A VDML model includes measurements of operating variables and value contributions. These measurements are the basis for assessing the effectiveness of the business operation. Changes to the design or operating measurements will be propagated to changes in the measurements that describe overall performance and customer satisfaction.
VDML is under development as an OMG (Object Management Group) standard. In late 2010 and early 2011, I did a series of blog posts on VDML starting with Value Chain Modeling Part 1: Capability Analysis. Since that time, we engaged additional experts, incorporated additional perspectives from a number of business modeling techniques, added graphical notation and refined the earlier metamodel specification.
In this post, I will provide a brief overview of the VDML principal concepts and their relationships based on the latest draft specification. In subsequent posts I will discuss some of our current work as we move toward adoption of the proposed OMG specification later this year.
The fundamental, structural concept of a VDML model is collaboration. A collaboration is defined as a group of participants, working together for a shared purpose. An enterprise involves many, networked collaborations including collaborations with customers and suppliers. Roles within a collaboration define how each of the participants contribute to the collaboration. A participant can be an actor (person or automaton), a supporting collaboration or another role. For example, a manager (role) of an organization (collaboration) can be assigned as a member (role) of a task force (collaboration).
There are four specialized types of collaboration in VDML: an organization unit, a business network, a community and a capability method. These are described in the following paragraphs.
An organization unit, such as a department, a team, a division or a corporation, is a collaboration that is relatively stable with associated resources including people, facilities and intellectual capital. The roles in an organization unit may be filled by people and/or other organization units thus representing an organization hierarchy. There are typically organizational relationships in an enterprise that do not fit the conventional organization hierarchy pattern such as project teams, interest groups and committees. VDML provides for the representation of all organizational relationships.
An organization unit typically has defined capabilities based on its purpose, resources, facilities and intellectual capital. The activities required for an organization unit to apply a specific capability can be modeled with a capability method, discussed below.
A business network is a collaboration among economically independent business entities. This may represent customer relationships and relationships with suppliers or other business partners. Business networks focus on the exchange of products, services, money and related values such as product quality and availability of field support. In a viable business network, participants exchange values where each participant receives values that, in its context, has greater economic value than the values it provides.
A community is a loose association of members such as a professional association, an industry standards group, a market segment or employees with a common interest who share ideas. In a business network, a typical customer may be represented as a member of a market segment community.
A business capability is the ability to perform a certain kind of work. A capability method is a collaboration with defined roles and activities for applying a business capability to deliver a particular result. An organization unit may have a general capability, but it typically delivers more specific capabilities using its resources, facilities and intellectual capital in particular ways. Its capability methods define patterns of activities and resources required to apply the more specific capabilities.
Activity networksWithin any collaboration, activities can define what the participants do in their roles. Activities receive business items and add value to change or produce business items as deliverables. Stores represent inventories of business items pending consumption by activities or delivery to another recipient. Business items can include resources, intermediate products, sales orders, money, specifications, intellectual property or anything that is an input or deliverable of an activity that is relevant to the value contribution. Most deliverables are received by activities or stores in the same collaboration, but some are outputs to other collaborations, including external business entities.
The dependencies based on deliverable flows between activities and stores form an activity network within a collaboration. An activity network can represent any form of repetitious, organized behavior including adaptive processes that perform some activities only part of the time.
VDML does not represent process flow-control loops or decision branches, but focuses on the utilization of activities and the flow of deliverables between them. Measurements of values (for example, cost and duration) associated with activities and stores each represent an average per unit of production, so the measurements for an activity may reflect that it is engaged only once for some units of production, and multiple times for other units of production.
CapabilitiesVDML includes a capability taxonomy that may be represented as a capability map. Each capability identifies the organization units that can provide that capability.
Each activity requires a capability and identifies the role of an assigned participant has that capability to perform the activity. The activity defines how that capability contributes to the particular collaboration. The role of a participant may be associated with multiple activities in the collaboration. The participant must meet the capability requirements of each of the activities associated with that role.
A role may be filled by an actor (a person or automaton), or, where the work of the activity requires multiple participants, it may be filled by an organization unit with the required capability. The organization unit may identify a capability method that defines how the capability is applied. The capability method is engaged by the activity through delegation. Delegation is the mechanism by which a capability method can be shared as with shared services. Delegation defines the flow of inputs of the parent activity to the capability method and from the capability method to become deliverables of the parent activity.
Activities add value to produce deliverables. Values may be positive or negative. Values of interest typically include per-unit cost, duration and defects, but other product-specific values may also be captured. Each value-add contribution is expressed with a measurement. From contributing activities, value adds of each type are aggregated in a value proposition that represents the values of the product or service.
A value proposition is a package of values and deliverable(s) that are offered to a recipient, typically a customer, but a value proposition can also be offered to other stakeholders such as business owners or internal “customers.” The value proposition incorporates those value contributions that are of interest to the recipient. The value proposition expresses its values from the recipient’s perspective. For each type of value, the aggregated measure is transformed to a level of satisfaction based on a formula for the particular type of recipient. Different customers or market segments may be interested in different values with different priorities, so separate value propositions can represent the levels of satisfaction for these different recipients.
The activities, deliverables, capabilities and values that contribute to a value proposition are characterized as the value stream for that value proposition. Value contributions and deliverable flows that feed the value proposition can be traced back to the activities involved and the capabilities they use to contribute to the value proposition.
When a value proposition indicates a poor level of satisfaction of a value, the value stream can be examined to identify the activities and thus the capabilities that contribute to that value and the analyst will look for potential improvements that could raise the satisfaction level. Conversely, if a capability is disrupted, an analyst can determine all value streams that will be affected.
VDML provides the ability to represent the same business model under different circumstances. The structure may be the same, but the measurements are different. We describe these different circumstances as scenarios. So the measurements of different product mixes might be represented with different scenarios.
In addition, a capability method might be engaged more than once within a value stream or by multiple value streams. The measurements of the capability method will be specific to each context. VDML manages the measurements separately for each occurrence.
SummaryVDML provides the means to manage the complexity and competitive forces that I outlined in Rethinking Business for a Changing World. VDML will provide a robust modeling capability for business architects and managers that goes beyond business process modeling to incorporate modeling of value creation and exchange, capabilities and capability sharing, organizational relationships and performance measurements. Business processes are part of the model but are represented without the flow-controls details. This will improve understanding of the way the enterprise works, and will provide support for strategic planning, decision-making, innovation and optimization of business value. It provides a context for consideration of many challenges such as capacity planning, risk management, regulatory compliance, business transformation, new product planning, consolidation and outsourcing. It will enable development of persistent business models that can be used for on-going analysis and improvements rather than requiring a new, blank-slate modeling effort for each new challenge or initiative.
At the same time, VDML will improve accountability for customer value contributions. It will provide information needed by first-line managers to improve their operations with an understanding of their impact on the rest of the business and the related organizations with whom they must collaborate and coordinate. It enables enterprise-level optimization where many lines of business share capabilities for economies of scale and improved enterprise agility.