The Value Net

www.mindtools.com

The Value Net Model, seen in Figure 1 below, was developed by Adam Brandenburger and
Barry Nalebuff, and published in their 1996 book, Co-Opetition.
The model illustrates the interdependencies
between yourself and the four other types of
player in your business:
Customers – The people who buy your product
or service.
Suppliers – These provide your organization
with the resources you need to produce a
saleable product.
Competitors – Competitors take a share of your
target market by offering a similar product or
service.
Complementors – These are other players who
provide a product or service that can be linked to Figure 1: The Value Net
your own to make both offerings more attractive
to your customers.
Customers and suppliers are both located in the vertical dimension. Raw materials and labor
flow from supplier to company, where they are converted into products and services before
continuing to the customer.
The company needs both suppliers and customers to be viable. But, while most organizations
understand that it's essential to listen to what the customer has to say, they often overlook the
value of listening to suppliers.
The same is true of the horizontal dimension between competitors and complementors. Often,
organizations shape their strategy exclusively around what their competitors are doing, but
miss out on key opportunities to connect and grow with potential complementors.
Removing these blind spots will improve your strategic choices.
How to Use the Value Net Model – PARTS

To shape your strategy, Brandenburger and Nalebuff suggest using the Value Net model
alongside their PARTS approach. PARTS is an
acronym for:
• Players
Step 1: Identify Players
• Added value
Step 2: Calculate Added value
• Rules
Step 3: Define Rules
• Tactics
Step 4: Identify Tactics
• Scope Step 5: Define Scope

Step 1: Identify Players

Your first step is to use the Value Net model to identify the players that influence your
business. To do this, list the people and organizations that fall within each role in the model.
Look at the players you've identified. Bear in mind that your own participation in the market
makes you a player, too, and consider these questions:
• Are there opportunities for cooperation or competition in any of these relationships?
• Would bringing in extra players (such as additional suppliers or new customers) create
any more benefits?
• Who stands to gain from forming a strategic partnership with you? Would any of these
players pay you to join them, if their gain was great enough?
• Who stands to lose? Would any of these players pay you to avoid joining forces, if their
loss stood to be big enough?

Step 2: Calculate Added Value

Added value measures what each person, in each role, brings to the table. This helps you
identify who has the most power, and helps you think about how you might increase the value
you provide for others.
To calculate your own organization's added value, identify where you add value through:

• Your unique selling proposition – how uniquely valuable is your product to the market,
and how sustainable is this?
• Supply and demand – can you expand to meet growing demand without creating excess,
unused capacity?
• Trade-ons and trade-offs – can you reduce costs in a way that delivers a better product, or
deliver a better product in a way that reduces costs? Can you raise costs to make a better
product without reducing the customer's willingness to pay?
• Rewards you offer (or could offer) as a "thank you" to customers or suppliers. (Be careful
not to contravene local or home country bribery laws when offering rewards.)
• Creating greater customer or supplier loyalty.
Also, think about what the added values are for the other players you identified in Step 1, and
look at ways that you can get a share of this for yourself.

Step 3: Define Rules

Every industry has certain established and unwritten "rules" that must be followed. While
developing your strategy, evaluate which of these:

• Help your organization.

• Limit what your organization can achieve.
• Could be changed to benefit customers and clients.
• Could be changed in your supplier contracts to your mutual benefit.
Clearly, some rules cannot be changed. However, it might make sense to change others if it
allows you to shape your strategy better. Even small changes to some rules can dramatically
change the competitive game.

Step 4: Identify Tactics

Each player in the Value Net model perceives your organization in a certain way. How you
shape and manage these perceptions is the foundation of your business tactics. Consider these
questions:
• How have you established credibility in your market? Could you offer additional
guarantees, free trials or performance contracts to strengthen your credibility and add
value?
• Are your organization's actions predictable or unpredictable? If a rival company wanted to
"take you on" by offering higher quality goods or services, or more competitive pricing,
would you be able to respond, or would you have something else up your sleeve?
• How do your customers perceive your organization? Use the Perceptual Mapping tool to
better understand their views.
• Is your product or service priced simply, or is pricing more complex? How would
switching from simple to complex, or complex to simple, change others' perceptions and
benefit your organization?
Another way to look at tactics is to analyze how much you're spending on branding and
advertising. Higher spending often signals that you have greater confidence in your product or
service. How might increased (or decreased) spending change perceptions in your market?

Step 5: Define Scope

Scope is perhaps best understood as the boundaries of your game, or market, but these can be
extended by linking to other markets. Your goal in this last step is to identify where those
links are and whether there are benefits to increasing scope, or whether you should sever
existing links to redefine the boundaries.