Value networking, says Gartner vice president and distinguished analyst Carol Rozwell, is a method for examining the relationships among a group of related organizations or individuals to understand and categorize the value each gains from the relationship.
While this is not an exact measurement system, it has implications that range from the business management level (Does the enterprise have the right business partners to succeed, and if not what is missing?) down through the project level (What partnerships with which entities or individuals will best ensure the project's success?) to network infrastructure design, since the network provides the infrastructure that makes those relationships possible.
"I first encountered the value relationship concepts in 1998-'99, when e-commerce was the rage," Rozwell says. "At that time, many brick-and-mortar entities were concerned that new Internet-based competitors would disrupt their businesses. Value network mapping was an attempt to identify all their complex sets of relationships and identify the economic value drivers of the network.
Concept is catching on
"As the awareness of the importance of partnerships has increased, the value network concept has seen a gradual uptake," she says. "It is being used by companies that are receptive to techniques that seem a little squishy at first."
She has charted the life sciences value network, mapping pharmaceutical and biotech companies to other entities such as contract manufacturers and hospitals. In the process, she coded each organization according to its main business strength known as its value discipline:
-- Operational excellence,
-- Customer intimacy,
-- Product leadership, or
-- Brand mastery (a category added to the list by Gartner.)
"For instance, if you are a traditional pharmaceutical manufacturer, your major corporate focus most likely will be product leadership," she says. "So in your value network, you want partners with complementary value disciplines such as customer intimacy and branding." These might include Internet services such as WebMD or blogs as well as contract sales and marketing organizations. So at a corporate management level, value networking helps companies plan better business strategy and select the best partners to maximize success.
The value network map can be used to examine existing relationships to see whether the enterprise is allied to business partners that have complementary rather than competitive strengths and to identify potential new partners with complementary strengths. "So instead of starting with a blank sheet of paper, you have a methodology for understanding the tangible and intangible assets that flow from organization to organization."
By putting the customer, rather than the modeler's enterprise, at the centre of the network, management can examine the value of each relationship and entity in the network to the customer. This can lead to valuable insights into customer needs and reactions that can result in improved business strategies. Most companies have a problem seeing beyond their own products and marketing. This exercise can help management understand what the customer wants and how the customer sees the enterprise and its products. For instance, it can help a pharmaceutical company see how it contributes to the care patients receive and how it can improve that care. It can help management identify gaps and redundancies and develop an approach that helps rather than confusing the customer.