Wednesday, February 16, 2011

Value Chain Modeling, Part 5: The Organizational Perspective

This is a continuation of a series of posts on value chain modeling that started with “Value Chain Modeling: Part 1, Capability Analysis
A value chain represents the work that is done to deliver a product or service. Responsibility for the work and delivery of value belongs to various parts of the organization.  When considering the performance of the value chain, it is important to identify responsibility and accountability for performance and initiation of improvements.  Improvements as well as new business undertakings may also require organizational changes. 
In this article I will discuss a generic organizational modeling capability and its relationship to the value chain model. 
We define a basic, recursive pattern of organization structure that is a collaboration of participants working together, fulfilling roles for some joint purpose.  “Collaboration” and “Role” are fundamental, abstract concepts.  A collaboration may be a formal organizational unit, an ad hoc group such as a task force or committee, or an informal gathering such as a community of interest.  Traditional nodes in a corporate hierarchy are collaborations specialized as “org units.”  Roles may be filled by actors (e.g. people), other collaborations (e.g., org units) or other roles.  Actors do the actual work.  The diagram, below, illustrates relationships between some hypothetical collaborations and roles.
In the diagram, boxes are collaborations and ellipses are roles.  Each arrow represents a participation relationship.  There is one actor, Fred, depicted with a rounded box.  The XYZ Company is a collaboration with two subordinate collaborations shown: the Claims Processing Department and the Quality Policy Committee.  The Claims Processing Department is shown with one Claims Agent role and a subordinate collaboration—the Claim Resolution Team. 
Fred is an employee of the XYZ Company—he fills an Employee role in the company.  As an employee, Fred fills a Claims Agent role in the Claims Processing Department.  As a Claims agent, he is a Quality Reviewer of the Claim Resolution Team, and as a Quality Reviewer, he is a member of the Quality Policy Committee.  Thus roles are filled by other roles.  In other words, Fred would not be a member of the Quality Policy Committee if he were not an Employee, a Claims Agent, and a Quality Reviewer.
Within a collaboration, participants in roles may exchange ideas and work products to achieve their joint purpose.  In the value chain model, from an organizational perspective, a value chain as a collaboration of capabilities performing activities.  Work products flow between activities.  A capability, in turn, is a collaboration among employees who contribute to that capability, and a capability model may include roles of other supporting capabilities.  A business process can also be viewed as a collaboration among participants.  As collaborations, the value chains and capabilities each have roles in the org units that manage them.
From an organizational perspective, a value exchange, discussed in my previous blog post, is a collaboration among independent business entities.  The business entities fill party roles in the exchange collaboration.  Each of the business entities may be viewed as engaging a high-level activity in the exchange.  Deliverables conveying value(s) are exchanged between activities through transactions between party roles and their internal activities.   In an exchange, deliverables are typically exchanged in both directions, whereas, in a value chain, we focus on the transfer of deliverables as defining dependencies between activities.  The output of one activity enables another activity to proceed.
Although it is beyond the scope of the current modeling language specification effort, the value exchange pattern can be applied to any collaboration where participants work together to create or exchange value.  This is an important perspective for strategic planning because not everything that is important to the success of an enterprise can be understood or evaluated based on financial impact.  This can be used to consider value exchanges in  internal communities of interest that share knowledge, participation in industry standards organizations, informal relationships with suppliers and customers as well as informal relationships between individual employees.

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