Value chains, networks and cycles -- from a business perspective

Freedom, Democracy, Justice: Isolated Nouns or Interwoven Verbs? (Part #6)

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Economic values: Business has appropriated and reframed "values" to emphasize their purely economic nature and relevance. Without economic value, a value is then effectively inferred to be non-existent. Arguably democracy, justice and freedom are not discernible as relevant from an economic and business perspective. This has currently been made blatantly obvious in the complicity of foreign state-supported businesses in Libya over recent decades, reinforced in the midst of the slaughter of civilians there by the recognition, noted by Terry Macalister (Libya's oil exports cut as companies hedge their bets, The Guardian, 3 March 2011) that:

Oil companies are hedging their bets over who to back in Libya as the country descends further into chaos, leaving oilfields, pipelines and export terminals in the hands of different warring parties. The fighting has encouraged foreign energy groups to make tentative approaches to rebels holding key oil and gas assets, but they are anxious not to fall out with Colonel Gaddafi for fear he could still restore his autocracy.

It has been noted that the countries supplying the weapons used against the civilians include Italy, Germany, France and the UK -- all anxious to defend their business interests in Libya, presumably at any cost to human life.

Value chain: Importance is attached by business to the concept of a value chain. This is a chain of activities undertaken by a business. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain is then understood to give the products more added value than the sum of the individual activities. As a tool of strategic  planning, application of the value chain analysis has been extended to whole supply chains and distribution networks. The Supply-Chain Council  is a global trade consortium which groups over 700 member companies, governmental, academic, and consulting groups, It manages the Supply-Chain Operations Reference (SCOR). A Value Reference Model (VRM), developed by the Value Chain Group, offers an open source semantic dictionary for value chain management encompassing one unified reference framework representing the process domains of product development, customer relations and supply networks.

Of interest in this context is the distinction made between "added value" and "value added". The latter refers to "extra" features of an item of interest (product, service, person etc.) that go beyond the standard expectations and provide something "more" while adding little or nothing to its cost. Value-added features give competitive edges to companies with otherwise more expensive products.

Value network: Potentially more complex is the concept of a value network as a business analysis perspective describing social and technical resources within and between businesses. The nodes in a value network represent people (or roles). The nodes are connected by interactions that represent tangible and intangible deliverables of financial value -- including knowledge.

Hybrid value chains: Curiously the non-business world has lagged in elaborating equivalent approaches to values of marginal economic significance. Articulation of such possibilities has tended to come from a business perspective -- extending the methodology to include "hybrid value chains", notably in recent conferences responding to the more evident challenges of corporate social responsibility (Global Value Chains, CSR and New Social Movements. Multinational Companies, Global Value Chains and Social Regulation). A case is made for value chains for development, for example.

Value cycles: It is intriguing that one application of economic indicators is the study of business cycles, namely economy-wide fluctuations in production or economic activity over several months or years. Most of these do not follow a mechanical or predictable periodic pattern. Engaging effectively with these cycles, to the extent that they can be recognized, is a major challenge for governance. Of related interest is the focus on confidence cycles (Rob Salmond, Political Business Confidence Cycles: the political causes and effects of business confidence surveys; Teresa Santero and Niels Westerlund, Confidence Indicators and their Relationship to Changes in Economic Activity, OECD Economics Department Working Papers, 1996). Con paper ****

The business framing of "value network" and "value chain" has encouraged an extension of the logic of their structural "geometry" into "value cycles" -- dynamically understood. This follows naturally from any systems perspective regarding environmental consideration of recycling of resources, including waste products (R. Roy and R. C. Whelan, Successful recycling through value-chain collaboration, Long Range Planning, 25, 4, August 1992, pp. 62-71). However the existing focus on the "recycling value chain" is primarily concerned with waste management rather than with any sense that all "value chains" imply "value networks" which, in turn, may imply "value cycles".

As in the case of the application of the "value chain" concept, this cyclic insight has been applied to development, as explained by Olivier Serrat (Value Cycles for Development Outcomes, Knowledge Solutions, July 2009):

The value cycle is a conceptual framework depicting how organizations can build a continuous momentum for creating value. Importantly, it integrates internal (comparative advantage, competitive advantage, and measures of organizational performance) and external (value proposition, customer perceived value, and market-based measures of performance.

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