Value network analysis is a business methodology that sets the relationship between business activities and the value network by evaluating members of an organization. It is usually performed by visualizing the link among various business activities using different modeling tools such as system dynamics, social network modeling, and process instruments.
Evaluation of the participants is performed based on knowledge and other intangible assets that they bring on board. Value network analysis looks at both the financial and non-financial aspects of business operations.
Value network analysis is a technique for business evaluation that sets the network value of a business by evaluating the contributions of each active member in the organization.
Value network analysis offers an effective platform for evaluating tangible and nontangible assets of a business.
The methodology is mostly used to optimize both the internal and external business operations.
Understanding Value Network Analysis
Value network analysis offers a unique way for individuals and business owners to evaluate and manage both the tangible and non-tangible aspects of a business effectively.
The basic premise of this methodology is that the critical elements of the interactions form the basis of a successful business venture. At the macro-levels, this concept uses networks incorporated with maps or diagrams as the primary conversion mechanisms for transforming one form of value to another between different points of each network.
The visualizations and diagrams represent processes, activities, individuals, and business units in an industry, and can be constructed using Excel spreadsheets. A network system comprises workgroups and structures that are involved in producing goods or services.
Therefore, the value network analysis is important in determining the value creation properties of members and their value interactions.
Types of Value Networks
Networks are made up of specific roles and value relationships inclined towards achieving a specific outcome. The active members within networks are real people who play significant roles in the exchange of benefits such as knowledge and ideas necessary for business operations.
A network with a specific objective is regarded as a value network or value conversion network, where active people interact to attain a common economic goal. Such a system comprises of activity-oriented sets of interactions between individuals.
An example of an activity-focused network includes the chief financial officer and members of the team. On the other hand, the association between an organization, its investors, and suppliers is known as an external value network. These interactions occur between people outside the organization.
Applications of Value Network Analysis
The role-conversion techniques applied in network analysis can be used to optimize the internal and external operations of an organization. The workgroup network across the organization benefits from shared intangible assets such as expertise, knowledge, and information.
The primary objective of value network analysis is to improve business operations and overall productivity by ensuring all members of a network communicate and collaborate effectively.
The methodology can also offer valuable ideas on how to restructure internal processes and improve workflow, as well as project planning across interdependent units. An organization that is undergoing acquisition or merger can also apply the technique to connect and integrate new departments and operations.
Value analysis can also be applied to an organization that is redesigning its business operations. In this scenario, this form of analysis can identify roles and interactions that must be made.
The analysis can also be useful in identifying the resources needed when an organization is creating a new business model and in the regular running of the model.
Other business aspects that can benefit from value network analysis include research and development. This is achieved by identifying the critical elements required for innovation within the organization, such as expertise or information.
Conditions for Conducting Value Network Analysis
Before conducting a full value analysis, it is important to identify value exchanges and transactions. Three main questions underlie the analysis:
The first question relates to exchange analysis, which addresses the overall trend of value creation and exchanges in an organization.
The second question addresses the impact that each value input has on the network.
The last concern focuses on value creation, which looks at the best possible way of creating, leveraging, and extending value.
Integrating Value Network Analysis with Other Analysis Tools
Value network analysis is compatible with other tools for business analysis, given its focus on both the tangible and intangible transactions.
For example, value network analysis can be combined with the Lean Six Sigma technique in manufacturing companies to provide clarity to a given problem before moving to the next phase of analysis.
It can also be combined with system dynamics. In this case, the methodology helps to uncover the fundamental interactions and roles for creating solutions. The integrated system view of the value analysis helps to identify problems and requisites for the solutions.
The analysis can also be used in customer support, alongside organizational network analysis to establish whether the active human networks are fit for exchanging knowledge, information, and expertise.
CFI offers the Commercial Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:
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