More on value chains: Stabell & Fjeldstad
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Finally, I have in hand a paper with some theoretical clarity regarding value chains, networks, and shops. That paper is Stabell & Fjeldstad, "Configuring Value for Competitive Advantage: On Chains, Shops, and Networks." (I am not sure how long that link will be valid.)
I confess to feeling some uncertainty when the ITIL v3 authors chose to advocate value networks and deprecate value chains for the purpose of IT service analysis. After reviewing the material available at the time, my initial reaction was that nothing of value was being added, and in fact we were losing analytical rigor. This was based on in particular reviewing the work of Allee and van Middendorp, whose value network diagrams are essentially undirected functional maps - for example, see page 11 here, and page 7-8 here. (This method is nothing new at all; see IDEF0.)
What I object to in these examples is the loss of sequencing, and the loss of any distinction between primary value-add activities versus supporting, overhead activities. Sometimes one can't define a main "happy path" sequence of activities, nor easily determine primary versus supporting, and in such cases one is then forced to the un-directed, amorphous functional view. But if there is a clear overall sequence of functional dependency, or a clear hierarchy of primary versus supporting, that adds analytical value. Why throw it out? And we have both functional and timing dependencies and clear primary/supporting dynamics in IT service management.
Basing my judgement of value networks on Allee's work (and others including Bovet/Martha, Pepperd/Rylander, Stern, and Cherbakov et al) was incomplete however. Stabell and Fjelstad have a very different approach. First, they abstract: "...the value chain is but one of three generic value configurations." (P. 414)
Putting my modeler hat on, I originally modeled this as inheritance:
but then decided it was better considered as instantiation, as we are talking about three different modeling techniques, essentially: it is a metamodel structure.
Now that we have asserted that there is some master concept that all three variants derive from, we're on much firmer analytical ground. What are the common contents of the that master "Value Configuration" concept? Stabell and Fjeldstad define a coherent meta-analysis framework here; any value configuration must have:
- Logic
- Primary Technology
- Primary [as opposed to secondary] activity categories
- Main interactivity relationship logic
- Primary activity interdependence
- Key cost drivers
- Business value system structure
They are clear that their concept of "value configuration analysis" is not used by Porter. The question at issue is, at which level was Porter really operating? In his manufacturing-centric example, was he presenting what he perceived to be the framework, which Stabell and Fjeldstad subsequently enhanced with their "value configuration" abstraction? Or was Porter himself presenting merely an instance of a more general framework implicit in his theory?
Academics may argue those questions endlessly. My assumption was the latter. I think the assumption of many of those I have debated with is the former. I don't really care, because this debate may never be settled; let me say for the record that my "IT Value Chain" is a value configuration in the Stabell/Fjeldstad sense. When I undertook my "value chain analysis" of IT, the first thing I did was to throw out Porter's five primary activities:
- Inbound Logistics
- Operations
- Outbound Logistics
- Marketing
- Service
I did this on the assumption that value chain analysis was inherently an abstract framework. I replaced them with
- Demand/Customer Relationship Management
- Solutions Delivery
- Service Support
Consider Stabell and Fjeldstad's "Value Network" primary activities (p. 430):
- Network Promotion and Contract Management
- Service Provisioning [Provisioning is an alternative term for Delivery]
- Infrastructure Operation
They also indicate supporting activities: Firm Infrastructure, HR, Technology, Procurement. So, without having ever read Stabell and Fjeldstad, my IT Value Chain model is substantially identical to their "Value Network" model.
The main point of debate might be that they insist the primary activities are undirected and overlapping (p. 430). This may be so for a bank, but they were not analyzing IT service management specifically, and in my experience in enterprise IT there *is* stage containment and linear ordering between the primary activities. Coordination across the activities is the domain of the supporting functions. It is to their credit however that they have defined a framework which does not discard the possibility of directed dependencies between the major activities, but rather calls out a number of possibilities. I can now be very specific: while my IT value chain's primary activities are functionally identical to theirs, the "main interactivity relationship logic" I believe is still sequential and not simultaneous/parallel. We are now at a level of specificity where we can have a fruitful debate.
Furthermore, a key point they make is: "all three configurations have in common a focus on ... the distinction between primary and support processes ..." (p. 433) Some have argued on this blog that the distinction between primary and supporting activities is no longer meaningful, due to the issue of "intangibility." I think I refuted that here. However, this point of view appears to be limited to the Allee/van Middendorp school of value network thinking.
Stabell and Fjeldstad do not want to throw the primary/supporting baby out with the value chain bathwater; they instead consider it core to the fundamental value configuration analysis framework - although they do note that some primary and supporting activities need to be "coperformed" for value shops (i.e. talent management).
The Stabell and Fjeldstad paper is rich and will bear repeated reading. There's enough analytical rigor there to derive further metamodel work from. I think that in light of this representation however, my IT value chain continues to hold water.
Charlie
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