The Fallacy of Moving Up the Value Chain for Ireland Inc.

Much has been written and spoken about Ireland Inc’s plans to “move up the value chain” as the future saviour of our economy. Unfortunately most of it is coming from people who wouldn't recognise a value chain if it was sitting beside them.



The Value Chain concept was popularised by Michael Porter in his 1985 book “Competitive Advantage,” where he defined value as the amount buyers are willing to pay for what an organisation provides. He defined the Value Chain as the combination of steps within an organisation that together provide value to customers.



As few modern organisations are completely self contained they rely on Suppliers (Supply Chain) and Distributors (Demand Chain) to compete successfully.



This “Chain of Value Chains” forms a Value System where ideally each organisations specialises in a value aspect, creating an optimised Value Systems or Value Chain.



Implicit in the notion of “moving up the value chain” is that there is a “hierarchy of value” running through the Value Chain (from left to right in the graphic above taken from the Value Chain Group) with R&D being the highest form of value adding activity and on down to Building, Fulfilling, Sales & Support being the lower value activities.



Assuming for the moment that this is true ( and there is much evidence to the contrary), the problem for an economy such as Ireland in pursuing a “move up the Value Chain” strategy is that it does nothing for providing jobs for the large part of our workforce who are never going to be able to fill these so called high value adding roles.



What seems to be forgotten is that the Value Chain is more like a “Value Pyramid” when viewed from a job creation perspective.



Only a relatively small number of jobs are available in the high value creation activities as against the larger volume of jobs available in the so-called lower value added activities.
For Ireland Inc. to focus the bulk of our efforts and future on chasing these high value added jobs is a bit like Toyota deciding its only going to make Lexus cars and ignoring the other market segments.



Unless we plan to abandon those people who for the foreseeable future are going to remain (unless we radically change our childcare, welfare and education systems) a large minority, if not a majority of the workforce, then we have to find a portfolio of solutions that cater for the diverse competencies that exist in the Irish labour force now and in the future.



Telling the 1,900 people (3,000 high value add jobs were retained) who were made redundant at the Dell plant in Limerick that our national strategy is to move up the value chain is to condemn them and many of their children to a life of unemployment.