What Is a Value Network?
Let me explain to you what a value network is—it's a set of connections between organizations and/or individuals that interact with each other to benefit the entire group. In this setup, members can buy and sell products as well as share information. You can visualize these networks with a simple mapping tool that shows nodes for members and connectors for relationships.
Key Takeaways
- Value networks are connections between individuals or individuals and corporations in which their interactions benefit the group.
- Members in a value network can buy and sell from one another as well as exchange important and relevant information.
- Value networks can be depicted in mapping tools through nodes (members) and connectors (relationships).
- The primary advantage of a value network includes the way a business or individual applies the resources, influence, and insight of their network connections.
- Value networks help their members to grow value and consist of internal (e.g. research and development) and external (e.g. customers) resources.
Understanding a Value Network
In business and commerce, value networks serve as an example of an economic ecosystem. Each member relies on the others to foster growth and increase value. These members can be external, like customers, or internal, such as research and development teams.
Value networks enhance innovation, social welfare, and the environment, along with many other areas. If there's weakness in one node, it can affect the entire network—for instance, if a development team is weak, the production team struggles to create the product, which can delay shipments to buyers.
Types of Value Networks
The main types of value networks include the Clayton Christensen network, the Fjeldstad and Stabells network, Normann and Ramirez constellations, and Verna Allee's networks.
Clayton Christensen Network
The Clayton Christensen network describes relationships that already exist externally, where any new entrants into the network will be molded to fit the current network or business model's shape. New entrants will have a difficult time breaking through or providing new ideas or implementing changes because they will most likely end up accommodating and falling in line with the current network.
Fjeldstad and Stabells Network
Fjeldstad and Stabells believe that the most important parts of a network are (1) customers, (2) services, (3) service providers, and (4) contracts that allow access to services. This theory states that customers are essential to the network and their involvement provides the added value. The most common example is social media, such as Facebook, YouTube, Instagram, and TikTok, where customers sign up, agree to terms in the contract, and add value to the network.
Normann and Ramirez Constellations
The Normann and Ramirez constellations value network believes networks to be fluid setups that allow for constant change and improvement. It is up to members in the network to analyze the current relationships and look for openings and opportunities as a way to add value.
Verna Allee's Networks
Verna Allee's networks believe that networks create both tangible and intangible values and that value network analysis should be incorporated into all facets of a business to extract the most value in every stage.
Benefits of a Value Network
The benefit that a value network provides comes from the way a business or individual applies the resources, influence, and insight of others to whom they are connected. Take a startup, for example—it may look to its external connections, such as investors and mentors, to provide experienced guidance on how to approach the development and growth of the business.
While many founders have a deep understanding of the product or service they develop, bringing that service to market, finding customers, and scaling up the business may be unfamiliar to them.
To make up for this shortcoming, they may seek the advice of trusted stakeholders with experience on such matters, which is considered an intangible benefit of their relationship. They might also look to groups that specialize in assisting startups, such as incubators and accelerators, to increase their exposure to potential mentors and investors.
Example of a Value Network
An investor typically provides their guidance to the startup they are backing because, by helping the leaders grow their ideas into a tangible company, stakeholders stand to benefit from the startup’s development. That guidance can take the form of expertise that the investor possesses.
The investor might foster introductions between the founders of the startup and other businesses they can work with to further their plans. For example, if the company needs to produce a prototype of its product, an investor might direct them to another company that creates made-to-order prototypes. Likewise, if the startup is looking for a mass manufacturer or a distributor, the guidance they receive may benefit all involved as it can mean increased business for each organization and individual.
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