Looking for ideas up and down the Value Chain

There is quite a bit of academic research that says entrepreneurs start companies in industries in which they have work experience. They can leverage their deep knowledge of the industry to come up with a way to add value. A great way to brainstorm business ideas within an industry is to use the value chain.

As seen below, the value chain lists all of the primary and secondary activities that any given business must perform. But not all of these have to be performed in-house. Therefore, opportunities for new ventures may exist by providing one or more of the activities listed on the value chain or offering services that bridge two or more aspects of the value chain together.

Porter Value Chain

To come up with new business ideas, do the following:

  1. Look at the industry in which you have experience to see where most of the businesses in an industry fall in the value chain.
  2. Brainstorm opportunities to service those other businesses by focusing on the other activities in the value chain.

The goal is to think about where the most value can be added because if a business does not add value then there is no reason for it to exist.

Let me illustrate this process with an example. A rapidly growing segment of the restaurant industry is the food truck sector. In cities like Los Angeles, San Francisco and New York City, food trucks are all the rage. The “roach coaches” of old have been replaced by food trucks that serve cuisine that rivals many fancy restaurants. While many entrepreneurs have been launching food trucks focusing on different cuisines, some are starting businesses that help food trucks thrive.

First is Cater2.me, which is a firm that offers catering services by partnering up with a host of partners, including food trucks. In other words, this firm is giving customers the ability to enjoy food from a food truck without trying to track it down on twitter. And the food trucks are no longer limited to selling their food only to the people who walk up to them. The net result is a win-win for both the foodie and the food truck owner.

Second, a company called Off the Grid is working to help food truck owners become successful. They work on almost every aspect of the business – from getting the right permits to leveraging social media to improving the cuisine. The firm is already working with over 100 food trucks in the San Francisco area and many food truck owners say they would not have been able to survive without the services of Off the Grid.

To use terminology related to the value chain, cater2.me is adding value for food truck owners by helping them with outbound logistics (i.e., delivering their products to customers) and marketing and sales. While Off the Grid is also helping food truck owners with “marketing and sales”, they also assist with many of the support activities, such as setting up the business’ infrastructure, procuring resources, and managing technology.

Both these businesses are thriving because they focused on opportunities in other parts of the value chain and created something of value to many others in the industry. Hopefully this idea-generation technique can be of use to you as well.

Dr. Atul Teckchandani is an Assistant Professor of Management at the Mihaylo College of Business and Economics, California State University, Fullerton. He teaches courses in entrepreneurship, provides student advising and is involved with the Center for Entrepreneurship within Mihaylo College. He has a PhD in Business Administration (Management of Organizations) from the Haas School of Business at the University of California, Berkeley, as well as an MBA from the McCombs School of Business at the University of Texas, Austin.

 

Published by CSUF Entrepreneurship

We teach, coach and lead the principled, cross-disciplinary practice of entrepreneurship. We believe that, through determined practice, leadership and team work, our students, faculty, clients, volunteers and alums can systematically recombine the new and the old to forge new ventures, create an entrepreneurial culture, and dramatically benefit our community.

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