This blog is adapted from the paper, “Value Creating Networks: Organizational Issues and Challenges,” being published in November by Emerald in The Learning Organization Special Issue on Social Networks and Social Networking.

This example demonstrates how value network modeling can bring fresh insights into even long established organizational structures and processes. A large utility company wanted to improve their ability to handle complex technology repairs and improve their service delivery. Previously they had modeled this work as a business process but “exceptions” were causing costly delays in responding to trouble tickets.

The project team convened a one-day workshop to map out the technology service activity and begin a VNA. Figure 1 is the original “as is” map showing both tangible and intangible deliverables. The temptation was to simply map the “official” repair service process. However, in order to address the real issues the group used a sequencing approach to map exactly where the technology repair became problematic and escalated to a “worst case” scenario. They first mapped the critical interactions and then “told the story” of the activated network by sequencing the interactions.

From this map the group identified and pulled out several different value flows where they could gain improvements. In the following figures the thick black lines and comments show where the group identified significant gaps in their own understanding of the roles, relationships, and interactions in the activity.

Figure 2 shows the “Happy Path” scenario, where the trouble is reported and handled as it should be and the customer is satisfied. Even in this happy path the project team was able to identify issues and improvements. VNA is especially valuable for addressing “hand-offs” where responsibility for the activity shifts from one role to another. The Happy Path team found a number of these hand-off areas where one role would assume something was being taken care of but there was no way of actually knowing. They also needed to better understand certain communication flows.

Figure 3 depicts the Service Level Agreements (SLAs) activity where these are developed internally. The Service Coordinators, Field Technicians, and Field Managers must reference this information frequently to respond appropriately to different customers. Yet, they found that the information is often missing or not complete. In other scenarios a particular Service Level Agreement had been created in a way that made response either difficult or needlessly labor intensive. They realized that for the technical repair activity to work well, they needed to be much more involved in developing and managing Service Level Agreements, but had little understanding of the activity or how they could best contribute to improving it.

Figure 4 shows the Escalation flow. This is what happens when things are not going well. Note the number of informal requests for information and updates passing between the Customer Technology Manager, Field Manager, Field Technicians, and Service Coordinator. Intangibles of this type are frequently found where there are “work-arounds” because something is broken. Here there were both and informal and formal processes that were needlessly redundant. The implications for coordinating these flows across multiple organizations within the company are significant. VNA provides a different foundation for thinking about technology support that goes far beyond simply processing trouble tickets or problem reports.

This example shows just how many improvement insights can emerge from a VNA. In this case the project team divided into smaller groups, each dedicated to optimizing one of the value flows. They achieved outstanding performance improvements in just a few weeks of work with the issues. Perhaps more importantly, by engaging with other roles involved they improved communication and collaboration significantly across organizational boundaries.

Also of interest is the Online Version of Final Draft: Allee, Verna, "Value Creating Networks," The Learning Organization Special Issue on Social Networks and Social Networking, Volume 6, Issue 6, pp. 427-442, November 2009.

The basic challenge of the network orientation is the same challenge we have been dealing with in organizations for two decades with the focus on business processes: the world of human interactions and the world of business transactions are treated as two completely different worlds. Human interactions are dealt with in organizational charts, team charters, performance reviews, organizational culture, change management, and training. Business transactions are managed in the world of process maps, workflow systems, applications, and technology. Implementing value networks overcomes this “split” by bringing together both human interactions and business transactions in a human-centric, role-based model of business activity.

Supporting network patterns of organization requires addressing several key issues:

Supporting “roles”

Most staffing and resource efforts focus on filling seats or “jobs” on the formal organization chart. Common HR practice is not to seek people who can fill multiple roles, but to create a job description of specific credentials and skills and then seek candidates who have done exactly that same work for many years. Reorienting toward networks means supporting people in wearing different “hats” and filling roles in multiple value creating networks. Their formal position then becomes just a “home base” while they are more flexibly deployed where needed in different roles. The role doesn’t care who plays it. In companies where value networks have been implemented a daily duty roster first lists the role, then the individual who is assigned to the role and then what organization or “box” they come from.

Supporting variation to drive innovation

Human interactions account for 70% of business value and activity and also intelligently bring innovation to every aspect of the business. But innovation requires variation. After all, the whole goal of business process engineering is to drive out variation. Yet in complex work environments variation is not only a given – it is desirable and necessary for rapid response and continuous innovation.

Rethinking how “value creation” happens

If value is being created anywhere it must be created everywhere. Traditional views of value hold that value is only monetary value. It only happens at the “end point” of a business process where product or service is delivered to the customer. Value network modeling reveals the “hidden value” that is being created between roles carrying out a business activity. It drives consideration of value as something everyone is negotiating and creating in every work activity. Further it expands the concept of value to include non-financial value, especially consideration of how we are building strategic capability for the future.

Expanding to more systemic performance indicators

Performance indicators and KPIs rarely address systemic indicators that indicate the vitality of the organization. Network analysis opens up an entire new world of whole-system types of indicators that can provide powerful insights into the health and vitality of an enterprise. For example, Value Network Analysis includes indicators for resilience, value creation, perceived value (brand), asset impact, reciprocity, structural dependency and risk, agility, and stability.

Managing intangibles

While any executive will agree with how important intangibles are for success, very few companies put any serious effort into understanding or managing intangibles. As VNA spreads as a management practice, intangibles management moves from an esoteric corner of the executive suite right down to the shop floor. With value network maturity people negotiate both their formal and intangible deliverables and also learn to develop indicators for both financial and non-financial impact.

Compliance, standards, and business reporting

The XBRL movement (Enhanced Business Reporting Language) is supporting adoption of Value Network Analysis taxonomies in market space and organizational reporting. The SEC is throwing its full weight behind adoption of XBRL as a way to bring auditable reporting into the Management Discussion and Analysis (MD&A) portions of the SEC 10K Filings (Eccles et al., 2007). In addition value networks are endorsed as critical in strategy blueprinting by the newest editions of industry process standard ITIL (Information Technology Infrastructure Library) and are integrated into eTOM (the enhanced Telecom Operations Map).

Supporting the learning curve

Finally but certainly not least is the challenge of learning the language of networks. Back when companies were moving into process tools and learning to work as teams there was a huge amount of training support. Today, we tend to throw people into new technologies or toss a few buzz words at them like “collaboration” or “networks” and expect them to suddenly begin behaving differently. The shift into the process orientation and team structures required significant investments in training and education. However, comparable support appears to be seriously lacking as we move into the world of networked organizations. There are new skills sets, mindsets, toolsets, and behaviors that must be mastered. Otherwise “networks” comes out our lips but “processes” and “org charts” run our lives.

One of the challenges confronting public, nonprofit and the private sectors is the creation and effective management of inter-organizational networks. The Annual conference of Healthcare Leaders’ Association of British Columbia will take place October 19-20 in Vancouver. Managers, clinicians and researchers who wish to better understand network concepts and strategies will benefit from concurrent sessions addressing these issues and will learn about leadership and management in the context of inter-organizational collaboration and networks.

International and local keynote speakers and concurrent session presenters are all experts in their field and provide a variety of perspectives and experiences within healthcare and diverse business fields. They will be covering a unique set of topics and providing leadership strategies, experiences and thought-provoking concepts to integrate into day-to-day operations and personal growth applications. In addition, The Hon. Kevin Falcon, Minister of Health Services, will open the conference.

The Networks Management Symposium Co-Chairs, George Eisler and Ron Lindstrom, provided input to the program and invited speakers. Speakers include Brian Schmidt, Dr. Thomas Homer-Dixon, Françoise Morissette, Verna Allee, Rahaf Harfoush, Mike Conroy, Dr. Chris Eagle, Chris Mazurkewich, Christy Clark. Here is the full program.

In the interest of creating a level playing field for job applicants talent managers have been caught in a tight squeeze to meet the changing demands of the workplace. Agile resource allocation is essential for success, yet at the same time there must be transparency and fairness in how people are deployed. Value networks can help meet that challenge by providing a role-based structure for managing the flexible workforce.

Most HR and ERP systems (and even performance review systems) are designed to support one worker holding only one job. Yet, today’s knowledge worker plays multiple roles in an organization. They may spend the morning processing work orders, but in the afternoon they may move to a cross-boundary process improvement project, play a mentoring role for a new hire, or be a member of a strategic council. Typically these other roles are unacknowledged in formal talent management systems. At the Future of Talent gathering at Pacific Grove, California, in October 2009, talent managers and HR VPs from a number of organizations were grappling with this dilemma. The discussion was triggered by the ValueNet Map™ role-play exercise led by Verna Allee. Dart Lindsley of Cisco pointed out that Cisco actually has a role-based organization that works in complement to the formal organization because they have Councils that cut across the entire organization. The diagram below is a variation of a simple map he drew to describe this structure, showing where “jobs” and “roles” are best defined. 

As Dart and others pointed out, without a systematic way of defining and managing roles, the coordinating costs – and risks – are considerable. What are the real costs of trying to resource the many roles that are required in a company and how can fairness and transparency be assured?

Companies that are implementing value networks are using Value Network Analysis (VNA) to define the role-based networks, projects, councils, teams, and learning communities that cut across the organization. These roles can then be planned for and allocated as part of the talent management system, instead of lurking in the vague area outside it. As long as they are in that area there is a very real risk that roles will not be filled by the right people, that the contributions will not be acknowledged, they will not receive adequate resources, and that potentially unfair practices will become embedded.

Mapping these cross-boundary projects and networks as value creating networks provides a systematic and transparent way for HR to develop a role-based taxonomy that can help deploy talent more effectively, whether they are job-based workers or contingent workforce.

Data required to monitor roles would be typically obtained from a) direct role mapping of key business activities in the organization, b) current employment information as found in internal HR and ERP systems, and c) from standard business process role taxonomies data. This information can be aggregated based on the ValueNetworks.com™ data model and then provided to talent managers for more effective approaches to resource deployment, performance management, and employee development.

Also of interest:

The Glossary of Terms commonly used in Value Network Analysis (VNA) was updated earlier this year along with the Help Library in the ValueNetworks.com™ application. This comprehensive document is also publicly available in the How-To Guides section of the Open Value Networks resource website, www.openvaluenetworks.com/.

We have now updated it again, to include brief descriptions of some specific Performance Indicators. These indicators were recently explained in a series of our blogs.

The complete Glossary (PDF) is here, and below are some excerpts. The Help Library has many articles and other resources expanding on this material. Some terms here, such as Impact Analysis, are also available as complete articles at www.openvaluenetworks.com/.

Image is by Eileen Clegg, www.visualinsight.net/.

GLOSSARY EXCERPTS

Agility

One indicator of network agility is how quickly information can move around the network and spread out across the network to reach all members. A network’s agility is important to be able to make sense of and adapt to internal and external changes. It is also an indicator of how easy it is for any individual to reach the person who might be able to solve a specific problem. A high average distance between Roles can be an indication that there are not enough hubs or connectors in the network. Agility is one of the indicators reported by the ValueNetworks.com™ application.

Asset Impact

Asset impact considers which assets are most affected by the network behavior as a whole and by the actions of specific roles. Impact can be determined to the sender role, to the receiver role, or to the network itself. Typically people assess impact to the receiver. However, it is quite useful as a way to assess the impact of a transaction to the network as a whole. Asset Impact is one of the indicators reported by the ValueNetworks.com™ application.

Centrality

Centrality is a classic network indicator that shows which roles have the most ties. Roles with more ties are said to be more “central” to the network and may have advantaged positions, alternative pathways to satisfy their needs, less dependency on other individuals, and access to more of the resources of the network as a whole. Just because a role has a strong position structurally does not mean it is providing the most value to the network. That determination can be made, however by examining incoming and outgoing ties separately, using Centrality indicators. Centrality is one of the indicators reported by the ValueNetworks.com™ application.

Channel Management

See Mechanism or Channel Analysis.

Deliverable in a Value Network

A deliverable is the specific “thing” or value that is conveyed from one role or participant to another role or participant. It can be a tangible product or service, such as a pair of jeans or a manicure. It can also be an intangible product (e.g., information or knowledge about something) or an intangible benefit (e.g., political support) that one person can bestow upon or give to another.

Density

See Stability.

Exchange in a Value Network

Exchange refers to two or more transactions between two roles or participants, and it evokes a quality of reciprocity (e.g., an exchange of money for service).

Exchange Analysis in ValueNet Works™ Analysis

Exchange Analysis, a core analysis in the methodology, is an assessment of overall patterns and network dynamics of value exchange that determines if the value system is healthy, sustainable, and expanding.

Flows (of value)

Two or more transactions that occur as a logical sequence are considered a flow. Examples of flows are business processes, communication flows, and chains of causality in which one event triggers another.

Impact Analysis in ValueNet Works™ Analysis

Impact Analysis, a core analysis in the methodology, is an assessment of the tangible/intangible costs (or risks) and tangible/intangible gains or value realization derived from an input that:

- Generates a response or activity

- Increases or decreases tangible assets (cost/benefit)

- Increases or decreases intangible assets (cost/benefit)

- Provides other positive or negative benefits

Intangible Assets

Intangible assets are resources under the control of an enterprise that are typically non-physical and not of a monetary nature, and that are critical for the success of the business. These resources include things such as brand image, customer and employee loyalty, quality of business relationships, social standing, competence of the workforce, improvements in internal structures and processes, and social citizenship. When these resources accumulate and are “held” by an entity, they are considered assets. Intangible assets may be converted to other types of value (e.g., products or services).

Intangible Value in a Value Network

Intangible value is generated by informal, non-contractual activities that help build business relationships and contribute to operational effectiveness.

- Intangible knowledge exchanges include such things as strategic information, planning knowledge, process knowledge, technical know-how, collaborative design, and policy development. These exchanges flow around and support the core product and service value chain.

- Intangible benefits are advantages or favors that can be offered by one person to another. Examples include offering to provide political support or a research organization asking someone to volunteer time and expertise to a project in exchange for prestige by affiliation. These intangible products or deliverables can be exchanged when people “trade favors” to build relationships.

Key Performance Indicators (KPI)

See Performance Indicators or Measures.

Mechanism or Channel Analysis

This is an analysis that determines the most appropriate technology and infrastructure support for each transaction or group of transactions in a value network. Channel Management is one of the indicators reported by the ValueNetworks.com™ application.

Organizational Network Analysis (ONA)

ONA involves the application of Social Network Analysis (SNA) as a diagnostic for business and organizational challenges.

Participants in a Value Network

Participants are individual people, institutions, or groups that execute the Roles in a value network. They can be individuals, groups or subgroups, organizations, collectives or aggregates, communities, or nation-states.

Perceived Value

A key focus in VNA, perceived value is how valuable you as well as other roles and participants perceive your deliverable to be.

Perceived Value Analysis

Perceived Value Analysis is a way to assess the level of value roles or participants feel they receive from individual deliverables that come from other roles and participants, and from the network as a whole. Perceived Value usually is assessed as part of the Impact Analysis. The analysis is also done to assess what other roles or participants feel about the level of value of their deliverables. Perceived Value is one of the indicators reported by the ValueNetworks.com™ application.

Performance Indicators or Measures

Performance indicators are either qualitative or quantitative metrics for assessing the quality or efficiency of execution of an activity, or for demonstrating progress toward a goal or desired outcome. The terms performance indicators and performance measures are often used interchangeably. Indicators is a somewhat broader term that can include second-order indicators that point to possible progress, even if that progress cannot be measured directly. More recently, the term key performance indicator (KPI), which refers to any aspect of human and business performance, has become part of the business language.

Reciprocity

Reciprocity is the extent to which value contributions (ties) are reciprocated between roles and in the network as a whole. Assessing reciprocity surfaces imbalances of tangible/intangible inputs and outputs, overburdened roles, work-arounds that might indicate something is not working in the formal processes or a role is not functioning as effectively as it could, disconnects of missing or dead links, and structural interdependencies. Reciprocity is one of the indicators reported by the ValueNetworks.com™ application.

Resilience

Resilience is critical for a network to respond to changing conditions and requires the right balance of formal structure to informal knowledge sharing. The ratio of tangible/intangible transactions is helpful as an indicator of Resilience. If the percentage of intangible transactions is higher than tangible transactions it usually indicates a high level of flexibility, collaboration, and trust. If the ratio is too heavy on the intangibles side, however, it might show that there are work-arounds or it could show that the network is largely social in nature. A high percentage of tangible exchanges shows that there is a lot of formal structure to the interactions. This might demonstrate a high level of transparency if processes are visible on shared systems, or on the other hand few informal interactions could indicate a low level of trust, information sharing, and/or flexibility. Resilience is one of the indicators reported by the ValueNetworks.com™ application.

Risk

One kind of risk to the value network shows up in Role Dependency. Speed of transactions provides a cross check for where a role might be a bottleneck in value flows. Another useful indicator is the distribution of inputs and outputs across roles in the network. If there is too much structural dependency on a role then it can affect the entire network if something goes wrong. Structural Dependency is based on Centrality, one of the most common structural indicators in network analysis. The wider the variance between numbers of connections between roles, the higher is the risk to the network. These indicators are reported by the ValueNetworks.com™ application.

Roles in a Value Network

Roles are the contributing roles in a value network. They are populated by Participants (specific people or entities) who generate transactions, send messages and other deliverables, engage in interactions, conduct processes, create value, and make decisions. They can be filled by individuals, groups or subgroups, organizations, collectives or aggregates, communities, or nation-states.

Social Network Analysis (SNA)

SNA is a social science discipline that focuses on relationships between social entities (e.g., members of a group), corporations, or among nations. It explores both directional and bi-directional exchanges, including sharing of information or types of business relationships.

Stability

Stability is revealed by measures of network Density. Density is calculated as the number of actual connections between roles divided by the number of potential connections between roles. The higher this percentage, the higher the density. The most significant Density indicator is Weak Tie Stability, which shows the extent to which the loss of connections in the network will impact performance of the network as a whole. Weak Tie Stability is the ratio between intangible and tangible transaction Density. Stability is one of the indicators reported by the ValueNetworks.com™ application.

Tangible Assets

Tangible assets show up on the financial balance sheet, for example as cash reserves, physical property, machinery, and accounts receivable.

Tangible Value in a Value Network

Tangible value is generated through contractual or mandated activities that contribute directly to economic gain. Tangible value transactions involve all paid or funded exchanges of goods, services, or revenue, including all transactions involving contracts and invoices, return receipt of orders, request for proposals, confirmations, and payment. Knowledge products and services that generate revenue (including products that are expected as part of service, such as reports or package inserts) are part of the tangible value flow of goods, services, and revenue.

Transaction in ValueNet Works™ Analysis

A transaction is an activity generated by a person that involves imparting a tangible or intangible product, service, or benefit, or other deliverable to another role or participant.

Value Conversion

A key focus in VNA, value conversion is the act of altering or transforming one type of value into another. An example is transforming an intangible input or asset (e.g., industry insights and experience) into a tangible output (e.g., subscription newsletter).

Value Creation Analysis in ValueNet Works™ Analysis

Value Creation Analysis, a core analysis in the methodology, is an assessment of the tangible and intangible costs and gains for each value output a role or participant contributes to the systems through:

- Adding new tangible or intangible value

- Extending value to other roles or participants in the value network

- Converting one type of value to another

Value Network

A value network is any web of roles and relationships that generates tangible and intangible value through complex dynamic exchanges between two or more individuals, groups, or organizations. Any organization, group of organizations, or purposeful network in which people are engaged creating social or economic good, can be visualized and analyzed as a value network, whether it is in private industry, government, or the public sector.

Value Network Analysis (VNA)

VNA is a whole-system mapping and network analysis approach to understanding tangible and intangible value creation among roles and participants in any purposeful activity, whether small work groups, organizations, business webs, or civil society networks.

Value Realization

Value realization is the act of turning a value input, either tangible or intangible, into real gains, benefits, or assets – all of which contribute to the success of an individual, group, or organization.

Also of interest:

Glossary - complete (PDF)