Value network
From Wikipedia, the free encyclopedia
Value networks are complex sets of social and technical resources. They work together via relationships to create value (economics). This value takes the form of knowledge, intelligence, a product (business), services or social good. Included in a company’s value networks are research, development, design, production, marketing, sales, and distribution (business). Value networks exhibit interdependence. They account for the overall worth of products and services. Companies have both internal and external value networks. External facing networks include customers or recipients, intermediaries, stakeholders, complementors and suppliers. Internal value networks focus on key activities, processes and relationships that cut across internal boundaries, such as order fulfillment, lead processing, or customer support. Value is created through exchange and the relationships between roles. Value network operate in public agencies, civil society, in the enterprise, institutional settings, and all forms of organization. Value networks help advance wealth, social good and environmental well-being. They can also support groups that challenge the standing social order or operate on the fringes of society and can be equally well employed by terrorists and criminals.
[edit] Important terms and concepts
[edit] Tangible value
- All exchanges of goods, services or revenue, including all transactions involving contracts, invoices, return receipt of orders, request for proposals, confirmations and payment are considered to be tangible value. Products or services that generate revenue or are expected as part of a service are also included in the tangible value flow of goods, services, and revenue (2). In government agencies these would be mandated activities. In civil society organizations these would be formal commitments to provide resources or services.
[edit] Intangible value
- Two primary subcategories are included in intangible value: knowledge and benefits. Intangible knowledge exchanges include strategic information, planning knowledge, process knowledge, technical know-how, collaborative design and policy development; which support the product and service tangible value network. Intangible benefits are also considered favors that can be offered from one person to another. Examples include offering political or emotional support to someone. Another example of intangible value is when a research organization asks someone to volunteer their time and expertise to a project in exchange for the intangible benefit of prestige by affiliation (3).
All biological organisms, including humans, function in a self-organizing mode internally and externally. That is, the elements in our bodies—down to individual cells and DNA molecules—work together in order to sustain us. However, there is no central “boss” to control this dynamic activity. Our relationships with other individuals also progress through the same circular free flowing process as we search for outcomes that are best for our well-being. Under the right conditions these social exchanges can be extraordinarily altruistic. Conversely, they can also be quite self-centered and even violent. It all depends on the context of the immediate environment and the people involved. Reference--Ehin,Charles. Hidden Assets: Harnessing the Power of Informal Networks. New York: Springer, 2005.
[edit] A Non-Linear Approach
- The value networks model challenges the traditional notion of a value chain. Historically we have been in an industrial age, focused on a linear value model, and have recently begun to switch to a new business style in which there are a web of different resources that work together to create value.
- Often value networks are considered to consist of groups of companies working together to produce and transport a product to the customer. Relationships among customers of a single company are examples of how value networks can be found in any organization. Companies can link their customers together by direct methods like the telephone or indirect methods like combining customer’s resources together (4).
- The purpose of value networks is to create the most benefit for the people involved in the network (5). The intangible value of knowledge within these networks is just as important as a monetary value. In order to succeed knowledge must be shared to create the best situations or opportunities. Value networks are how ideas flow into the market and to the people that need to hear them (6).
- Because value networks are instrumental in advancing business and institutional practices a value network analysis can be useful in a wide variety of business situations. Some typical ones are listed below.
[edit] Relationship management
- Relationship management typically just focuses on managing information about customers, suppliers, and business partners. A value network approach considers relationships as two-way value-creating interactions, which focus on realizing value as well as providing value.
[edit] Market space strategies and investments
- Identifying lucrative and powerful investment opportunities requires the ability to quickly assess a complex environment and accurately map the current and emerging market space. A value network analysis helps identify, analyze, evaluate, prioritize, and manage investments in market spaces - ranging from providing seed capital through joint venture financing and support of management buy-ins or buy-outs. it views a firm as a series, chain, or network of basic activities that add value to its products and services, and thus add a margin of value both to the firm and its customers. In the value chain conceptual framework, some business activities are primary processes; others are support processes
[edit] Business web and ecosystem development
- Resource deployment, delivery, market innovation, knowledge sharing, and time-to-market advantage are dependent on the quality, coherence, and vitality of the relevant value networks and business webs and ecosystems.
[edit] Fast-track complex process redesign
- Product and service offerings are constantly changing - and so are the processes to innovate, design, manufacture, and deliver them. Multiple, inter-dependent, and concurrent processes are too complex for traditional process mapping, but can be analyzed very quickly with the value network method.
[edit] Reconfiguring the organization
- Change is all there is. Mergers, acquisitions, downsizing, expansion to new markets, new product groups, new partners, new roles and functions - anytime relationships change, value interactions and flows change too.
[edit] Supporting knowledge networks and communities of practice
- Understanding the transactional dynamics is vital for purposeful networks of all kinds, including networks and communities focused on creating knowledge value. A value network analysis helps communities of practice negotiate for resources and demonstrate their value to different groups within the organization.
[edit] Develop scorecards, conduct ROI and cost/benefit analyses, and drive decision making
- Because the value network approach addresses both financial and non-financial assets and exchanges, it expands metrics and indexes beyond the lagging indicators of financial return and operational performance - to also include leading indicators for strategic capability and system optimization.
[edit] References
- Haag, Stephen.Management Information Systems.Toronto: McGraw-Hill Ryerson, 2004.194
- Understanding Value Networks by Verna Allee (retrieved May 2006)
- Value networks create value by mediating exchanges between their customers by Computer Sciences Corporation (retrieved May 2006)
- Carnegie Mellon Software Engineering Institute (retrieved May 2006)
- Value Network Clusters (retrieved May 2006)
Allee, Verna. The Future of Knowledge: Increasing Prosperity through Value Networks, Butterworth-Heinemann, 2003
“Value Networks: How Organizations Really Work,” Dr. Alexander Schieffer, Knowledge Management Research & Practice, January 2005
Ehin, Charles. Hidden Assets: Harnessing the Power of Informal Networks. Springer, 2005.
Open resource site for value networks [1]
