Spotting Value in Value Chains
If Value Innovation and Value creation made you think 'value chains', then do I have a concept for you!
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Forgive the Game of Throne jumpscare, I just needed something to help visualize what we’ll be talking about this edition!
If you’ve been keeping up with The Value Blueprint since edition 1, heck even Value Innovation and Value creation as a concept since I first started talking about it, you’ll probably had this question in the back of your mind:
Does Value creation have anything at all to do with Value chains?
Or rather, do the two concepts interface with each other?
The answer is absolutely yes.
The same way that goods and services, interactions and partnerships can move around and be exchanged within the value chain that an enterprise occupies, so too can Value itself, and by extension Value creation and Value opportunities, be moved about and be exchanged within the value chain.
In fact, the entire state of the value chain itself with all its interconnecting parts can be looked at from a Value creation perspective, and from it Value can be created and leveraged.
But before we jump into that, let’s make sure we’re all on the right page: what exactly is a value chain?
In summary? A value chain is a representation of all the activities that play a part in the creation and selling (and in some cases disposal!) of your offering.
To get a feel for what that includes, ask yourself: “If I stop doing this particular activity, or end this relationship would I still be able to sell my offering in the same way, at the same price?”
So if you’re a bakery supplying other shops, your value chain includes:
Sourcing your raw materials suppliers (including the municipality, for water and lights!)
Your delivery services
Your clients who buy from you
Your operations, marketing and sales
The research and development you do to make sure your products stay fresh, etc.
It’s pretty easy to get this confused with the supply chain, but here’s the difference:
Supply chain deals with getting raw materials in and sending finished product out,
Value chain includes that, and other things connected getting your product out there
So how does this factor into Value creation?
Through a nifty concept within Value Innovation (and sector in the Value mapping framework!) called Value Networks and Ecosystems!
Before we hop into that, it’s vital to remember that the scope here is externally referenced: this means that we’re looking at the interplay and relationships between your business, non-profit or creative venture and the external parties you engage with.
Hence the ‘External Value Mapping’ underneath: when we do Value mapping in this sector of the framework, we’re looking externally of your enterprise.
Value Networks? AND Ecosystems?
What even are Value Networks and Ecosystems?
As you can see, it’s 2 concepts brought into a one: the “Value Network”, and the “Value Ecosystems”.
Value Networks
Within Value Innovation, a Value network is basically the network of parties that are connected to each other via Value and its creation.
For instance:
you and a specific supplier are in a partnership wherein they supply you with biodegradable packaging at a decent price,
you and a delivery company are in an arrangement wherein they package and deliver your goods in recyclable boxes, using solar powered scooters.
These two arrangements allow you to create value for your customers, who are looking to be eco-conscious and have a great experience without paying out their noses for it.
You, that packaging supplier and the delivery company are in a Value network with each other, and are connected via the Value you deliver to your client.
Value networks tend to be relatively small, and while everyone is connected via at least one party, not everyone in the Value network is connected to everyone else. What’s vital to note is that if it should happen that one of these parties fall through on their part of the value delivery, the Value you deliver is impacted.
Value Ecosystem
By comparison, a Value Ecosystem is basically a whole bunch of Value networks that are connected to each other at some points, that interlink and span multiple value chains.
The full definition within the Value Innovation methodology is actually “an expanded matrix of parties connected via Value and its creation” but it helps to see it as a bunch of connected Value networks.
Again, not every party in a Value ecosystem is necessarily connected to directly to each other, but they are connected to each other, through each other, in the ecosystem.
An important thing about the nature of the Value ecosystem is that its all parties will at some point eventually cross paths or even connect through Value creation, either directly or indirectly. Remember this! This is important!
To what end?
The rationale behind Value Networks and Ecosystems is scrutinizing the interactions you have with the players in your value chain from a Value creation perspective, at the level of the Value ecosystem, and at the level of the Value network.
In this scrutiny, you’re asking questions like:
“How do we create and use the connections we have in our Value networks and ecosystems to create/bolster Value?”
”How can we leverage the interactions between us and the players in the enterprise environment, or value chain, to maximize our value?"
The output of work under Value Networks and Ecosystems is two-fold:
leverage those connections and interactions to create Value, and
create, mediate and facilitate connections and engagements in the Value networks and ecosystems, so that they happen through YOU
And that last point may look like:
Connecting parties in the value chain that ordinarily would not connect and create Value, through YOU
Speeding up interactions, through YOU, etc.
such that that connection, mediation and facilitation becomes the additional Value that your enterprise offers.
But take it a step further!
The eventual aim of work in this sector is to have it such that nobody can do anything connected with what YOU do in the ecosystem, without involving you.
Under Value Innovation, this powerful move is defined as becoming the ecosystem facilitator.
As you can imagine, this can have incredible impacts on your competitive advantage and influence on the value chain and market you operate in itself.
These are pretty big concepts with BIG implications, so it might be a little challenging to make all this practical and accessible. So we’ll have another case study in next week’s edition to really take this concept home!
Value Networks and Ecosystems is my ultimate favourite sector in the entire framework. Here, your gaze shifts towards your business’ non-profit’s or creative venture’s value chain, with a specific focus on value creation and protection.
In my opinion, Value Networks and Ecosystems as a concept and as a part of the framework really puts the ‘Innovation’ in Value Innovation!
If Value Networks and Ecosystems sounds like something you’d like to learn more about and you’d like to see how it can be leveraged to create Value in your business, non-profit or creative venture, I’m exactly who you need to call!
Click right here to pop me an email!
Tell me more about what you think about this latest edition, and how you’ve been thinking about Value creation for your enterprise in the comments, drop me a line on LinkedIn, or if you received this an email, send me a reply!