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A value network is a graphical illustration of social and technical resources within/between organizations and how they are utilized. The nodes in a value network represent people or, more abstractly, roles. The nodes are connected by interactions that represent deliverables. These deliverables can be objects, knowledge or money. Value networks record interdependence. They account for the worth of products and services. Companies have both internal and external value networks. [1]
External networks include customers/recipients, intermediaries, stakeholders, complementary, open innovation networks and suppliers.
Internal networks focus on key activities, processes and relationships that cut across internal boundaries, such as order fulfillment, innovation, lead processing and customer support. Value is created through exchange and the relationships between roles.
Christensen defines value network as:
"The collection of upstream suppliers, downstream 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 models to conform to the value network and therefore fail at disruption because they become co-opted." [2]
Fjeldstad and Stabell [3] declare a value network as one of three ways by which an organisation generates value. The others are the value shop and value chain.
Their value networks consist of these components:
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 company provides insurance. Customers can travel and interact in various ways while limiting risk exposure. The insurance policies represent the company's contracts and the internal processes.
F/S and Christensen's concepts address how a company understands itself and its value creation process, but they are not identical. Christensen's value networks address the relation between a company and its suppliers and the requirements posed by the customers, and how these interact when defining what represents value in the product that is produced.
Fjeldstad and Stabell's value networks emphasize that the created value is between interacting customers, as facilitated by value networks.
Normann and Ramirez argued [4] in 1993 that strategy is not a fixed set of activities along a value chain. Instead the focus should be on the value creating system. All stakeholders are obligated to produce value. Successful companies conceive of strategy as systematic social innovation.
Verna Allee defines value networks [5] as any web of relationships that generates both tangible and intangible value through complex dynamic exchanges between two or more individuals, groups or organizations. Any organization or group of organizations engaged in both tangible and intangible exchanges can be viewed as a value network, whether 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 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 deliverables that together form a value network. Allee says, value network analysis can lead to profound shifts in perception of problem situations and mobilise collective action to implement change [6]
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.
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. [7]
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.
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.
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.
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, business webs and business ecosystems. [8]
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.
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. [9]
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.
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.
Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information.
In commerce, supply chain management (SCM), the management of the flow of goods and services, between businesses and locations, and includes the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfillment from point of origin to point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.
Intellectual capital is the result of mental processes that form a set of intangible objects that can be used in economic activity and bring income to its owner (organization), covering the competencies of its people, the value relating to its relationships, and everything that is left when the employees go home, of which intellectual property (IP) is but one component. It is the sum of everything everybody in a company knows that gives it a competitive edge. The term is used in academia in an attempt to account for the value of intangible assets not listed explicitly on a company's balance sheets. On a national level intellectual capital refers to national intangible capital (NIC).
Marketing is the process of intentionally stimulating demand for and purchases of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to emphasize in advertising; operation of advertising campaigns; attendance at trade shows and public events; design of products and packaging to be more attractive to buyers; selection of the terms of sale, such as price, discounts, warranty, and return policy; product placement in media or with people believed to influence the buying habits of others; agreements with retailers, wholesale distributors, or resellers; and attempts to create awareness of, loyalty to, and positive feelings about a brand. Marketing is typically conducted by the seller, typically a retailer or manufacturer. Sometimes tasks are contracted to a dedicated marketing firm or advertising agency. More rarely, a trade association or government agency advertises on behalf of an entire industry or locality, often a specific type of food, food from a specific area, or a city or region as a tourism destination.
In commerce, a supply chain is a system of organizations, people, activities, information, and resources involved in supplying a product or service to a consumer. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product and deliver to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains. Suppliers in a supply chain are often ranked by "tier", first-tier suppliers being those who supply direct to the client business, second-tier being suppliers to the first tier, etc.
In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying the organization's objectives, developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models often include a feedback loop to monitor execution and to inform the next round of planning.
In business, a competitive advantage is the attribute that allows an organization to outperform its competitors.
A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product for the market. The concept comes through business management and was first described by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.
The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing organization as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources – money, labour, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits.
Relationship marketing is a form of marketing developed from direct response marketing campaigns that emphasizes customer retention and satisfaction rather than sales transactions. It differentiates from other forms of marketing in that it recognises the long-term value of customer relationships and extends communication beyond intrusive advertising and sales promotional messages. With the growth of the Internet and mobile platforms, relationship marketing has continued to evolve as technology opens more collaborative and social communication channels such as tools for managing relationships with customers that go beyond demographics and customer service data collection. Relationship marketing extends to include inbound marketing, a combination of search optimization and strategic content, public relations, social media and application development.
Situation analysis refers to a collection of methods that managers use to analyze an organization's internal and external environment to understand the organization's capabilities, customers, and business environment. The situation analysis consists of several methods of analysis: The 5Cs Analysis, SWOT analysis and Porter five forces analysis. A Marketing Plan is created to guide businesses on how to communicate the benefits of their products to the needs of potential customer. The situation analysis is the second step in the marketing plan and is a critical step in establishing a long term relationship with customers.
A strategic alliance is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations.
Enterprise relationship management or ERM is a business method in relationship management beyond customer relationship management.
ERM - Enterprise Relationship Management is basically a business strategy for value creation that is not based on cost containment, but rather on the leveraging of network-enabled processes and activities to transform the relationships between the organization and all its internal and external constituencies in order to maximize current and future opportunities.
In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long run. Business value expands concept of value of the firm beyond economic value to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value. Many of these forms of value are not directly measured in monetary terms.
Value network analysis (VNA) is a methodology for understanding, using, visualizing, optimizing internal and external value networks and complex economic ecosystems. The methods include visualizing sets of relationships from a dynamic whole systems perspective. Robust network analysis approaches are used for understanding value conversion of financial and non-financial assets, such as intellectual capital, into other forms of value.
A value shop is an organization designed to solve customer or client problems rather than creating value by producing output from an input of raw materials. The principles of value shop were first conceptualized by Thompson in 1967, and properly defined by Stabell and Fjeldstad (1998), who also created the name.
A knowledge market is a mechanism for distributing knowledge resources. There are two views on knowledge and how knowledge markets can function. One view uses a legal construct of intellectual property to make knowledge a typical scarce resource, so the traditional commodity market mechanism can be applied directly to distribute it. An alternative model is based on treating knowledge as a public good and hence encouraging free sharing of knowledge. This is often referred to as attention economy. Currently there is no consensus among researchers on relative merits of these two approaches.
A value proposition is a promise of value to be delivered, communicated, and acknowledged. It is also a belief from the customer about how value (benefit) will be delivered, experienced and acquired.
New business development concerns all the activities involved in realizing new business opportunities, including product or service design, business model design, and marketing. When splitting business development into two parts, we have: ‘business’ and ‘development’. The first things that come into mind when looking at business are: economics, finance, managerial activities, competition, prices, marketing, etc. All of these keywords are related to risk and entrepreneurship and clearly indicate the primary scope of the term ‘business development’. Development is very abstract and can be linked with some of the following keywords: technological improvement, cost reduction, general welfare, improved relations, movement in a (positive) direction, etc.
Netchain analysis is a theoretical concept integrating supply chain management and network analysis which was introduced by Lazzarini, Chaddad and Cook in 2001. While supply chain analysis focuses on vertical and network analysis on horizontal interdependencies across companies, netchain analysis incorporates both type of interdependencies into one concept. Netchain analysis emphasizes value creation and coordination mechanism sources corresponding to different kind of interdependencies. In practice, netchain analysis is often used in a more general way referring to the perspective that takes into account chain and network characteristics as well. However, it differs in the focus and in the tools used from network science.
Network Orchestrator Companies are defined as:
... companies [that] create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, Visa, Uber, Tripadvisor, and Alibaba.