Partnerships as a Value Network
No digital product, service, or business model is fully independent. They all rely on partnerships.
Each building block can require several partners, whether it is implementing partners as channels, volunteer communities writing code in key activities, or a consortium of partners that have a shared ownership/commitment to the digital solution or service itself.
The rise of the digital economy has not just seen the emergence of products and services but also the unbundling of a lot of the roles surrounding products and services that traditionally would have been carried out within a single organization. Thinking only about your organization and its business model is no longer sufficient. Analysis, decisions, and ongoing management need to be carried out at an ecosystem level, which can be characterized as a value network.
Your value network is composed of actors with which you have a key partnership.They help make your business model work and are involved in creating and delivering value in regards to your product or service. This value can be in many forms, both financial and nonfinancial, such as knowledge, learning, access to other organizations, and other intangible benefits.
Traditional approaches to value network mapping do not delineate sufficiently between close partners and more distant partners. However, it is important to map out your value network into two main groups: an inner value network (IVN) and an outer value network (OVN).
Inner Value Network
This network is composed of organizations and individuals who are involved in the core design and development of your digital solution or those with whom you have a close working relationship. Traditionally, all of these actors may have been housed within a business or organization in different teams or departments. Now they are just as likely to be external individuals or organizations that are collaborating with you.
Cultivating and managing this IVN is critical to the sustainability of your business model. The inner value network will have roles across most, if not all, of the building blocks in your business model canvas. Key aspects of your inner value network to consider are:
- How does money and value come into and distribute across the IVN?
- What is the typology, governance, and management structure of the IVN, and how does it change from an MVP to a sustainable solution?
- What are the legal structures required of different entities?
- What is the decision-making structure of the network? For instance: How much control do you have across the network, how much influence, and are there processes for democratic decision-making if it's dispersed?
- When should a role or activity be carried out by an IVN partner and when should it be retained or brought into your own organization?
Outer Value Network
This network is linked to the inner value network, but it is not involved in the design and development of the solution, and you do not have a close working relationship with members of this network. Rather, those in your OVN play roles such as complementors, funders, regulators, and even competitors. This network should be analyzed and strategized for, but you do not need to manage or coordinate it. Key aspects to consider when mapping your OVN are:
- Have you mapped all the actors that have a direct impact on the success of your product or service?
- What types of organizations/entities are in your OVN, and what implications might this have for your organization? For example: If there are many academic individuals/institutions in your OVN, do you need to onboard an academic to position your organization well in the ecosystem?
- How much is the ecosystem for your solution in place? Or are you building the first ecosystem for your solution and, therefore, trying to influence an emerging OVN?
- Do you have key dependencies (e.g., on other software) within the OVN?
- How will the OVN function at the end game phase of your business model, and how do you build towards that end game version of your OVN?
- The boundary lines between your organization, the IVN, and the OVN can be fuzzy and will change over time. This means you will need to iteratively update your value network map.
To complete the key partnerships building block in your Business Model Sustainability Canvas, you will need to look at your value network and distinguish between your close partners (those in your inner value network) and more distant partners (those in your outer value network). Sections 8.1 and 8.2 will provide pointers to help you make this distinction and tips on how to navigate your inner and outer value networks.
Section 8.1: Inner Value Network
This section provides guidance to map out your value network and identify those partners that you should consider as being in your inner value network.
Key discussion areas:
- Explore your value network and identify your IVN
- Understand the components needed to foster a healthy and effective IVN for your business model
Section 8.2: Outer Value Network
This section helps you identify those partners that you should consider as being in your outer value network.
Key discussion areas:
Identify different types of OVN actors, including complementors, regulators, and competitors Track what each of these actors is doing in terms of adding or reducing value for your customers
A business model relies on an ecosystem called a value network, which is composed of two main groups: an inner value network and an outer value network.
An IVN is made up of organizations and individuals that your organization has a close structured working relationship with.
An OVN is made up of organizations and individuals that have a direct (and sometimes indirect) impact on your business model through how they behave, but you do not have a formal or structured working relationship with them.
Complete the following in your Business Model Sustainability Canvas:
- Identify all the key members of your IVN and highlight which area of the business model they are involved in and label then as being part of your IVN.
- List any important actors in your OVN that your business model relies on to enhance your offering, such as complementors, regulators, and competitors. Label them as being part of the OVN.