Value Network Analysis

Establishes the relationship between business activities and the value network. 

By evaluating members of an organization, value network analysis establishes the relationship between business activities and the value network

Value Network Analysis

It is typically carried out by visualizing the link between various business activities using modeling tools such as system dynamics, social network modeling, and process instruments.

Participants are evaluated based on their knowledge and other intangible assets that they bring to the table. In addition, the financial and non-financial aspects of business operations are considered in value network analysis.

It is a map that analyzes an organization's value network in its ecosystem, allowing us to analyze exchanges from an organic, dynamic, and systemic perspective. 

Unlike business process linear graphs, which seek to trace efficient paths capable of continuous improvement, this map attempts to represent a vast territory to continue exploring with an open mind and explore new opportunities.

Linear graphics are still helpful and practical, but they have conditioning flaws. Software programmer Melvin Conway explains in the 1967 Conway's Laws:

"Organizations that design systems are limited to producing designs that are copies of these organizations' communication structures." Alternatively, "any piece of software reflects the organizational structure that produced it."

To put it another way, if we want our organizations' software to be more effective and help them make a qualitative leap in the digital age, we must first change how we think about and improve organizational dynamics.

The Value Network Analysis elicits much more information, such as communication, exchange, and intangible deliverable structures. In traditional processes, intangibles are frequently overlooked. 

They remain hidden from the workers in charge of moving the product line forward and are told they only need to do specific actions for everything to work. 

At the same time, the manager has a perspective from the heights, where he moves political processes such as favor exchanges and strategic alliances agreements. 

However, in the digital age, we discover that we are both intellectual and emotional workers, which we notice. 

The process will slow down or become stuck if you don't choose the correct map and rhythm for your business, confusing you and making you feel more angry and frustrated. 

Decide on the appropriate rhythm to keep your business vision clear to avoid all of those.

This map allows us to explore what is happening to us and open the door to the creative potential of teams by breaking the cycle of not talking and not seeing certain aspects that were previously only in the hands of managers.

Brain

What components comprise a Value Network Analysis?

According to Verna Allee, a value network is a set of roles and interactions that generate a concrete result (in the form of business, economic goods, and/or social goods) through the exchange of value in the form of tangible or intangible deliverables. 

The beauty of this definition is that it includes all the elements we'll need to create our value map: roles, transactions, and deliverables. 

We can map the value network from the standpoint of the entire organization, a specific area, or a particular product/service/activity.

  • Network nodes: Value network nodes are typically represented by an oval and represent specific people who contribute to the activity by participating in it. Of course, the same person can serve in more than one capacity.  Some Pantheon Work collaborators are researchers, broadcasters, or organizational leaders who prescribe.
  • Exchanges: Each directional arrow represents a value transaction between roles. We draw the arrow continuously or discontinuously, depending on how the value is delivered, bringing us to the third and final component, deliverables.
  • Deliverable: The labels on the lines define the different ways the value transaction occurs. We define tangible deliverables as essential and expected/required by the roles to perform a specific task and draw a continuous line between them.

The different Value Networks: Internal vs. External

As previously stated, there are two kinds of value network analysis: internal and external. 

The name implies that the internal branch or factors are within the business. For example, employees, management, various divisions within the company, and internal processes and activities, may be included.

In some cases, the value created by these networks can be applied to matters outside of business. Example: the relationship between two people working toward a common goal. 

The value of an internal network is determined by examining the connections between these various points within the organization.

Different Paths

On the other hand, an external value network analysis is influenced by factors outside of the company. For example, it may include an examination of the company's suppliers, business partners, and other stakeholders, as well as its customers and end users.

An external value network analysis examines the relationship and values these external factors create for the business.

Value Network Types

Networks have specific roles and value relationships that work together to achieve a common goal. 

Active network members are real people who play essential roles in exchanging benefits such as knowledge and ideas required for business operations.

A value conversion network is a network with a specific goal in which active people interact to achieve a common economic goal. A system like this comprises activity-oriented sets of interactions between individuals.

The chief financial officer and team members exemplify an activity-focused network. On the other hand, an external value network is an association between a company, its investors, and its suppliers. 

These interactions take place between people who are not members of the organization.

1. Applications of Value Network Analysis 

The role-conversion techniques used in network analysis can optimize an organization's internal and external operations. For example, the organization's workgroup network benefits from shared intangible assets such as expertise, knowledge, and information.

The primary goal of value network analysis is to improve business operations and overall productivity by ensuring that all network members communicate and collaborate.

Applications

The methodology can also provide valuable ideas for reorganizing internal processes, improving workflow, and project planning across interdependent units. 

A company undergoing an acquisition or merger can use the technique to connect and integrate new departments and operations.

Value analysis can also be used by a company that is redesigning its business operations. This type of analysis can identify roles and interactions that must be made in this scenario.

The analysis can also help determine the resources required when an organization is developing a new business model and in the model's ongoing operation.

Research and development are two other business aspects that can benefit from value network analysis. It is accomplished by identifying the critical elements required for organizational innovation, such as expertise or information.

2. Conditions for Valuation Network Analysis

Identifying value exchanges and transactions is critical before conducting a complete value analysis. Therefore, three main questions guide the analysis:

  • The first question is about exchange analysis, which looks at a company's overall trend of value creation and exchanges.
  • The second question focuses on the network impact of each value input.
  • The final concern is value creation, which looks at the best way to create, leverage, and extends value.

3. Using Value Network Analysis in conjunction with Other Analysis Tools

Given its emphasis on tangible and intangible transactions, value network analysis is compatible with other business analysis tools.

In manufacturing companies, for example, value network analysis can be combined with the Lean Six Sigma technique to clarify a given problem before moving on to the following analysis phase.

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It can also be used in conjunction with system dynamics. In this case, the methodology assists in identifying the fundamental interactions and roles for developing solutions. 

The integrated system view of value analysis aids in identifying problems and requirements for solutions.

The analysis can also be used in customer support and organizational network analysis to determine whether active human networks are suitable for exchanging knowledge, information, and expertise.

Network Analysis Techniques

The figure below depicts the two most common techniques used in network analysis:

Techniques

Two well-known network analysis techniques, Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT), assist managers in planning and controlling large-scale construction projects, research and development, and so on.

These techniques assist managers in handling such products and carrying out their project management responsibilities.

  • The critical path method (CPM): is a technique for identifying tasks required for project completion and determining scheduling flexibility.

In project management, a critical path is the most extended sequence of activities that must be completed on time for the project to be completed. Therefore, any delays in necessary tasks will cause the rest of the project to be delayed.

  • Program Evaluation Review Technique (PERT): this is a visual project planning tool. The technique assists project managers in determining start and end dates and interim required tasks and timelines. The data is represented as a network in chart form.

Advantages and Disadvantages Of value network analysis:

Companies also benefit from value network analysis because they effectively manage intangibles and tangible networks.

Advantage

  1. Network analysis is a vital and powerful tool for planning, scheduling, and controlling operations in large and complex projects.
  2. Evaluating the actual performance level compared to the planned target network analysis is a handy tool.
  3. Using network analysis, the technological interdependence of various activities can be determined, allowing for proper integration and coordination of multiple operations.
  4. Network analysis ensures proper coordination and communication between project components.
  5. Network analysis addresses the time-cost trade-off and determines the best project schedule.
  6. This technique is simple and appropriate for computer users.

Significant disadvantages of this type of analysis are that when operations of a company's overall vision and strategy may become lost or muddied.

  1. Complex network construction is difficult and time-consuming in network analysis.
  2. Estimating the actual time required for various activities is a difficult task. The project analysis is challenging to work on due to several resource constraints.
  3. The time-cost trade-off procedure is complicated in many situations.
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Researched and authored by Ranad Rashwan | LinkedIn

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