Value Chain Networking Summary
This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking. Download the entire white paper in pdf format HERE. This is the Summary – Return to the Introduction Value Chain Networking (VCN) is the concept of not only honing in on one company’s core value, but continuing to develop it among the other companies in the industry. It is the activity of creating a Value Network via business networking that includes suppliers, service providers, competitors and even customers. In a broader sense VCN is the continual development of a community, with the core mission of providing value to the marketplace and in a grander scheme, the world. Companies that engage intentionally in this activity and utilize the technology of today will benefit not only from market position but also from an enhancement in company capabilities. Company ability is the key, as market position and competitive advantages are temporary. Sustainability and ultimately profitability for a company is not achieved by locking-in market position but rather by continuing to build upon its capabilities, core value-add and its...
Read MoreValue Chain Networking: Leveraging Technology
This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking. Download the entire white paper in pdf format HERE. This is Part 4 – Return to the Introduction Technology Closes the Gap Given advancements in both internet and mobile technology in the last several years how businesses position themselves has now become a continually evolving rule-book. As Michael Dell stated, “…a fundamental shift in the definition of value is occurring. There used to be value around inventory; now there’s value around information.” Companies need to consider the implications of leveraging the Internet for their business. Simply establishing a web site-putting a web front-end on top of your company-is not going to create the efficiencies you need. You must re-think how you’re going to use information more efficiently, and drive inefficiencies out of the system. In the past in order to hold meetings, form alliances and meet like-minded people, physical travel was required. With the onset of new tools for interaction this is no longer a pre-requisite. This allows for the rapid development of capabilities on the fly with collaborators that are minutes or miles away. How a company creates this interface both internal and external will shape how their Value Networks develop either intentionally or unintentionally. For those businesses that seek to build a strong Value Network with collaboration that maximizes market exposure and minimizes costs along the value stream, technology integration is a must. Example; for years businesses have been able to link partner (website link) with other business to improve traffic, search engine ranking among other intrinsic benefits. Today businesses can go a step further and use social media outlets such as Facebook to directly communicate back and forth with each other’s customers. In reverse, consumers can set up a forum for any given activity or topic, and businesses that support that activity or topic can chime in to answer questions and offer support. For example a potential customer may ask what size tire fits their car on an automotive forum. A local tire dealer can assist this customer remotely and directly impact many other potential customers at the same time. From a business – supplier standpoint, businesses may setup knowledge centers for their customers and give them direct access to the supplier for further assistance. This is a practice that has been around especially in warranties for years. Now with the advancements in communication it can be expanded and even implemented as a core customer support strategy. Technology of today has made it easier than ever before for all companies to engage intentionally in the development of the Value Networks that impact their business. Continue to the Value Chain Networking...
Read MoreCreating The Value Chain Network
This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking. Download the entire white paper in pdf format HERE. This is Part 3 – Return to the Introduction The process of actually going about creating and/or developing a Value Network and putting together the most critical Value Chains for the customer benefit, is an elusive and complex practice. It becomes clear that organized business networking and resources sharing is necessary for these interactions to happen and relationships to evolve across industries and sectors. It is also evident that somewhere across the supply chain at least one business or group must take an active role in developing this community. The issue however is, by exposing suppliers or customers to potential competitors, will the company taking the active role be vulnerable to attack or use this position to create dominance in the industry? History provides us two such examples both in the realm of personal computing. During the PC revolution of the 80s and 90s IBM was an industry giant and abandoned its vertical integrated approach when it came to producing consumer ready computers. Instead they outsourced two critical elements, microprocessors to Intel and the operating system to Microsoft. By the end of the 90s the PC had gone through many generations and both suppliers and customers had come to care far more about “Intel Inside” or “Windows 98” then the actual brand on the box. The power in the chain had shifted, as had the financial rewards. IBM’s decision to outsource its PCs’ microprocessor and operations system determined the contours of the entire industry for years to come. Fast forward a decade to Apple Computer, Inc. Apple perhaps learning from the past has so far been able to avoid such brand erosion even though they bring together even more players than IBM did years ago. In fact Apple customers are more than just customers they are part of a loyal raving community that puts stickers on their cars and gets tattoos of the Apple logo on their bodies. Apple has been able to bring together software, hardware, application developers, and the entertainment industry among other players into a Value Network where both the customers and vendors are interdependent. Along the way Apple continues to innovate, develop new products and tie the network even closer together through each release. Once a business has identified its true core value added activities along with that of its suppliers, providers and competitors, building the value network with a networked business approach is the next step. Choosing the right processes to insource and the right ones to outsource is critical along this path. If a company is in a new or emerging industry, the competencies or products needed may not be available for purchase on the open market and thus will have to be developed. Does the business bring on partners to lower capital risk and speed up time-to-market or do they “go it alone” for fear of competitive pressures? There is never one right or wrong answer and instead each business must look at their most core values and constantly engage in the activity of business development to find the right “make vs. buy” mix, along with the correct partners and suppliers to bring this value to market. Creating and developing a strong and consistent feedback loop from customers is also a critical step. Having world class products is a given for dominance in the market and by enhancing the customers experience, businesses begin to develop a loyal “community” rather than clientele. This is exactly what Apple has...
Read MoreUnderstanding the Value Chain & Impact of the Value Network
This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking. Download the entire white paper in pdf format HERE. This is Part 2 – Return to the Introduction Understanding the Value Chain As touched on earlier understanding the make-up of a company’s Value Chain via Value Stream Mapping or a similar exercise is a critical activity. Not only understanding the internal structure but how the company fits into the Value Chain of the industry or sector also becomes necessary. This critical issue is truly identifying the company’s core value added activity in the eyes of their customer. This can be further broken down however and be used at the group, campaign or product level. This is not always possible though and at times a more loosely defined approach as seen in the Value Network Analysis is needed. From Wikipedia on 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.” A relevant real world example of this is how customer interacts on a company’s social media sites. A company may have a process for how they delivery content to their followers, however managing the response to this content and the tangential questions or comments that arise may be too loose and require a more free-flowing process to implement effectively. Impact of the Value Network The effect of belonging to multiple Value Networks changes actions and behaviors of individuals and business on a daily basis rather they know it or not. A lesser known fact is that Value Networks can breed negative results. As seen for individuals via social pressures, guilt and mob mentality. Business can get stuck into micro-economies or loose the organized structures to be cost effective and timely for their customers. By and large however when utilized and understood correctly Value Networks become a huge positive for all parties involved. This is evident in phenomena such as “group buying” and other voice of the customer communities. Online forums and social media have allowed Value Networks of consumers and activities to get together and communicate more effectively back to producers and suppliers in the same or congruent over-arching Value Network. For businesses it affords peace of mind and ease of business transactions. Also, by formalizing agreements it drives costs down between organizations and allows for a decrease in forecast error along the supply chain. For example a customer may have a group of suppliers that they routinely order supplies from. By formalizing these arrangements and guaranteeing volume it allows both parties to enjoy lowers costs and smoother day to day transactions. This is standard purchasing and logistics practice in supply chain management. The importance of the Value Network, is that when relationships and business networking is leveraged it allows for more parties to benefit from the collective whole. In the traditional approach both product and informational flows in one direction and process gaps or errors are more likely. Untimeliness of delivery and feedback is also an issue with this traditional setup. With the Value Network approach there is more connectivity and better information flow across the supply chain. Products can also get to the customer faster and in unfinished or aftermarket formats directly from entities higher up in the chain. An example of this type of approach is very evident in the world of personal computing with manufacturers like Intel and Microsoft and/or...
Read MoreValue Chain Networking Definitions
This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking. Download the entire white paper in pdf format HERE. This is Part 1 – Return to the Introduction As summarized in Aristotle’s Metaphysics, “The whole is greater than the sum of its parts,” this is too the case with the concept of VCN. However before understanding fully how the concept works and can be utilized for business, it is important to define the key concepts and how they are both independent and can become interdependent on the process of VCN. Value Chain or Value Stream The term “Value Chain” also referred to as “Value Stream” and the business management concept thereafter were first popularized in Michael Porter’s 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance. From Wikipedia, at the Firm Level, a Value Chain is defined as follows… “A value chain is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of the independent activity’s value.” At the Industry Level… “An industry value chain is a physical representation of the various processes that are involved in producing goods (and services), starting with raw materials and ending with the delivered product (also known as the supply chain).” To better understand how a value chain works view the general company example below. The key separation to note is the split between primary activities and support activities. While necessary for business continuance, support activities do not add value to the product and therefore are not considered part of the value stream. Some Lean Manufacturing or Six Sigma experts will go as far as to refer to these processes as waste, even “necessary waste.” A typical analysis used to identify the value stream in a company and thus identify opportunities to improve processes, reduce cycle time and eliminate unnecessary waste is “Value Stream Mapping.” For the businesses that are not sure of what makes up their Value Chain, creating a simple process map on their core business practices should first be conducted to identify these elements. Understanding the value chain of the suppliers, vendors, business customers and even competitors is critical when analyzing and creating the make-up of the Value Network. Value Network The international bestselling book by Thomas Freidman called the “The World is Flat: A Brief History of the Twenty-First Century” analyzes globalization and alludes to the shift required for companies to remain competitive where historical and geographic divisions are becoming irrelevant. With the onset of the internet among other technological advancements, the business world is a level playing field in terms of commerce where all competitors have an equal opportunity. Technology and locality no longer become a sustainable competitive advantage. Value Network enthusiasts assert that Value Networks and the true nature of collaboration meets this challenge head on with a systemic, human-network approach to managing business operations and ecosystems. Value network modeling and analytics provide better support for collaborative, emergent work and complex activities. A value network is a business analysis perspective that describes social and technical resources within and between businesses. The nodes in a value network represent people (or roles). The nodes are connected by interactions that represent tangible and intangible deliverables. These deliverables take the form of knowledge or other intangibles and/or...
Read MoreIntroduction to Value Chain Networking
This article is an excerpt from the Total Financial Network (TFN) white paper by Christopher Vincent titled Value Chain Networking. Download the entire white paper in pdf format HERE. The ever changing pace of today’s consumer market coupled with the transparency of technology and media, present a variety of challenges for all businesses. Start-up and existing small businesses may lack the structure and resources available to enact change whereas mid-sized and larger organizations may lack the flexibility to implement change within their culture. What becomes evident is that an ever evolving methodology of conducting business both internal to the company and external is required for success. As the saying goes, much like a tomato, a company is either ripening or rotting. For many businesses, an emphasis on more loosely collected / pooled resources or an emphasis on partnerships / alliances tends to be the trend as opposed to traditional vertical aligned, ridged and hierarchical designed organizations. This “networked business” or affiliate approach allows smaller organizations to utilize the assets of the collective whole while still maintaining the agility of a niche company. This can be seen most predominately in, subcontracted and resold products / services as well as the outsourcing of business commodities. Within this new, emerging and loosely defined approach, how do businesses formalize and intentionally pursue putting this framework together? How can owners and managers measure their success and their utilization of the tangible and intangible resources that are the most valuable to their business? The activity of Value Chain Networking (VCN) aims to answer these questions among others and offer a business strategy for implementation. Continue to Part 1: Value Chain Networking...
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