Creating 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 done while maintaining a unique protection of their commerce and value network strategies.

Continue to Part 4: Leveraging Technology