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Value Chain: a simple explanation

It is a chain of needs.

You can say, "I want to drink tea, and in order to make tea, I need tea, hot water and a cup".

Or you can visualize it like this:

An example of a value chain - with arrows

You should read that image as "I need tea, and to make my tea, I need a tea bag, a cup and hot water".

Due to the convention, we always start with the stakeholder at the top  and read the diagram from the top to the bottom. Therefore, there is no need to use arrows. We get a diagram like this:

An example of a value chain - without arrows

Why do we visualize Value Chains?

For every situation you are in, you can build a value chain that extends upward to include your stakeholders' stakeholders, thereby adding additional context to your situation.


Alternatively, you can delve downward to identify what you need to deliver what you intend to deliver.

You can use the value chain to communicate with others. However, its true value lies in exposing your assumptions and identifying knowledge or organizational gaps.

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