POV: You’re an account manager at a boutique marketing firm, and you’ve just landed a new client.

It’s a local Washington, DC coffee shop that’s been a staple of its neighborhood since opening two years ago with an enviable ethos—responsibly-sourced product, living wage for its staff, and sustainable materials. Still, it needs a larger and more diverse base of loyal customers to drive engagement, not to mention its profitability goals.

That’s where marketing professionals can come in, but where to begin?

Learning to recite the tasting notes of its macchiato versus its cappuccino and Americano surely isn’t the starting point.

Understanding what makes an organization tick, where its true strengths lie, and uncovering the greatest sources of opportunity requires a holistic understanding of how it operates, which is true whether you’re a marketing pro, a consultant, or a manager brought in from outside the company: You have to know its value chain backward and forward. 

What is a value chain?

You could say that a company’s value chain is every element that combines to make a business what it is. 

It’s the complex, behind-the-scenes web of materials, processes, and personnel that come together to form the end product experienced by the consumer: that hot, foamy, hint-of-caramel beverage they’re sipping inside a sun-splashed cafe with soft piano playing in the background as staff buzzes around the room.

The value chain consists of every rung on the complex ladder that creates and contributes to creating value.

A Value Chain Case Study

At your coffee shop client, the value chain might start with the beans it sources through fair trade practices overseas, but it also consists of the transportation used to get the beans to its doorstep. There’s the staff it hires. The point-of-sale software it uses at the counter. The vendor that supplies its to-go cups and to-go containers…

Don’t forget about the small, family baker it partners with on baked goods (after all, you can’t have a latte without a croissant). How about the Wi-Fi it offers? The ambience inside the cafe? What hiring practices are used?

Ultimately, the complete product experienced by the customer goes well beyond the concoction perfected by the barista behind the counter, owed to a value chain that ultimately produces the moment when a customer’s order is called.

Where did the term ‘value chain’ come from?

The term value chain dates back to Michael Porter’s 1985 book Competitive Advantage and has been a part of marketing parlance ever since. Porter came up with the concept as a way to better understand how companies make money, how they can gain a leg up on their competitors, and where their deficiencies (translation: opportunities) might lie.

In smart marketing, fully understanding the “how” and “why” behind each facet of the value chain isn’t optional—it’s required, argues Sonya Grier, professor of marketing at American University’s Kogod School of Business.