Chains, Shops, and Networks: The Logic of Organizational Value

An accurate understanding of an organization’s value logic (which can also be thought of as its business model) is critical. Accenture’s research into distinctive capabilities, one of the building blocks of high-performance business, shows that a company’s ability to create a customer-centric “value algorithm” is central to the business’s success. At the highest level, a company’s value logic can provide important insights that enable a company to construct a unique value algorithm.

The value-chain business model was jointly developed in the 1980s by Harvard Business School’s Michael Porter and Accenture. It aptly described the value-creating activities of most 1980s-era public companies. However, in the last 25 years the economy has been undergoing a metamorphosis-from an industrial economy to a more intangible-intensive one. Intangible-intensive companies differ significantly in their “value logic”-the way they create value-from most asset-heavy companies. Accenture Institute research has determined that 44 percent of the companies in the S&P 500 already obtain a significant component of their business value from one of two alternative business models:

* Value shops create solutions to external business problems by mobilizing the right mix of resources (human, monetary, information) with the right skill sets to properly diagnose and ultimately solve a particular problem creatively and quickly.

* Value networks bring buyers and sellers together for the exchange of goods via some network-based communication and mediation system. Value is created by identifying new customer sets for sellers and vice versa, with the types of products those customers are looking to spend money on.

This report explains the differences between the three value logics, explores the risks associated with shops and networks and discusses the management implications of each model.

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