Value Network Indicators

When people first learn VNA they are very drawn to the visual maps and quickly learn to "read" value flow patterns. Once people are familiar with the basic VNA language, however, they move on to appreciating the way both classic and new network indicators can enrich their insights and provide ways to monitor the network over time.

Using both classic and new indicators

VNA integrates several classic Social Network Analysis (SNA) indicators into the methodology. Value networks are, after all, networks! Classic network analytics can be applied to both the role-based and participant-based value network maps. However, some of the structural SNA indicators that might be interpreted positively for social networks or informational networks may not actually be that good for the health of a purposeful or value creating network.

Measuring Capacity for Value Creation in a Value Network

The active agents for value creation are the roles in the network. It is useful to look at the capacity for each role to generate both tangible and intangible value. A decrease over time in value outputs can be an indicator that resource availability or productivity has declined. An increase in value outputs with minimal additional resource demands is an indicator that value productivity is improving. The capacity of a network to generate value depends on good asset utilization - in both financial and non-financial terms One helpful indicator is the ratio of tangible to intangible value created by each role and how these might change over time.

Overall Asset Impact in a Value Network

A key measure of value is what type of value is realized whenever a value deliverable is received. Does it create value in the form of financial improvement, a gain in resources , or building strategic capability and intellectual capital? In VNA you can choose to have the asset impact represent impact to the Sender, the Receiver, or to the network as a whole. 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. Either way, the first step in this asset impact assessment is to identify the type of asset that will be impacted by the completion of the transaction.

Asset Impact and Cost/Benefit Analysis for a Value Network

Once the impacted asset has been identified the next questions are, "Does the transaction have a positive or negative impact on the asset? When the deliverable is received how is it going to impact the overall asset picture?" For example, completion of a financial transaction would provide a positive Benefit for Financial Assets. Completion of a knowledge deliverable might have a positive Benefit on Human Competence. Completion of a regulatory compliance transaction might have a negative Cost financially. It might also have an even greater negative Cost on Internal Structures by taking valuable IT time and resources. Note that Asset Impact indicators can be augmented by conducting a Perceived Value Analysis.

Asset Impact by Roles in a Value Network

Perceived Value and Brand Management in a Value Network

Brand Management has a lot to do with how valuable people perceive your offerings to be. Simply because there is an interaction does not mean that positive value is being created. If fact people may actively dislike the input, or feel it is too costly to process - which could be a negative value. Perceived Value is a way to assess the level of value people feel they receive from individual deliverables, from other roles, and from the network as a whole. Perceived Value indicators are especially useful for surfacing assumptions - often unspoken or unconscious - about value and value flows. Perceived Value is especially useful when applied to intangible deliverables, as it is often difficult to gauge their value with a number or financial measure. See Perceived Value.

Channel Management for Optimizing Value Network Flows

Every transaction and its deliverable is supported by some means to execute the transaction. This is the channel or delivery mechanism. Channel profiles provide a way to consider the effectiveness of different delivery mechanisms for specific deliverables. For example, some companies rely heavily on face-to-face meetings, where video conferencing might be a more effective way to work. Other companies rely on technology and systems for delivering information or automating provisioning. The channel is the medium or mechanism used to transport the deliverable. The chart below is a visualization of channel usage.

Measuring Resilience in a Value Network

Resilience in a value network is critical for the network to respond to changing conditions. Resilience requires the right balance of formal structure to informal knowledge sharing. So the Ratio of tangible/intangible deliverables is helpful as an indicator of the Resilience of the network. The charts below show the percentage and number of tangible and intangible transactions in a value network. The text in the chart shows the Ratio of tangible/intangible transactions.

Where tasks or relationships are complex with a lot of variables there are usually more intangible than tangible transactions. If the percentage of intangible transactions is higher than tangible transactions it usually indicates a high level of flexibility, collaboration, and trust - although it can also indicate a problematic lack of formal structure as well.

A high percentage of tangible exchanges shows that there is a lot of formal structure to the interactions. Highly structured interactions typically indicate a low level of flexibility. In highly systematized operational networks a higher level of tangible transactions than intangible is normal.

Reciprocity in a Value Network

Reciprocity is a key question addressed in the Exchange Analysis. Classic network analysis often looks at Reciprocity - the extent to which ties are reciprocated between roles. Some theorists feel that asymmetric (unreciprocated) ties may be unstable. A network that has a predominance of reciprocated ties over asymmetric connections may be a more "equal" or "stable" network than one with a predominance of asymmetric connections. A lack of reciprocity sometimes indicates there is a more hierarchical structure.

Role Contribution and Structure

Risk and Role Dependency

If there is too much Structural Dependency on a role, that can affect the entire network if something goes wrong. Structural Dependency is also determined based on centrality. In classic network analysis, high centrality is generally viewed positively as an indicator of prominence or high prestige. However, in VNA, extremely high centrality for any one role or participant may actually be a risk factor for the network!

The risk is that the role could be a bottleneck. If the role is not adequately resourced then value flow pathways can be negatively impacted with time delays. If a role cannot keep the value flows moving, that affects the speed of value creation and conversion in the entire network. A good cross check is to look at the speed indicators to see if a potential bottleneck role slows down the value flows.

Agility

One indicator of Network Agility is how quickly information can move around the network. Most people have heard the term "degrees of separation." Degrees of separation, technically referred to as "distance" in a network, is a measure of how quickly information can spread out across the network to reach all members. It is an important indicator of a network's agility in being 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 structure.

Stability in a Value Network

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. One transaction between two roles is considered as the maximum number of connections. The higher this percentage, the higher the density.

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