Reassembling the Value Network for Business Model Innovation

A company never creates value in isolation. There are always other companies involved in some way to realising and delivering the final product for the customer. Such value chains of companies optimise connections on their complementary capabilities, which enables each to focus on what they’re good at.

The composition of a car is a good example here. Car manufacturers design, and assemble cars under their own brand. But all the parts required for assembly come from different suppliers (for pistons, suspension, braking technology, seat manufacturing, etc), and distribution & sales of the car to the final customer is done through networks of car dealers.

Value chain analysis is great for supporting business as usual. However, when you need to shift your business to a seemingly similar, adjacent customer segment (as is often case in today’s turbulent business environments), the value chain’s usefulness breaks down. The solution lies in framing partnership relations in a different way, as I’ll explain in this article.

The Functional Value Chain
Value chain analysis is a great way to understand production systems. You sketch out the value chain for the product from its origin to the end consumer. The value chain shows the companies involved in value creation, and the sequence in which value creation is achieved.

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The linkages in the value chain can be used to describe the relation between each company in that chain. The value chain is a great tool to examine how and where value is created, and where the risks in the production system reside.

The Disfunctional Value Chain
The value chain approach works well for analysing very formalised, industrial production systems with a clear hierarchy in the organisation of production. But the knowledge that comes from analysing the value chain gives an elusive sense of control about the ability to actually change a production system.

The instant you want to focus on a different customer segment, or change your value chain, because a partner role is not contributing value (or has become obsolete) you start sensing the illusion. Change takes more than replacing some of the mechanics in a sequential production system.

When changing your company, and changing the value chain with it, you see that in reality you are part of a complex, highly interdependent, nested production network, that is designed to drive value creation towards a very narrow purpose.

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Attempts to focus on a customer segment outside of the scope of that system flushes up restrictive dependencies, and the configuration’s immune system will have you ousted, rather than change with you. You’re on your own!

This is what Unilever experienced with the recent hostile take-over bid from competitor Kraft. Though Unilever, and its customers are on a change route to sustainable consumption, shareholders remain with their demand of maximising shareholder value. The Kraft bid showed how Unilever has set each foot in a different value network, and that this inconsistency can painfully split a company.

Changing Partner Relations
Professor Tim Kastelle said it well:

“not only do our end users have to prefer our idea, but we also have to get others within the value network to stop using [and supporting] our competitors”.

In order to change your business model to serve a different customer segment, you need to draw in partners involved in other value networks, and lure them to investing resources into yours.

To achieve this, the perspective on partnership relations needs to shift from that of value chain efficiency, and scale, to that of value network discovery, and growth. This entails that partnership relations shift from tweaking business model efficiency, to a joint search for creating, delivering, and capturing new value.

This shift can be seen in Amazon’s partnership with an air freighter. It’s not that existing value chain partners like UPS, and Fedex aren’t able to work to the particular requirements  of Amazon’s operations. It’s more so that Amazon’s B2C customer segment is adjacent to UPS, and Fedex’s existing core B2B customers. They have different demands regarding delivery rhythms, volumes, and shipping rates than Amazon’s customers.

The Business Model, and Partnership Canvas: Tools that change Perspective
The objective is to define the logic of tying 2 business models together in an exercise of joint value creation. Search is required to figure out how you can collaborate in such a way that both your, and your partner’s business benefit from this new value.

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Partnership Design, which is based on Alexander Osterwalder’s Business Model Canvas, and my  Partnership Canvas, provides a way for achieving this. Partnership Design frames partnering as a business model innovation challenge. It brings focus to value inputs that partners can respectively bring to the table to jointly create a new form of value for delighting customers.

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By focussing on the potential of synergy between value offered, and value desired from each partner, discussions on relationships are framed around the merit of their creative potential. It allows thinking to escape the trap of conventions of efficiency in partnership relations, and upfront disqualification of new linkages due to differences in company size, market power, and assumptions about where industry boundaries lie.

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By looking at your partners one-by-one, you can start to gradually reassemble your value network, around a new customer segment.

The Business Model, and Partnership Canvas help teams to quickly flesh out key hypotheses. These need to be tested to verify whether the new relationship will add value to both their partner’s, and their own business model at the same time.

Continue the exercise for all the partners that you’ll need to build the value network, and watch the ripple effects change an industry!


Interested to learn how you can reinvent your industry through partnerships?
Check out our upcoming Partnership Design Masterclasses

Join the Partnership Design Linkedin group for support

Or contact me for specific questions.

Field notes from user research on Partnership Design

Over the course of developing the partnership canvas, I’ve talked to partnership professionals to hear from them about how they work, and what their experience is in forging business collaborations.

In this post, I would like to share some of the insights from my research, and show how they have lead me to develop the key features for the Partnership Canvas, and the partnership design process. I’ll use the Value Proposition Canvas to visually depict how the Partnership Canvas as a product provides value to people working in the profession.

At the end of the post, I will share a special offer with you to learn more about Partnership Design, and using the Partnership Canvas tool.

The partnerships professional
Partnership managers are a unique species of people. They’re involved in company strategy, as well as in operations of the divisions. Partnership professionals help sales, marketing, product development teams to achieve their goals for growth through collaborations, rather than creating it themselves entirely. They are not formally part of any of these teams/divisions, but they do work closely with them. The partnership professional is thus a business all-rounder.

To find out what some of the key aspects of the profession are, I’ve interviewed a couple of dozen partnership professionals, who I’ve gotten to learn through this blog, and partnership workshops.

Below you will find a summary of my key findings thus far. I’ve focused the presentation of my results on describing the key outcomes partnership professionals are looking to achieve in their work (the Jobs), and their most significant experiences in the process of achieving them (Pains, and Gains). Secondly, I look at the Partnership Canvas as a solution that partnership professionals can utilize, and how it addresses their most important jobs, pains, and gains.

The partnership professional’s profile

Jobs
The higher-level goal of partnership professionals is to create new growth opportunities for their organization, through cooperating with other companies. They are looking to achieve the following outcomes to accomplish this growth goal:

  • Understanding the priorities of all the key people in the organization.
  • Getting involvement from key people in the organization, and maintaining their involvement.
  • Doing research on industries, and specific companies to partner with
  • Talking to everyone in those industries.
  • Creating collaboration opportunities, and facilitating deals.

Gains
The following gains, are the positive experiences that come from working to the desired outcomes:

  • Knowing whom to talk to within the partner’s organization
  • On-going momentum in partnership conversations
  • Face time and trust in negotiations; keeping out legal until there is a clear narrative for the partnership
  • Getting into a flow of sculpting the deal together
  • Understanding what they get, and what you get.
  • Seeing the needle move on key metrics for the partnership
  • The satisfaction that comes from building out networks, and finding out intricate industry insights.

Pains
Lastly, partnership professionals experience the following pains in their jobs:

  • Convincing needed to get buy-in on the vision for the partnership, both externally, and internally
  • Not having enough space to explore a potential collaboration with partners.
  • Mobilizing people internally takes a long time. Lots of long talks, iterating along the ranks.
  • Changing internal priorities and people changing positions.
  • Hard to keep it simple: Every stakeholder adds on a layer of complexity for executing on the partnership

The figure below, visualizes these jobs, pains, and gains, and shows how they connect through color-coding.

The Partnership Professional
The Partnership Professional

The solution
Lets now look at the Partnership Canvas as a product, and some of pain relievers, and gain creators that it and the Partnership Design process provides to help partnership professionals succeed at their game.

Product
The Partnership Canvas is a visual business tool that captures the essential design elements of a partnership deal. Together with the Partnership Design process, it creates a method for understanding, designing, and testing business model partnerships.

Gain creators
The Partnership Canvas is an add-on to the Business Model Canvas. This enables it to tap into the power of the Business Model Canvas to understand, and design businesses. As such the tool  can be used for research on other business models, and partnership in an industry.  The connection with the Business Model Canvas also creates linkages with Lean Startup methodology, turning partnerships into testable business model experiments.

The partnership tool is also a simple, easy to understand visual tool. It asks for all the relevant insights, which are needed to create a complete understanding of a partnership.

Pain relievers

  • The Partnership Canvas is an agile tool, which facilitates quick communication, and decision making around business options.
  • The Partnership Design steps start with exploration of partnering options, before moving into experimentation and implementation.
  • The tool brings focus to partnership discussions. This also helps people with different (non-business) backgrounds, and disciplines to quickly understand and decide what is needed to build a productive partnership.
Partnership Design as a solution for the partnership professional
Partnership Design as a solution for the partnership professional

This is still an ongoing research project, and I haven’t covered the full depth of partnership professionals’ field of work yet. I keep learning from every new conversation I enter. I’d love to hear your thoughts on the profile I’ve compiled so far, and also about other tools, and methods that you use yourself to design partnerships. Do comment, or send me an email to bart[dot]doorneweert[at]gmail[dot]com if you’d like to talk further!

Interested to learn more about using the Partnership Canvas for transformative business collaboration?
Check out our upcoming Partnership Design Masterclasses