Value Mapping

VALUE
What is Value?
Value Chain One of the key skills in an environment of unpredictability
Value Train and accelerating change is to understand the nature and
complexity of how value is created, to use it as a strategic
Value tool, and to empathize with the perspective and amount of
Networks value as a product or service matures to varying stakeholders
and users.

Value Creation
Subsequent to the comprehension of value is the process
and set of skills to create value. A great rst step is to look at
value from a perspective of an industry including symmetric
and potential asymmetric players. Secondly, to look at value
creation from a rm-level perspective. And nally and most
importantly looking at value from the customer and/or user
perspective.

Welcome to Value Mapping!

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Value Mapping
What is Value?
What is Value? Value is in the eye of the beholder!
Value Chain
Value is the worth of something to someone. There are
Value Train
two major kinds of value: Objective and Subjective.
Value
Networks From economics, objective value of something (object,
service, good) is measureable, agreed upon, and intrinsic.
For example, the value of gold expressed in terms of
pesos. This form and de nition of value is very useful for
the pricing of commodities and raw materials and follows
closely the laws of supply and demand and therefore is
changes with market uctuations.

The other, more interesting form of value is subjective.

Simply put, value to you is what you get relative to what
must be given up:

GET
VALUE =
GIVE
This simple equation is far more powerful than it appears.
When the perceived GET is less than GIVE, no person
would transact. If the perceived GET is greater than the
GIVE, only then is there the potential to transact with that
person.

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Value Mapping
What is Value?
What is Value? Value is in the eye of the beholder!
Value Chain
Value Train
Value GET: What do we mean? There are many forms of
Networks bene ts and the sum total of these may include more
straightforward utility and functionality, it may also
include more esoteric versions of bene ts: member of
club of owners, status, personal style, etc.

GIVE: Costs of course but the trick is to think broadly.

Price, cost to switch technologies, hardware or service to
support, insurance, training, learning curve, risk, etc.

GET
VALUE =
GIVE

This implies that this comprehensive view of value is

highly subjective and conditional requiring deep study,
analysis, and customer empathy.
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Value Mapping
THE VALUE CHAIN
What is Value?
Value Chain
Michael Porter, PhD, and Harvard Business
Value Train
School Professor of Strategy is well known
Value for his ve-forces model, competitive
Networks advantage, and the value chain.

This model is linear, splitting primary

sequential value generating activities and
non-sequential supporting activities.
Primary Activities

Inbound Outbound Sales and

Operations Service
Logistics Logistics Marketing

Procurement
Human Resources
Pro t
Firm Infrastructure

Technology Development

Secondary Activities

In this classical view, value is linear, it

creates competitive advantage via lower
cost and higher levels of service through
practice, investment, and learning.
There are de ciencies in this view of value in
the digital and technology network-oriented
economy.
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Value Mapping
What is Value?
Value Chain
Value Train
Value
Networks
Value Train
The Digital Economy and Pandemic have
changed forever the way value from
products and services are created and
delivered. Often the role of a particular
company in an industry can augment or
delete certain parts of its value creation and
hence requires a broader industry-level view.

There is a marked difference between the

digitally-enabled and analog worlds. Think
about the changes in the products, delivery
and companies in the record industry, or lm
photography, or television.

Let’s analyze a couple of industries and

present value-train scenarios to modernize
them.

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Value Mapping
What is Value?
Value Chain
Value Train
Value
Networks
Value Train
The goal of the diagram called the value train is to
map the creation and delivery of value.

We need to answer a few question within the

process so keep them top of mind:
• How does the offering reach the ultimate customer?
• What key businesses are involved in the process?
• Which participating rms have more leverage over the others?
• Where is symmetric or asymmetric competition present?

To create the diagram consider these actions:

ORIGINATOR PRODUCER DISTRIBUTOR CONSUMER

This applies to a broad set of digital industries and

might be expanded:

Recording Editing Broadcast Installed base Viewer

Feel free to make it even more complex as your

understanding of the industry and the purpose of
your analysis becomes more clear.
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Value Mapping
What is Value?
Value Chain
Value Train
Value
Networks
Value Train
Drawing Steps:
1. What is the value offering (product or service) you will analyze?
2. Consumer: Who is the ultimate consumer? Draw them as a circle on the far
right of your diagram.
3. Last rm: What source does the customer receive the offering directly from?
Draw this party as
a square to the immediate left of the customer.
4. Prior rms: What other rms, if any, provide unique inputs to that rm? Draw
them as additional squares to the left.

5. Focal rm: Which rm is the focus of your analysis? (e.g. your own rm, or
another whose value. Add an additional outline to the square around it.
6. Value exchange: Between each car, add arrows in both directions. Label each
arrow pointed to the right to indicate what value is being delivered to the
downstream party (e.g. product, service, or component of them). Label each
arrow pointed to the left to indicate what value is being delivered upstream
(typically, monetary, but there may be other value, such as data or marketing
support).
7. Symmetric competitors: For each car in the train, identify the symmetric
competitors (i.e. businesses that offer similar value, with a similar business model).
Add them to diagram as rectangles below the car they compete with (e.g. if
Walmart was in your value train as the nal distributor, below it you would put a
rectangle indicating other brick and mortar distributors).
8. Asymmetric competitors: For each car in the train, identify the asymmetric
competitors (e.g. an alternate distribution channel, product producer, or
component manufacturer that can substitute for the business, but has a different
business model). Add them to the diagram as trapezoids above the car they
could potentially serve as a substitute for.
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 Value Mapping
What is Value?
Value Chain
Value Train
Value
Networks
Value Train
Ways You Can Use the Tool
The Competitive Value Train can be used to analyze the cross-currents of
competition and cooperation in any business’s path to delivering value to
consumers.
It is particularly useful for understanding the forces of disintermediation (how an
intermediary partner may be “skipped over” and cut out of a value train), or
intermediation (what happens when a new distribution partner inserts itself
between a rm and important customers or suppliers), as well as any
shifts in the relationships between a rm and its sales channels or suppliers or
both.

First, parties with more unique value at their stage in the value train (e.g. a uniquely
in uential producer, or distributor) have move power over partners. This principle
explains the level of competitive leverage in many inter- rm relationships (e.g. why
Walmart has so much in uence over the brand manufacturers who stock its
shelves).

Second, the parties at the ends of a value train (i.e. nal distributors and original
creators) have more power than intermediary producers in the middle. This power
imbalance was famously described in manufacturing industries by Stan Shih,
founder of computer maker Acer. Shih described a “smiling curve” where
technology patent holders (my “original creators”) have high power to capture
pro ts, as do companies who ultimately brand and distribute products (my
“distributors”), but the product fabricators and manufacturers in between them (my
“producers”) languish in a valley of low leverage and pro tability.1 The same
dynamics have been observed in services industries, giving more power to
the nal “customer interface” (the last party in the value train, and in
telecommunication and media industries, where unique content creators (like star
journalists) and nal customer discovery layers (like Facebook and Google) are
accruing pro ts while traditional businesses in the middle of the value train
are getting squeezed.
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VALUE NETWORKS
What is Value?
Value Chain Today’s businesses and their leaders have been admitted into and
incredibly complex game that is increasingly less linear in value
Value Train generation. So we need a tool that can help us analyze more
Value broadly than ever the ingredients that create value and they can
come from unexpected places. Coopetition (cooperating with
Networks competitors) is an increasingly more common and necessary
phenomenon where each company bene ts from the strengths of
the other. Consider that in order to compete with Boeing, Airbus
was created by competitors to create a eet of craft that would not
be possible for any company on its own. Headquartered in
Toulouse, France, Airbus Industrie was comprised of members:
Aérospatiale, Matra, Messerschmitt-Bölkow-Blohm, Dornier
Flugzeugwerke, MTU München, Daimler-Benz's aerospace, and
others across Europe and the UK. Also consider that Microsoft
competes with Apple but also makes software for Apple.

Link to Disney case: an internal value network and how it has

expanded.

So, how do we start a Value Network diagram?

(Mindmapping is a great tool for this)

Step 1: Put your division in the middle

Step 2: Start with the identi cation of resources, similar to the value
train and value chain. Speci cally think outside your company and
divisions inside that are suppliers, strategic allies, or suppliers).
Step 3: Connections BETWEEN Resources when a business
relationship exists.
Step 4: Potential customers, user groups, in uencers, and
competitors: add them in and connect with all those interrelated
Step 5: Keep going down in types of cinema, typoes. of gamers, add
in the value networks of some key players such as Microsoft with
XBox-EA-FIFA-TEAMS-PLAYERS…

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Value Mapping
VALUE NETWORKS
What is Value?
Value Chain
So, what does this value network tell us? First of all, if there is a
Value Train strong monetary relationship, you could color the connections, you
Value could also put arrows showing the ow and dotted line connections
for in uence without money or product transfer per se.
Networks
What this spaghetti tells us is that value is an ecosystem of
interrelated parts. When a HUGE movie comes out, say Tenet or
Avatar, ripples through the ecosystem will happen to strengthen the
business potentially down to or company. The spaghetti tells us
where to look for campaign partners, where business development is
needed, what area might be expanded to. The uses are endless and
the value is as much in the creation of the network realizing certain
connections one does not always think about in driving value.

Remember that networks have signi cant value, what is your

company’s possibilities?

Sony Playstation, Cinemark, Marvel,

Microsoft, Facebook, Rappi, Airbnb, etc.

Pick one and draw the value network.

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 Frame 1
VeRy
Virtual Company

(Fictitious example)

Cinema

Suppliers Partners
Samsung Facebook (meta) Sports

Nvidia

Texas Instruments
Frame 2
VeRy
Virtual Strategic alliances, suppliers,

Strategic alliances and partners

HP
Microsoft MLG: major league gaming
Lenovo

Cinema

Suppliers Partners
Samsung Facebook (meta) Sports

Nvidia

Texas Instruments
Frame 3
VeRy
Virtual
Connections BETWEEN

HP
Strategic alliances Resources when a business

Microsoft MLG: major league gaming relationship exists

Lenovo
 VR Therapists

Universities Cinema

Samsung Facebook (meta) Sports

Nvidia Oculus
HTC
Texas Instruments
VeRy
Falabella Virtual Gamers

Ripley
HP
MLG: major league gaming
VR Training Microsoft
Lenovo
PC Factory

Frame 4
Potential customers, user groups, in uencers, and competitors:

add them in and connect with all those interrelated

And you can keep building: genres of cinema, amusement parks, production companies,
superheroes, etc.
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Value Mapping
VALUE NETWORKS
What is Value?
Value Chain
Networks have a huge bene t for a platform or network owner as it
Value Train is an asset, it is sticky (meaning dif cult to switch - can YOU get off
Value of WhatsApp easily), and there are numerous ways to create
revenue. But how do we understand the value of a network or its
Networks potential value? Well it depends upon what kind of network and the
average revenue of a user.

There are principally three types of networks: Broadcast, Peer-to-

Peer, and Groupings. They follow Sarnoff’s Law, Metcalf’s Law and
Reed’s Law respectively.

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Value Mapping
VALUE NETWORKS
What is Value? So you see that value is dependent upon whether on e is a broadcaster, a
peer-to-peer, or sets of groups.
Value Chain
Value Train On other set f factors has to do with network externalities or what is known as
a network effect. This is value that comes simply because more users and
Value user types are on the network.

Networks

A user type is a homogenous set of users (gamers) that have distinctly

different roles and capabilities on a network or platform than another set (say
game developers). In some cases, ALL of the users of a network are exactly
the same such as with phone, WhatsApp or the early days of facebook (before
advertising). We call these one-sided or single-sided or direct network
effects. These are built into the peer-to-peer value model from before. In
other cases, there is more than one type of user and they are dependent upon
the other type of user like Uber. Chicken and Egg: The more taxis, the more
riders, the more taxis and so on… This is known as cross-sided or multi-sided
network effects that are direct.
There is another set that is far more complex to calculate but important to
know of: Indirect Network Effects which are based upon the number of
complementary products and user types that exist on a network (we call the
successful ones ecosystems). Imagine Sony Playstation, it adds value to
Gamers and Game Developers. But there are others, how about advertisers
inside the games or content services like Net ix that can be accessed via the
device. And how about all those accessories that are made by third parties
like joysticks and chargers and stands, and even televisions and audio bene t
from Playstation’s advanced resolution and speed capabilities.

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