Leveraging the Value Web (3)

Monday, March 23rd, 2009 at 8:32 am

Now that we have determined the importance of each value transaction to the receiver, and specified the number of value providers, we can calculate the incremental value for each constituent group. Let us revisit the previous example. We will work with two cells: the one that contains the value a customer provides to the firm (E, I) and the one that contains the value he receives from the firm (E, I, T). Figure 5.8 shows how we calculate the total value for each of the two cells. First, we multiply the importance rating (importance of transaction to receiver) by the degree of concentration (number of providers) to arrive at the incremental value for each of the three value dimensions (E, I, T). Next, we add these values to arrive at the total value received. Then, we transfer this number to the corresponding cell in the value index table. Adding the values of each cell in a row (and column) yields the total value each constituent group receives (or provides).
The final task is to create a normalized metric that will later allow us to plot value index measures against the sustainability index that we will develop next. Dividing each row total by the corresponding column total produces the value index for each constituent group. Referring to Figure 5.8, the value index for the customer constituency equals the sum of the cell values for the row (15+X) divided by the sum of the cell values in the corresponding column (50+Y).

Preparing the value index was important to quantify the nature and strength of the relations among the Value Web’s constituents. Going through the effort of constructing and interpreting the value index alone
can yield valuable insights into the extent of which network members receive (or provide) value from (or to) other participants. Based on these insights, a firm can chart in particular short-term tactics that exploit gaps in the existing value relationships. For our purposes, however, which was to assess the complete Value Web, we are not yet finished. The next step provides for the dimensions of constituent relevancy and ease of market entry to enter our analysis.

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