Are You Truly at the Top of Your Game?

"The value chain is about producing real value for the customer — not just for today, but for tomorrow as well." - Michael Porter

Have you ever stopped to wonder where you really sit in the value chain? Not just in your company, but in your industry? How do you quantify your true value, and - perhaps more importantly - what will that value look like tomorrow?

These aren't just fleeting questions - they are existential ones that every executive should wrestle with. Yet, they don't have simple answers. They are the types of questions that keep us awake at night, gnawing at the edges of our certainty. And here is why: they require you to dissect your business down to its bones, understand your competitors with uncomfortable clarity, know your market with ruthless honesty, and - more than anything - connect with your customers on a level that many leaders avoid or overlook.

But here is the twist: this is not a blog post that promises you answers. In fact, it does the opposite. It lays the groundwork for a journey - a long, winding road that we will navigate together, through future entries. Because answers that matter don't come easy, and they certainly don't come all at once.

So, let's get this started.

• Where Is Your Business Now?

• Finding Your Place on the Smile Curve

• Where Are You Going As a Business?

• Your Focus, Their Focus

• Ask Yourself: Are You Truly at the Top of Your Game?

Where Is Your Business Now?

"The most dangerous thing in business is the illusion of knowledge." - Daniel J. Boorstin

Not where you think it is, or where you hope it is (and hope is not a strategy - ha!), but where it truly sits. Are you driving the industry forward, lagging behind, or worse - just coasting along?

Too often, companies operate with a false sense of security about their position in the value chain. We assume we know our role, our impact, our significance - but do we really?

Understanding your business's true place in the value chain isn't just about strategy - it is about survival.

Here’s the harsh truth: most businesses don’t fully grasp where they stand. Sure, they may have a strong brand, a healthy balance sheet, and a solid customer base, but these are superficial indicators. They don’t tell the complete story of how resilient - or vulnerable - your business truly is.

Start by stripping away the comforting illusions. Forget the accolades, the market share, and the revenue growth. Instead, look at the hard realities: where does the real value come from in your industry? Who creates it? Who controls it? Is your business shaping that value, or just riding along?

Then, assess your impact on the market. Are you setting trends or reacting to them? Are you creating new value for customers, or just optimizing old models? Who depends on your business, and who could easily replace you if you vanished tomorrow?

Now, ask yourself the most critical question of all: where will your future value come from? If you are only focused on today, you are already a step behind. The value chain is dynamic, and constantly shifting. Are you positioning your business to evolve and adapt, or are you clinging to yesterday’s strategies and hoping for the best?

"If you don't know who you are, the [stock] market is an expensive place to find out." – Adam Smith

So, where is your business - really?

Finding Your Place on the Smile Curve

The Smile Curve - ever heard of it? It could be the key to understanding your business's true place in the value chain.

The Smile Curve is a concept first introduced by Stan Shih, the founder of Acer, to illustrate where the real value lies in any given industry. Picture a smile: at the two high points on either end are the activities that generate the most value - research, design, innovation, branding, and customer experience on one side; marketing, sales, and after-sales services on the other. In the middle, where the smile dips, is the lower value-added work - manufacturing, assembly, and basic operations - yet, necessary as part of the value chain!

As the global market has evolved, many companies have strategically moved production, manufacturing, and assembly to countries where these activities can be carried out more efficiently and at lower cost. The image below perfectly illustrates the Smile Curve in action 🙂

Let's consider a very visual example: Apple. If you have a pair of AirPods nearby, pick them up for a moment and take a closer look at the back. You will notice how the words “Designed by Apple in California” sit proudly at the top of the curve - the high-value end - while “Assembled in China” falls at the bottom, where the curve dips.

It is a simple visual, yet it speaks volumes. Apple focuses on high-value activities like design, innovation, and branding - areas that command a premium and foster customer loyalty. Meanwhile, the actual assembly is outsourced to a region where costs are lower, aligning with the middle of the Smile Curve where margins are tighter and competition is steeper.

Wang Chuanfu, BYD's Chairman and CEO, once expressed a hard truth that resonates far beyond the borders of China: "Chinese companies have mastered the art of organizing workers, but they have yet to learn how to organize engineers." It's a blunt assessment.

The message is clear: to thrive in the future, businesses must go beyond managing workers to inspiring and organizing engineers. Those who balance both - creating an environment that values both production efficiency and groundbreaking innovation - will be the ones shaping the future.

Let’s circle back to Apple. Take a closer look at the back of the AirPods case, and you will see how the Smile Curve is perfectly illustrated in its design - very smart people. Notice how "Designed" anchors one end of the curve while "California" holds the other, emphasizing both ends of the value spectrum. By doing so, Apple cleverly associates its products with a globally recognized hub of innovation and creativity, harnessing the prestige of Silicon Valley.

Meanwhile, "Assembled in China" sits at the opposite, right in the dip of the Smile Curve, where the emphasis is on cost efficiency rather than brand value. So, BYD's Chairman and CEO isn't that wrong, right?

This stands as a powerful reminder that the real value isn’t found where the product is assembled, but in where it is conceived, designed, and brought to life.

Where Are You Going As a Business?

So, where does your business sit on the curve? Are you riding high on the edges, creating unique value through innovation, brand power, and customer relationships? Or are you stuck in the middle, competing on cost and efficiency, squeezed by those adding value on either side?

Here's the thing: if you find yourself in the middle, you are in a tough spot - it is a race to zero; and the first one who gets to the finish line loses 🙂 The middle is crowded, competitive, and constantly under pressure from those who do the high-value work of innovation, and those who excel in distribution, branding, and customer engagement.

In the middle, you are sitting between two driving powerful forces that will look at you as a way to leverage their bargaining power and shrink your margins - not exactly what you want, right?

So, how do you move up the curve?

Step 1: Innovate Relentlessly

If you are on the lower-value side, it is time to rethink your product or service offerings. Can you shift your focus to research and development, improve your design capabilities, or leverage technology to create something genuinely new? The key is to add a layer of uniqueness that cannot be easily replicated. As an example, think about being the R&D for your customers. Sit with them and understand how you can leverage your unique capabilities to complement their R&D efforts.

Step 2: Build a Powerful Brand

If your business is buried in the trenches of manufacturing or basic services, start investing in branding, marketing, and customer experience. Can you create a narrative that sets you apart, builds loyalty, and makes your brand irreplaceable in the eyes of your customers? Be customer obsessive.

Step 3: Go Beyond the Transaction

Think beyond the traditional scope of your business. Can you offer after-sales services, personalized customer support, or community-building initiatives that keep customers engaged long after the sale is made? Think about the customer journey, what do you want it to be? Where do you want it to end? What value are you generating to them so they continue with you beyond the purchase?

Step 4: Partner Up

Collaborate strategically with those at the edges of the smile. Partnerships can elevate your business's position by aligning with brands that innovate or excel in customer engagement. Don't just partner for cost; partner for value creation. Think critically about, what you do for them now? what could you do for them? and, Why would they want you to do something else for them?

Step 5: Invest in Knowledge and Skills

Value comes from intellectual capital as much as financial. Are you fostering a culture of learning, innovation, and adaptability? Are your people equipped to push the boundaries and redefine your industry?

"If you are not adding value, you are taking up space." - Unknown, Maybe Me?

Where you are on the Smile Curve determines how well you can weather market shifts, technological disruptions, and competitive pressures.

Being stuck in the middle isn't necessarily a death sentence, but it’s a clear signal: you need to think differently; about what capabilities you have and what you need to build to become a different organization. The businesses that thrive are those that find a way to add real value on either side of the curve - or even better, those that learn to dominate both.

So, ask yourself: where does your business fall on the smile curve today? And more importantly, where should it be tomorrow? Because finding your place on the curve is more than just a strategic exercise - it’s the difference between being indispensable or just another name in the crowd.

It's time to smile 🙂 strategically.

Your Focus, Their Focus

As mentioned earlier, being in the middle can be challenging, but it's not always a dead end.

Let's play a game.

Which of the brands below do you recognize? What do you think they all have in common?

• AKM in Japan

• Diodes in the US

• Sharp in Japan

• LG in Korea

• Micron in the US

• SK Hynix in Korea

• Hon Hai Precision Industry in Taiwan

• Jabil Circuit in the US

Hint: Think Apple 😉

Curious yet? Hold your breath and keep your powder dry, because next week, we will dive deep and unravel the story that connects these names. Get ready for some eye-opening insights! 🎉

Ask Yourself: Are You Truly at the Top of Your Game?

What untapped potential lies dormant in your business, waiting to be awakened?

Imagine for a moment that you could redesign your company's role from the ground up – not constrained by what is, but inspired by what could be!

Where would you position yourself on tomorrow's smile curve? What bold strokes would you make to carve out a space where your unique value shines brightest?

Remember, the future of your business isn't written in stone – it is sketched in the fluid lines of innovation, adaptability, and vision.

So, as you close this page and open your mind to new horizons, ask yourself: If you were to reimagine your business as the North Star of your industry, guiding others towards unprecedented value creation, what radical transformation would you need to undergo today?

Are You Truly at the Top of Your Game?

Keep your Smile with a big Curve in mind 🙂