Managing the Value Network

In today’'s fast-paced environment, it is important for organizations to be capable of continuous innovation not just in their products and services but in their strategic management as well. Because the value network places importance on knowledge, it is important for firms to design not only strategies that will maximize the value of knowledge but also an organizational structure that will facilitate the effective implementation of those strategies. Because of this, it is important for firms to veer away from traditional structures and management styles. The traditional structure where decision making rights are given only to top-level management is flawed because it implies that they are the only ones capable of taking such responsibilities.

Taking on a relatively flat organizational structure whose decision-making rights veer away from the center empowers individuals within the organization. Assuming that the organization has mechanisms in place that ensure each individual’s role in the value network and that each individual’s goals are aligned with the goals of the entire organization, empowering them would make the firm more effective because decision making rights are transferred to those with knowledge. This also lowers the costs involved because it is less costly (in terms of money, time, and opportunity) for those with information to make decisions for the firm rather than taking the extra step of transferring knowledge to those at the center and have them decide.

Maximizing the value of knowledge that is internal to the organization is only one part of its value network. Firms that recognize that knowledge must not only be created but also acquired, benefit from expanding their value network through outsourcing. Of course, outsourcing has its own disadvantages but it is often necessary if the firm would like to gain by focusing on its core competencies. An example of this is UK’s Silverjet airline, a company that attributes its rapid growth to its IT outsourcing strategy. The airline outsources hosting for its website, reservation system, online booking facility, call distribution software management, and departure control systems. By doing so, it is able to focus on filling seats in a cost-effective manner.

Firms also expand their value networks through partnerships where they gain innovation from networking and collaboration. A recent example of this is MySpace and Sprint Nextel. Through their partnership, both firms hope to gain by making it easier from Sprint subscribers to access the free MySpace Mobile web site to be launched in early 2008.

Firms also have much to gain by expanding their value network through mergers and acquisitions. For example, just a few weeks ago, Microsoft announced their acquisition of UK’s Multimap. The acquisition was not made for Microsoft to gain full control of Multimap’s operations but to facilitate the future growth of its venture into online mapping and location-based services. It will also complement Microsoft’s Virtual Earth, Live Search, Windows Live, and MSN features.

Through the reasonable expansion of organizations’ value networks and ensuring that they are managed effectively, firms are able to gain by specialization and rapid innovation. Rapidly developing technology has made it possible for organizations to break traditional boundaries. It is up to them to be innovative enough to take advantage of this same technology to create, enhance and make full use of its value network.

By: boredumb
Published: 01/30/08

Article Sponsors:

quality leather belt fits great

Share On:

Comments (1) | Must Login to Vote

1 Posted Comments:

Value Networks

@ 8:37 am 02/21/08 by John T Maloney

Hi --

There are standard industry methods, tools, practices and technologies for value networks and value network analysis. See:

Telenor Testimonials :: http://kmblogs.com/public/item/194339

Innovation Networks :: http://kmblogs.com/public/item/194847

Fluency :: http://kmblogs.com/public/item/194271

This site, open value networks, is a open content, open source repository.

Open Value Networks :: http://www.value-networks.com/

Finally, you may join the worldwide Value Networks Consortium here:

http://www.vncluster.com/VNVAC.htm

-j

Reply to this Comment