Value network analysis is a business modeling methodology for understanding internal and external value networks. The methods include visualizing business activities and sets of relationships from a dynamic whole systems perspective and several unique analysis approaches for understanding value conversion of financial and non-financial assets, such as intellectual capital, into other forms of value. The value conversion question is critical in both social exchange theory that considers the cost/benefit returns of informal exchanges and more classical views of exchange value where there is concern with conversion of value into financial value or price. Value network analysis offers a taxonomy for non-financial business reporting, which is becoming increasingly important in SEC Filings. Such taxonomies are supported by Extensible Business Reporting Language XBRL. Venture capitalists and investors are concerned with the capability of a firm to create value in future. Financial statements are limited to current and past financial indicaters and valuations of capital assets. In contrast, value network analysis is one approach to assessing current and future capability for value creation and describe and analyze a business model. Value networks (value webs), are the human and technical resources in a business that work together to form relationships and add value to a product or service. ... Intellectual capital makes an organization worth more than its balance sheet value. ... Social exchange theory is a social psychological perspective that explains social change and stability as a process of negotiated exchanges between parties. ... In Marxian political economy, exchange value refers to one of three major aspects of a commodity, i. ... Look up taxonomy in Wiktionary, the free dictionary. ... The Securities and Exchange Commission (SEC) requires public companies to file reports regularly so that they can be made available to the public. ... XBRL (eXtensible Business Reporting Language) is an emerging XML-based standard to define and exchange business and financial performance information. ... Venture capital is a general term to describe financing for startup and early stage businesses as well as businesses in turn around situations. ... Historical financial statement Financial statements (or financial reports) are formal records of a business financial activities. ... The term business model describes a broad range of informal and formal models that are used by enterprises to represent various aspects of business, such as operational processes, organizational structures, and financial forecasts. ...

Strong value-creating relationships support successful business endeavors at the operational, tactical, and strategic levels. A value network perspective encompasses both internal and external value networks — loose yet complex configurations of roles within industries, businesses, business units or functions and teams within organizations that engage in mutually beneficial relationships. Tools used in the past to analyze business value creation, such as value chain and value added, are linear and mechanistic approaches based on a process perspective. These approaches are simply inadequate to address this new level of business complexity where value creating activities occur in complex, interdependent and dynamic relationships between multiple sets of actors. The value chain was described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance, New York, NY The Free Press. ...

Value network analysis is an essential skill for a successful enterprise dependent on knowledge exchanges and collaborative relationships, which are now critical in almost every industry. This type of analysis helps individuals and work groups better manage their interactions and address operational issues, such as balancing workflows or improving communication. The approach also scales up to the business level to help forge stronger value-creating linkages with strategic partners and improve stakeholder relationships. It also integrates with other modeling tools such as Lean Manufacturing, Six Sigma, workflow tools, business process reengineering, social network analysis tools and system dynamics. It has been suggested that this article or section be merged with Toyota Production System. ... The often-used six sigma symbol. ... Workflow at its simplest is the movement of documents and/or tasks through a work process. ... Business Process Reengineering is a management approach aiming at improvements by means of elevating efficiency and effectiveness of the processes that exist within and across organizations. ... A social network is a map of the relationships between individuals, indicating the ways in which they are connected through various social familiarities ranging from casual acquaintance to close familial bonds. ... System Dynamics is an approach to understanding the behaviour of complex systems over time. ...

Basics of value network analysis

Value network analysis addresses both financial and non-financial value. Every business relationship includes contractual or mandated activities between participants — and also informal exchanges of knowledge, favors, and benefits. The analysis begins with a visual map or diagram that first shows the essential contractual, tangible revenue- or funding-related business transactions and exchanges that occur between each node of the networks. Although nodes typically represent roles, they can also be individuals, groups of individuals such as a business unit or aggregates of groups such as a type of business in an industry network.

Along with the more traditional business transactions the critical intangible exchanges are also mapped. Intangible exchanges are those mostly informal knowledge exchanges and benefits or support that build relationships and keep things running smoothly. These informal exchanges are actually the key to creating trust and opening pathways for innovation and new ideas. Traditional business practices ignore these important intangible exchanges, but they are made visible with a value network analysis.

The visualizations and diagrams link to a variety of assessments, usually handled in Excel type spreadsheets — to increase value outputs, to leverage knowledge and intangibles for improving financial and organizational performance, and to find new value opportunities. When the analysis is complete people gain insights into what is actually happening now, where more value can be realized, and what is required to achieve maximum value benefit across the entire business activity that is the focus of the analysis.

References

Allee, Verna. The Future of Knowledge: Increasing Prosperity through Value Networks. Butterworth-Heinemann, 2003.

1. [1] What is Value Network Analysis?
2. [2] Value Network Mapping Basics
3. [3] Exchange Analysis
4. [4] Impact Analysis
5. [5] Value Creation Analysis

External links

• Value Network Clusters
• Open Value Networks Industry Consortium
• Open resource website for value network analysis
• GenIsis Open Source Tools and Techniques for value network analysis