Basically this value chain suggests that businesses buy things in, transform them in some way, send them out and deliver a bit of services for customers. All sectors and each organisation, to a greater or lesser degree, have their own value chains. You should know what yours looks like!
All of these activities, the primary activities of the business, are how the business develops its margin and profitability, the key need being to align them around its differentiation or cost leadership position. This is how it develops and retains its competitive advantage.
But there are also a couple of secondary, or support, activities which don’t play a direct role in creating margin or competitive advantage, but support the primary activities to do this.
And, as you’ll know or will have noticed, one of these is HR. i.e in a business competing via competitive positioning, HR is a support function – by definition. So a lot of the stuff which is discussed in HR conferences and publications is just gumph because HR can’t be strategic in this model.
I think a lot of what we’re really talking about when we use the word strategic is just being proactive, i.e we can either be proactive – at the metaphorical table when the big business issues are discussed, so that we can immediately start working on doing what we need to do in HR to support the business. Or, we can be reactive – staying behind our locked rooms at the end of the long corridor in the basement until the FD remembers to tell us what was decided three months ago. Being proactive is obviously a good thing, but it’s not the same as being strategic. And in the example I’ve given here, the focus of the business is all about the business = nobody wants any neat ideas from HR thank you very much, because it’s not one of the primary activities.
So it’s a big disadvantage for a business trying to use competitive positioning that they can’t use the potential benefits of competing on people, via HR. And it’s means that HR becomes a bit of a back water because we are, by definition, a support function.
The good news is that the alternative forms of business strategy are increasingly becoming more popular and these offer greater opportunities to contribute strategically to the business, and therefore to make working in HR a more valued activity too…