DEFINITION of Value Network
A value network is a set of connections between organizations and/or individuals interacting with each other to benefit the entire group. A value network allows members to buy and sell products as well as share information. These networks can be visualized with a simple mapping tool showing nodes (members) and connectors (relationships).
BREAKING DOWN Value Network
In business and commerce, value networks are an example of an economic ecosystem. Each member relies on the others to foster growth and increase value. Value network members can consist of external members such as customers or internal members such as research and development teams. Weakness in one node can affect the entire network. For example, if a development team is weak, the production team has a harder time creating the product which, in turn, can leave a buyer waiting for their shipment.
How Value Networks Benefit a Company
The advantage a value network provides comes from the way a business or individual applies the resources, influence, and insight of others to whom they are connected. A startup, for example, may look to its external connections, such as its investors and mentors, to provide experienced guidance on how to approach the development and growth of the business. While many founders have a deep understanding of the product or service they are developing, bringing that service to market, finding customers and scaling up the business may be unfamiliar to them. To make up for this shortcoming on their part, they may seek the advice of trusted stakeholders, which is considered an intangible benefit of their relationship, who have experience with such matters. They might also look to groups that specialize in assisting startups, such as incubators and accelerators, to increase their exposure to potential mentors and investors.
Value Networks and Startups
An investor typically provides their guidance to the startup they are backing because by helping the leadership grow their ideas into a tangible company, shareholders stand to benefit from the startup’s development. That guidance can take the form of expertise the investor possesses. The investor might foster introductions between the founders of the startup and other businesses they can work with to further their plans. For example, if the company needs to produce a prototype of its product, an investor might be able to direct them to another company that creates made-to-order prototypes. Likewise, if the startup is looking for a mass manufacturer or a distributor, the guidance they receive may benefit all involved as it can mean increased business for each organization and individual.