What is a value network?
From a social perspective: a value network is an interconnected form of social organization. Through interaction, values and rules as well as norms of reciprocity and trustworthiness are constantly emerging and being (or not) sustained.
From an economical perspective: a group of individuals collaborating and sharing resources to create and/or to distribute value, expecting rewards that are proportional to everyone’s contribution.
Technically, a value network is a complex dynamic system, a living system. The structure is not imposed, it is emergent. We are looking at self-organizing systems. There are basic requirements and initial conditions for success which are characterized as a Critical Path.
Value and network
to be revised...
The term network refers to the various structure within the value system. In terms of allocation of resources, the term implies decentralization. In terms of decision making, it implies free initiative for the most part of economic activities, and direct or liquid (proxy voting) democracy for the governance of the commons and shareables.
See technical definition of a network from WolframMatworld.
In other words, a value network is built on a value system, as perceived by humans, composed of value sources, processes of value creation, transformation and value exchange mechanisms, all that embodied as a decentralized form of organization.
- Some value systems are in most part abstractions. A cult or a sect is built on a value system. Apart from tangible benefits for being part of a tight group, a large part of the value system is purely immaterial, subjective and even illusory. The same can be said for a corporation or a cooperative, there is tangible value flowing through them as well as intangible value, real and imaginary. The benefits or the negative effects people get from engaging in different endeavors, either properly understood or not (in the case of deception), can be very real and tangible.
- What comes first, value or structure? I.e. what comes first, a role system or a value system? Is a value system determining the role system or vice versa? I think that value comes first, the value system should inform the role system. The structure of any organization depends on the nature of the value that flows through it. See also here, the same ideas are expressed, if modified do it everywhere
A value network allows individuals to engage in economic activities using whatever assets they may possess. In that sense, we are breaking away from the present-old economy, which is definitely over-dependent on financial assets: without money it is very hard to engage in economic processes (value production, distribution), i.e. it is hard to launch a company without financial capital.
- High tech enterprise: SENSORICA
- Glocal food systems: Greener Acres
Application scenario in high tech
Imagine a mechanical engineer. We’ll call him Joe. Joe has a very good product-idea but he has very little money. Let’s also assume that in order to market Joe’s product-idea it would require the input from other individuals with complementary skills, like chemistry, electronics, sales and marketing, administration, etc.. In the present-old world, Joe would have a few options to bring his idea to market.
The first approach would be more individualistic. Because Joe doesn’t have enough money, he must find the funds necessary to buy some tools, to rent a space, and to hire employees. If financiers are involved early on, they will rightfully ask for a larger share in the venture, in proportion to the greater risk they take (greater uncertainty).
In the second scenario Joe would start by creating a partnership. He must find other individuals with complementary skills and convince them to join the venture. Remember, we are supposing that Joe doesn’t have enough money to hire other employees. Once the group is formed, Joe and his partners create a company, and they decide to each take a % of the company - equity. The partners can now continue their work to grow their venture in value and in potential, enough to reach the threshold of confidence at which financiers would become interested to invest at lower risk. At that stage, the co-founders must agree to give a portion of their shares to the investors (to dilute), who will rightfully ask for a share in the venture in exchange of the risk they are willing to undertake. If investors get involved at a later stage, the percentage given to them might be smaller than in the first case.
How is that going to affect Joe’s bottom line? In fact, Joe can end up in almost the same place. But the other two friends are now co-owners instead of being just employed by Joe, which is probably better, because they have a stake into the business and can be more motivated.
Imagine now that Joe can find not only a few partners, but thousands of them. In this case, the venture initiated by Joe might not even need financing, if all these partners bring with them no only skills and know how, but also different materials like tools and instruments, and even a bit of cash. Finding thousands of partners in an effective amount of time was impossible 20 years ago, because we were limited to our social network within a small geographical area. Today, the Internet allows this possibility, if the idea is great and if Joe has the proper social skills.
In the second scenario, cooperation and sharing is involved. The value network extends the second scenario to the point where there might not be a need to rely on financiers. It allows Joe to bring his idea to market entirely through sharing and collaboration. We already have examples to point to. GNU/Linux, the open source operating system, was entirely produced through cooperation by thousands of individuals, distributed throughout the planet. Wikipedia is another example of massive collaboration and co-production of value. We call that peer-production. The problem with these examples is that no revenue is generated. There are no tangible returns from this type of participation in value creation. These are called gift economies. A value network goes beyond the gift economy. It actually contains a gift economy, but it allows those who participate in the value creation process to be rewarded in a tangible way. In other words, value networks allow individuals to get involved and to initiate economic processes through sharing and collaboration, relying less on financial assets. Time, skills, tools, physical spaces, social capital, and other tangible or intangible assets can be used as currencies within the value network.
Moreover, the value network is supported by an infrastructure that reduces transaction costs.
Value production and value distribution
Infrastructure for cooperation, co-production and internal value exchange. Allow exchange of various assets within the value network in order to unblock economic processes of design and production. Reduces transaction costs.
Incentive system stimulates value to be exchanged and accrued.
- Openness: barrier to entry for participation, access to resources
- Transparency access given to the public to information, processes
- Reliability: defines the reliability of the network components and the connectivity between them. Mean time between failures (MTBF) is commonly used to measure reliability.
- Resilience: includes the protection of the network components and the data/information they contain and/or the data transmitted between them.
- Scalability: defines how well the network can adapt to new growth, including new users, applications, and network components.
- Topology: describes the physical layout and the logical way data and information moves between functional components.
- Adaptability: describes how well the network responds to changes in the environment
- Vitality: degree of activity, degree of involvement of participants
- Sustainability: describes how well resources are managed
Visualization of value networks