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A Valuable Proposition

Are you adding value or just passing things down the line?

This story appears in the June 2001 issue of Entrepreneur. Subscribe »

Value chain and supply chain, two classic business concepts, have traditionally been considered very similar. The assumption has been that everyone who touches a product or service adds some value to it. So farmers add value by growing and harvesting grain; truckers or railroads add value by hauling the grain to grain elevators, which add value by storing the grain and distributing it to the manufacturers, who add value by turning it into finished products. Along the way, a lot of other people join the value chain, from ad agencies to supermarkets.

Today, of course, we realize there's a difference between adding a "fingerprint"-just touching a product along its path-and adding tangible value. Imagine how many supersized orders of McDonald's french fries compare to a 100-pound bag of Idaho potatoes. Now compare the price. We've also had to modify the very definition of value to pertain to an economy based on generating and manipulating information.

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