Wal-Mart has just stepped up to create a compelling online offer that should rival sites like Amazon.
Traditionally, Wal-Mart’s business model has been to sell its inventory and it makes huge profit through excellence and innovation in supply chain management.
Amazon, on the other hand, has a business model of selling other people’s inventory and it makes huge profit by acting as a portal and taking a portion of the revenue.
Both are good models. Recently, Wal-Mart has adopted Amazon’s business model for its online stores. That is, suppliers whose wares are not necessarily offered in Wal-Mart can be sold on walmart.com with Wal-Mart taking a share of the revenue.
This is a great step for the mega-retailer. Really, there were few companies that could compete with Amazon (the Wall Street Journal suggests that ebay is one of them) in this space but Walmart can do it. They have the web traffic (and it’s easy for them to get more web traffic through instore promotions, flyers, etc… everything they already do anyway).
It’s also a good step because it’s easy to implement. Many smaller suppliers who aren’t able to get into Wal-Mart just might be able to get onto their website which will generate more traffic. But Wal-Mart doesn’t really have to do anything other than supply the technology.
I can see other options, too, such as in-store kiosks where users can buy products that they can’t find in the store; there are also cross-promotion opportunities that Amazon doesn’t have, likepotentially having the products shipped to your local store so you can pick them up on your next trip.
In a previous blog I wrote about the four Function Diamonds of the Business Diamond Framework™: Leadership, Support, Value-Add, and To-Market.
The layout of the Framework is intentional. This layout allows Framework practitioners to not only understand the business from the perspective of each of the four functions, but also from the perspective of the organizational structure and the value chain. This this blog, we’ll look at the value chain.
The horizontal axis represents the business’ value chain (a concept pioneered by Michael Porter of Harvard Business School). Raw materials and information begin on the left and move through the business until they are sold and distributed on the right. Here we see a very basic value chain…
… and the Framework practitioner’s job is to fill out the value chain in detail and then place it onto the Framework. Here we see it integrated into the Framework:
Here’s why this is important: Understanding the value chain is essential to running an efficient, competitive business. But understanding how the functions of the business interact with and contribute to the value chain is even more valuable. And there’s more you can do with the value chain in the Business Diamond Framework (and I’ll talk about that in an upcoming post).
The Business Diamond Framework™ is a new way of looking at a business.
There are many different kinds of businesses but all of those businesses perform the same four functions to achieve their unique ends. Those four functions can be depicted like this:
“Leadership” represents the vision-casting and management of decision-makers. “Value-Add” represents the input-side of the business’ supply chain, which might include information or raw materials. “To-Market” represents the output-side of the supply chain, which includes marketing, sales, distribution, and other steps to bring a completed product or service to market. And “Support” represents the critical but non-revenue-generating functions of the business, which usually includes payroll, reception, HR, and other departments.