Exploring Value Chain Analysis for SME Business Development
- Understanding workflows for process optimization
- Mapping the customer journey
- Managing commitment, conflict resolution and market engagement
SME businesses in Nigeria are fragmented and largely disconnected to enjoy value-chain opportunities, unlike large businesses. This is not far-fetched as the challenge of capacity in terms of resources is a major impediment. The rapid improvement of technological innovation, however, has opened the opportunity for small businesses to connect and engage along many nodes within the business value chain. A typical professional services provider like a financial consultant must engage in the administrative and non-administrative functions needed by his company, however, activating a value-chain structure can help him or her outsource these processes without diluting its core processes.
Every business has a value chain opportunity to explore, however, not every business enjoys this opportunity. Exploring value-chain analysis requires that we understand the entire cycle from customer need to delivery. A business opportunity starts from the need to solve a problem or create a solution. Each opportunity to become a part of the creation process enables the creator to be a part of the value chain. From resource sourcing to order delivery many businesses or business processes are engaged in. A value chain is the string of support and connections that are present, available and utilized in the provision of goods and services to consumers. From sourcing from raw materials, transportation, storage, processing, warehousing, production, inventory management and retailing, different players are found within that value chain. The ability of SMEs to conceptualize this string of activities can further help them leverage the value chain opportunities needed to reduce their cost of production and make them more profitable.
Most SMEs operate within a niche and stay within that niche. While that can be a competitive advantage, understanding the activities within the value chain can make the business more profitable even though it still operates within a niche market. Mapping the entire customer journey, anticipating where frictions can disrupt business activities and managing the flow of activities offers SMEs the opportunity to take advantage of the value chain of the markets where they operate. Large companies leverage economies of scale to stay competitive. Small businesses can use value chain management to stay competitive. While this strategy is not a perfect fit for many small businesses, the value chain analysis and management can help these businesses stay competitive in the dynamic and unpredictable market environment.
- Understanding workflows for process optimization: SMEs are typically small businesses. They are nimble and the enterprise owners rarely operate by considering workflow management. Many small business owners work in all areas of their businesses. This can be a big win or a challenge. The big win comes in understanding how work relates to each other or a challenge in terms of scaling operations or working efficiently. Most small businesses rarely practice division of labour as they are mostly short-staffed or operate on a relatively small scale. Taking advantage of the value chain and workflow can create opportunities to scale through outsourcing. Outsourcing operations can be a big opportunity for SMEs to engage in backward or forward integration which stimulates workflow. The more SMEs focus on their competitive strength and leverage other SMEs along the value chain can help them grow, scale and improve their operations.
- Mapping the customer journey: The customer journey is a long tedious one and one that many businesses struggle to envision. Effectively mapping the customer journey can help SMEs understand what they need to do not what they want to do. Knowing what your customers need and how to meet them will keep you in business for a long time.
- Managing communication, conflict resolution and market engagement: Communication is a vital tool and activity in driving business processes. From market awareness to information management and order fulfilment, effective communication can reduce conflict and enhance market engagement. The most visible businesses are those that leverage effective communication.
SMEs are vital to national development as they create about 80% of jobs in Nigeria. While they are a highly fragmented sector, they can leverage the value-chain concept to serve niche markets through a multi-layered value-chain system.
The need to identify, understand and explore value-chain activities that can enhance SMEs' operational activities cannot be overemphasized. This requires understanding the operational workflows and mapping the customer journey to identify strategic collaborations that enhance efficiency and guarantee profitability. It is also important to effectively manage communication and resolve conflicts that can stifle operational efficiency.
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