The topic of added value has typically been addressed under the category of system improvement. Cheaper, better and/or faster was the way to achieve a competitive advantage along the entire added value chain. It no longer suffices to work WITHIN the "added value system" when an integrated value chain has been broken up, corporate borders have become more permeable and industry lines have become blurred. Working ON the "added value system" is a must.
The automobile industry example
The automobile industry shows just how much the concept of added value can change. In the 1920s, when the car appeared as a “new” product on the market, pioneering companies displayed a high level of integration. Take Ford, with its legendary River Rough Plant. They didn’t just manufacture cars there. The plant also featured upstream processes such as steel extraction, metalworking and at times even power generation. But times have changed, and with them the logic of added value. In the 1990s, General Motors charged $20,000 for a Pontiac Le Mans. Roughly $6,000 of that went to Korea for labor and assembly. $3,500 went to Japan for engines and electronics while $1,500 went to Germany for design and styling. Taiwan and Singapore received $800 for small parts and England ended up with $500 for marketing. About $100 landed in Barbados for data processing and the rest – less than $8,000 – went to strategists in Detroit, lawyers and bankers in New York, lobbyists in Washington, insurance company employees and shareholders of GM itself. The example illustrates some things about added value. Namely, it is increasingly difficult to define added value with an integrated and sequential process that begins with raw materials and ends with the presentation of a finished product. The more sophisticated the product, the higher the centrifugal force on the added value chain.
What can we take from this for our subject of business logic?
Traditional industries develop into networks of added value zones. A number of roles then result from that constellation. Added value transforms from an area of optimization to an area of design. However, the effect of design elements depends on how clearly defined the roles are that serve as a pattern for added value and give the company its place in the networked added value space. Foregoing parts of the added value chain does not by a long shot mean that a company is cleverly focused. Resources may still be committed to uncritical processes. In other cases, action is taken too quickly and an attempt is made to regain lost ground. Many of those who take away supplemental added value – such as suppliers – often do it without much thought. From focused mid-size companies emerge diversified corporations struggling with excessive complexity.
Once again, the obligatory relationship between the strategic role and other elements of business logic is evident here. From this perspective, some companies cut themselves off from a vital part of their future. There are several reasons for this: Concepts are often not "mature" enough to eliminate other parts of the added value chain that are not (or no longer) vital to the strategy. Furthermore, the added value chain has long since displayed a lack of agility with which it can add or remove measures when needed. Finally, as far as substance or action are concerned, management appears unready for what may occur as part of a networked added value system, namely, the orchestration and control of independent added value partners who act, to a degree, on behalf of their own interests and beyond the traditional chain of command.