VALUE NET
A business model that shows how to benefit from collaboration
Academics and consultants have for many years recognised the importance of strategic alliances. Strategic alliances, or networks, are the foundations of the Value Net framework. In 1996 the term Value Net was coined in a theory expounded by Adam Brandenburger and Barry Nalebuff in their book entitled Co-Opetition.
This model shows how it is possible to work with other companies in a market to add value for customers. The model is based on the premise that a company can network and cooperate with different “players” to everyone’s advantage. It does not presume collusion with competitors which would be illegal in most markets.
The Value Net model puts a company in the centre of its universe and four forces surrounding it. These forces are:
-
Customers: Every company needs people who buy its products and services.
-
Suppliers: These are the companies that provide materials, equipment and software that enable a business to create products and services.
-
Competitors: These are companies that provide similar or alternative products and services.
-
Complementors: This is where the model becomes interesting and different from others. Complementors are organisations that offer something that makes a business stronger. In the case of restaurants competing in an area of town, there may also be bars that people can drop into before their meal. The bars are complimentary and they strengthen the offer of the restaurants to people dining out. A company that makes computers may load its products with software which enhances the value of its computers. The software is a complimentary product and, together with the computer, makes a more attractive offering.
Managing your business in a highly competitive environment doesn’t mean that you have to hit competitors head-on. There may be opportunities for collaboration with different players in the market that will add value to your offer. It requires a deep understanding of what your customers want and need.