Friday, July 17, 2020

Thoughts on 'value' in the Value Chain

In Wardley Maps there is a concept of value in the value chain.

It is important that the value is actually fleshed out when discussing a map.  The typical scenario shown in a Value Chain map is that Utility is better than Product.

There is an argument to be made that the perceived value needs to be understood in relationship to the actual value.

For the purpose of this exercise, I'm going to use a standard anchor in Wardley Maps, power.

Power can be attained in a multitude of ways and there are multiple aspects of value related to power.  I'm using specifically Utility Power (from the local electric company) and rooftop Solar as the example.

I will not get into the artificial mechanism of turning rooftop Solar into a "utility like" solution.  I'll leave that up to the sales guy that comes around once a month...

The basic concept is:


  • The value chain helps make a decision
  • Use power from a Product perspective or from a Utility perspective (see figure 1)

@swardley, Wardley, Maps, value, chain, decision, process
Figure 1.  What a Value Chain describes

This is the choice, the value chain helps make a decision, use power from a Product perspective or from a Utility perspective.  

To make a choice, you have to know what value you desire.  Where do you get "additional value" (Figure 2).

The value may be tied to specific capability or need.
@swardley, Wardley, Maps, value, chain, decision, process
Figure 2.  Additional Value

When you consider Rooftop Solar Power generation, which is arguably a product (Figure 3) and power from the power Company which is a utility, they each have a specific purpose

@swardley, Wardley, Maps, value, chain, decision, process
Figure 3.  Rooftop Solar vs Power Company

Because one is a product, the value may be enhanced by an external mechanism
  • One Example, a battery in the garage
  • Another Example, selling power back to a provider
The other is enhanced with an internal mechanism (you don't get the choice)
  • An example:  Utility Company creates a new generation station (or buys power from a new generation station)
@swardley, Wardley, Maps, value, chain, decision, process
Figure 4.  Enhanced Value

With that as the definition, lets talk about the choices available:

Choice 1:  Value Decision Utility (Figure 5)

Making a decision to go only with Utility Power is a value decision
  • Paying for what you use
Undesired Effect: monthly utility bill, infrequent but possible outages, brownouts

@swardley, Wardley, Maps, value, chain, decision, process
Figure 5.  Using Power company only

Choice 2:  Value Decision for Rooftop Solar (Figure 6)

Making a decision to go only with Rooftop Solar is a value decision
  • Being able to eliminate a Utility Bill or going “off Grid”
Undesired Effect: Its possible to run out of stored power, Costly Installation

@swardley, Wardley, Maps, value, chain, decision, process
Figure 6.  Rooftop Solar

Choice 3:  Value Decision Both (Figure 7)

Making a decision to go with both Solar and Utility is a value decision
  • Eliminate power Outages
Undesired Effect:  Power is more expensive 

@swardley, Wardley, Maps, value, chain, decision, process
Figure 7.  Both Solar and Utility

Conclusion:

It is important to understand the need and outcome

It is vital to understand the value desired

Choosing incorrectly has undesirable effects



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