What Is a Value Web? (2)

Wednesday, January 28th, 2009 at 9:36 am

The rationale behind employing the analogy of a web, or a network, as a structure in strategy formulation lies in the fact that in today’s complex business environment there are very few companies that can, on their own, deliver a complete solution to meet their customers’ requirements. By a complete, or total, solution we mean an offering that consists of all products, services, and information that fulfill a customer’s wants and needs. Instead of trying to go it alone, today’s companies operate in a business environment where each constituent, each company, provides a unique value, all of which when taken together create the complete offering.

Let’s explain using a simple example. When Henry Ford started to massmanufacture the Model T in 1908, the output of his operation was a vehicle, a mode of transportation, developed and produced for the consumer. The relationship of the company with the consumer was strictly transactional in nature; Ford secured the raw materials, built the manufacturing plants, produced the automobile, and sold the product to a customer. The relationship between the company and the end-user was largely transactional in nature. The two parties to the transaction never crossed paths again unless a service issue arose or until the next purchase. Today’s automobile purchasing process, however, is vastly different. What once was a simple, linear relationship between a company and its customers has evolved in a complex web of multiple parties interacting with each other in a continuous, nonlinear fashion. The parties to this process include several companies, many only marginally related to the physical product. To illustrate, some of the constituents of today’s automobile Value Web include not only the car manufacturer, but also companies such as Edmunds that provide automobile reviews considered by the customer during the decision-making process, institutions such as GMAC that provide dealer financing, dealerships, insurance companies, service and repair providers, vendors of after-market accessories, and others. Anyone who has purchased a new car before can relate to this example, an example that doesn’t even consider the multitude of networked companies on the supplier side that provide the inputs required to produce the actual automobile.

Taken From : Enterprise Guide to Gaining Business Value from Mobile Technologies