Service Value Chains and Effects of Scale

This paper generalizes Porter’s notion of the value chain for the analysis of service industries. The generalization entails that the flow and the physical transformation and assembly of goods that are characteristic of manufacturing are generalized into flows and transformation of data and flows and transformation of the physical and mental condition of people that are characteristic of many service industries. Utility is generalized from utilities of forms and function of goods, characteristic of manufacturing, to utilities of time, place, convenience, speed, safety, entertainment, physical and mental wellbeing, knowledge and mental capacity, funding and assurance. The analysis yields a categorization of industries according to central features of the value adding process. Here, the analysis is used to identify sources of (in)efficiency of scale, scope and experience, along the value chain.