Value Network

Designing the Structure of Your Marketplace Can Deliver an Unfair Competitive Advantage

Everyone is familiar with the concepts of Supply Chain. The fundamental limitation of the supply chain is that the suppliers are working in a constrained manner responding solely to the specifications of their down stream customers. This is extremely limiting since the source of the money in the supply chain, THE END CONSUMER, is only aware of the final vendor or possibly of the OEM who manufactured the final product.

Whenever a business's contribution to the supply chain is unseen by the end consumer, that business is at risk of having its products commoditized, and even more seriously, of being replaced by a competitor.

There is a powerful strategy to connect to the end consumer in a manner such that your business is perceived as a significant value-contributor to the products being purchased by the consumer. Examples of Tier1 and Tier 2 suppliers having achieved this enviable status include: DuPont Stainmaster, Intel Inside, Dolby Sound... By definition, if the end consumer does not perceive your business as contributing value to product they buy, then the business is NOT part of the Value Network.

An optimized Value Network is significantly more powerful in the marketplace than any supply chain:

A value network starts with the end consumer and propagates value up the supply chain.
The "value" in a Value Network is defined by the needs identified by Quality Function Deployment (QFD). Financial measurements are only valid for keeping score, not measuring the "value" being delivered.
Most importantly the Value Network is a dynamic proactive rather than reactive concept – the Value Network allows one to create strategies and tactics that then allow their existing products to experience a higher margin.
By considering the entire network of companies supporting a particular product marketplace, one can create strategic partnerships which both improve the margin of the participating business, and strengthen their position in the network.

The White Paper on Value Network contains a detailed description of the concepts and uses a model of a business with a new product offering to demonstrate the power of the related management methods.