Michael Porter is one of the world's premier management guru, coming up with various management tools that shaped our today's world. When I was taking my MBA, we had to learn two of his tools; Porter's Value Chain Management and Five-Force Model.  

Value Chain Management

What I would like to talk about is the Value Chain Management. First introduced in his book, "Competitive Advantage: Creating and Sustaining Superior Performance" published in 1985, it has basically changed how business operational set up is designed, bringing about improved performance from the synergistic relationship between primary activities and support activities. 

Hidden Cost

However, this synergy comes with a hidden cost that was not apparent back when the book was first published. In today's technology-drive business, integrating Procurement made from the various vendors mean providing certain level of accesses to a vendor into an organisation's network. These may come in the form of vendors handling an outsourced portion of the operations, or applications that are linked to the organisation's network. And here is where the risk arises.

Ideally, when these functions are outsourced to or managed by a third-party, the third-party should have similar or higher data security standards. However, we have seen tonnes of examples where hacking into a targeted organisation had occurred via their third-party vendors.

Unfortunately, many risk owners do not seemed to understand the risks of not sufficiently evaluating their vendors’ ability in securing their IT security. This is apparent in a listing compiled by a US-based cyber-security service provider, Black Kite, which had listed numerous cyber-security attacks conducted via third-party service providers over the years.  

Not a Weakness

I must note that what I am pointing out is not a weakness of the Porter's Value Chain Analysis. Rather, we should be recognising that technology have changed how business operations are being run. With benefits offered by new technology, we should be cognisant that the risks have also increased. In managing the change in the dynamics, so does the due diligence process and risk assessment process, which should not be allowed to stagnate. Only there and then that we can actually reap the benefits offered by Value Chain Management. 

Danny Liew is a content creator under the Newswav Creator programme, where you get to express yourself, be a citizen journalist, and at the same time monetize your content & reach millions of users on Newswav.
Log in to creator.newswav.com and become a Newswav Creator now!  

Newswav is solely an aggregation platform and hosts the content. The views expressed and content above including media (pictures, videos, etc) were provided by the author. If you have any questions about the content, copyright or other issues of the work, please contact Newswav.