Friday, March 14, 2008

Edge Economy & Value Creation

Umair says if there is one lesson you should apply at the edge, it’s that
“Business models happen” He goes on to say that:

“We don't "monetize" resources. We co-create and co-produce value….Monetization is ugly because it blinds us to the truth that value must flow in many directions.”

I love when someone who writes a blog on HBR starts crystallizing for me why I don't regret not going to business school and instead having my degree in environmental resource management...

Let’s take a look at one of the basic business tools, value chain analysis created by Michael Porter way back in 1985. Let’s go to our friend Wikipedia for a definition:

“A value chain is a chain of activities. Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities."

But we no longer create products and services for customers. To Umair’s point, we co-create and co-produce. It’s not linear any more and therefore cannot be prescribed nor predicted. It in fact, must emerge over time.

And yet where are the tools to understand emergent value? And if profit margins traditionally depend on our ability to manage the linkages between activities in the value chain, then what happens when we no longer have that management ability in a chaotic networked world?

We have been working on ways of trying to harness emergence. In large organizations this won’t simply happen without some structure that helps facilitate it and yet, the traditional tools are antithetical to solving the problem. Constructs while not the solutions in of themselves are key. A smart group of people sitting around in a room simply won’t solve this one.

photo credit

3 comments:

Gavin Heaton said...

Ah yes, but some of the tools are excellent. They just need to be recombined and activated in a way that works with your current business problems. That means you have to approach business models actively ... you have to try->fail-->learn and go again until you succeed. It is applying innovation to the process of innovation. Sound like fun?

Leigh said...

I just got an article from the IEEE which i haven't had a chance to read that talks about a new concept of "value constellation" replacing value chain. If it's any good I'll do a posting on it. :)

Mark said...

Umm, isn't this what Hollywood's been doing since the dismantling of the studio system in the late 40s?

-distributed innovation (producers)
-production ecosystems (rentals, post production, etc)
-aggregation platforms (studios)

"Edge principles" is Haques's unnecessarily opaque way of explaining what's been happening for 60 years in Southern California. Hollywood was the network before the network hit the grid.

 
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