing activities have gradually evolved into "supply chain management". This is a real change, not just a name change. Focusing on how to create value for customers, supply chain management requires people to have a more systematic way of thinking: investigate what they buy, not just pay attention to the price; Examine the speed and flexibility of procurement, and at the same time examine the cost; Investigate the knowledge and innovation ability of suppliers, and at the same time inspect the quality of supply.
The value revolution we just mentioned has played a role in many aspects of the company's business. When companies jump out of their own circles and observe from the outside, they often see a new world. Innovation meets customers' needs with various forms of solutions and value-added services, not just selling products to customers. If you want to know the earth-shaking changes that this change has brought to a company, you may wish to review Jack Welch's transformation of General Electric Company.
General electric company used to be the largest industrial enterprise in the world, but now 80% of its profits come from services. Take the locomotive production of General Electric Company as an example. It is the oldest production department of General Electric Company. Since 1895, engineers of General Electric Company have been producing locomotives-the "iron horse" of this industrial age. Until recently, Welch pointed out: "It is your mission to produce the latest efficient locomotives." These are all manufacturing concepts. However, when we look at our business from the customer's point of view, General Electric Company finds that the railway needs no longer bigger and more powerful locomotives, but wants to transport the most goods at the lowest cost. Now, what they really need is a locomotive that can always be in working condition. In other words, what they need is a more reasonable arrangement of locomotives, which can be repaired faster when faults occur, and so on. If you can solve the above problems, then you will greatly improve the performance of the railway, and these are what customers really yearn for.
For the locomotive production department of General Electric Company, it is as simple as turning on the light switch to change the concept from input to achievement and from product to solution. As soon as the light came on, General Electric Company immediately put forward a set of services, such as computer-aided dispatching system, which can help railway companies manage more effectively. Because of the equipment installed on the locomotive, both the railway company and the General Electric Company can know the location of the locomotive anytime and anywhere. Now, if the locomotive breaks down, the railway company doesn't need to call for help, and the maintenance personnel of General Electric Company can go directly to the scene of the accident to troubleshoot.
Because manufactured products have become more and more common and less precious to customers, General Electric Company is not the only company that finds that it can get more wealth from the related services of products than the products themselves. Think about it. When you buy a new TV set or computer, you can get a service contract when you get financial guarantee from the car rental agency. In the 1990s, IBM's success was largely due to its strategic transformation from a hardware manufacturer to a solution provider.
The same principle can also be applied to the most common consumer enterprises. Martha Stewart's website sells all household items at a higher price. For example, it sells a brand of iron on its website, and the price is 125, but the price in other shopping malls may be only 90. When asked about this difference, the company spokesman explained that their company increased the value of customer service by providing instructions. After turning on the iron online, you can learn how to iron shirts. Do customers pay for these suggestions, or for the convenience of ordering online, or for the brand authorization of Stewart company? The answer may be one or all of them. In the new economic era, value is increasingly attached to these intangible things.