Value network: Difference between revisions

{{Multiple issues|{{POV|date=November 2024}}{{Underlinked|date=November 2024}}}}

There is no agreed upon definition of value network. A general definition that subsumes the other definitions is that a '''value network''' is a network of [[Role|roles]] linked by interactions in which '''''[[Economic entity|economic entities]]''''' engage in both [[Tangible asset|tangible]] and [[Intangible asset|intangible]] exchanges to achieve economic or social good. This definition is closesimilar to theone definitiongiven ofby [[Verna Allee]].<ref name=":0" />.

[[Clayton Christensen|Christensen]] defines a value network as:

"The collection of upstream suppliers, downstream [[Marketing channel|channels to market]], and ancillary providers that support a common [[business model]] within an industry. When would-be disruptors enter into existing value networks, they must adapt their business[[Business]] models to conform to the value network and therefore fail at disruption because they become co-opted."<ref>[[Clayton Christensen|Christensen, C.]]; ''The Innovator's Dilemma: The Revolutionary Book that Will Change the Way You Do Business'', Collins Business Essentials, page 296</ref>

Fjeldstad and Stabell define a value network as one of three ways by which an [[Organization|organisation]] generates value.<ref>{{Cite journal |lastlast1=Stabell |firstfirst1=Charles B. |last2=Fjeldstad |first2=Øystein D. |date=1998-12-04 |title=Configuring value for competitive advantage: on chains, shops, and networks |url=https://archive.md/20121216134709/http://www3.interscience.wiley.com/cgi-bin/abstract/2193/ABSTRACT#selection-695.0-695.28 |journal=Strategic Management Journal |volume=19 |issue=5 |pages=413–437|doi=10.1002/(SICI)1097-0266(199805)19:5<413::AID-437SMJ946>3.0.CO;2-C }}</ref>. The others are the [[value shop]] and [[value chain]].

Their value networks consist of thesethe following components:

* [[Customer|customers]],

* a service that enables interaction among them,

* an [[organization]] to provide the service., and

* [[Contract|contracts]] that enable access to the service

One example of a value network is that formed by [[social media]] users. The [[company]] provides a service, users contract with the company, and immediately have access to the value network of other customers.

A less obvious example is a [[car]] [[insurance company:]]. The companyCompany provides [[insurance]]. Customers can travel and interact in various ways while limiting risk exposure. The insurance [[Policy|policies]] represent the company's contracts and the internal processes.

F/SFjeldstad & Stabell and [[Clayton Christensen|Christensen's]] concepts address how a companyCompany understands itself and its value creation process, but they are not identical. [[Clayton Christensen|Christensen's]] value networks address the relation between a companyCompany and its suppliers and the requirements posed by the customers, and how these interact when defining what represents value in the product that is [[Production (economics)|produced]].

Fjeldstad and Stabell's value networks emphasize that the created value is between interacting customers, as facilitated by value networks.

[[Richard Normann|Normann]] and Ramirez argued in 1993 that strategy is not a fixed set of activities along a value chain.<ref>[http://harvardbusinessonline.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?ml_action=get-article&ml_issueid=3934&articleID=93408&pageNumber=1 Online HBS Version Normann, R. and Ramírez, R. ''From Value Chain to Value Constellation: Designing Interactive Strategy''], [[Harvard Business Review]], 71, July/August 1993, pp. 65–77</ref>. Instead the focus should be on the value creating system. All [[Stakeholder (corporate)|stakeholders]] are obligated to produce value. Successful companies conceive of strategy as systematic social [[innovation]].

[[Verna Allee]] defines value networks as any web of relationships that generates both tangible and intangible value through complex dynamic exchanges between two or more individuals, groups or organizations.<ref name=":0">Allee, V. ''The Future of Knowledge: Increasing Prosperity through Value Networks'', Butterworth-Heinemann 2003</ref>. Any organization or group of organizations engaged in both tangible and intangible exchanges can be viewed as a value network, whether [[Private sector|private industry]], [[government]] or [[public sector]].

Allee developed [[Value network analysis]], a whole systems mapping and analysis approach to understanding tangible and intangible value creation among participants in an [[Enterprise software|enterprise system]]. Revealing the hidden network patterns behind business processes can provide predictive intelligence for when workflow performance is at risk. She believes [[value network analysis]] provides a standard way to define, map and analyse the participants, transactions and tangible and intangible [[Deliverable|deliverables]] that together form a value network. Allee says value network analysis can lead to profound shifts in perception of problem situations and mobilisemobilize collective action to implement change.<ref>Value Networks LLP, Value Network Adoption at Boeing and in Large Organizations (III/III), Publisher: Colabria, November 2007.</ref>.

All exchanges of [[goods]], services or [[revenue]], including all transactions involving [[Contract|contracts]], [[Invoice|invoices]], return [[receipt|receipts]] of orders, requestrequests for proposals, confirmations and paymentpayments 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 agency|government agencies]], these would be mandated activities. In civil society organizations, these would be formal commitments to provide [[resources]] or services.

Two primary sub-categories 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 [[Volunteering|volunteer]] their time and expertise to a project in exchange for the intangible benefit of prestige by affiliation (3).

All [[Organism|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|DNA molecules—workmolecules]]—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.<ref>Ehin, Charles. Hidden Assets: Harnessing the Power of Informal Networks. New York: Springer, 2005.</ref>

Relationship management typically just focuses on managing information about [[Customer|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.

Resource deployment, delivery, market innovation, [[knowledge sharing]], and [[Time to market|time-to-market]] advantage are dependent on the quality, coherence, and vitality of the relevant value networks, business webs and [[business ecosystems]].<ref>Tapscott, D., Ticol, D., Lowy, A. Digital Capital, Harnessing the Power of Business Webs. Harvard Business School Press. May 2000</ref>

Product and service offerings are constantly changing – and so are the processes to innovate, design, manufacture, and deliver them. Multiple, interdependent, and concurrent processes are too complex for traditional [[Business process mapping|process mapping]], but can be analyzed very quickly with the value network method.

Understanding the transactional dynamics is vital for purposeful networks of all kinds, including networks and [[Community|communities]] focused on creating knowledge value. A value network analysis helps [[communities of practice]] [[Negotiation|negotiate]] for resources and demonstrate their value to different groups within the organization.

Because the value network approach addresses both [[Financial asset|financial]] and [[Non-financial asset|non-financial]] assets and exchanges, it expands [[Metric system|metrics]] and indexes beyond the lagging indicators of financial return and operational performance – to also include leading indicators for strategic capability and system optimization.