Of the Concept of Value and Generative Ecosystems

October 15, 2015

The concept of Value is an intriguing one. We are quite familiar with terms such as Value Proposition and have an intuitive understanding of the term Value as well. We often think of it as transactional. As an enterprise we make something, either a product or a service or some combination of the two, with a target client in mind, and to us, it represents the value we create.

This understanding though is rather simplistic and often the reason why some offerings experience great success while others have to wonder why they did not find traction. Perhaps it is time to take a slightly different look at the idea of value and the associated systems.

Value, I argue is better understood as a complex concept with emergent properties. It emerges out of the interaction of and at the intersection of two broad organic systems – a Value Creating System, which is often a single enterprise, and the Value Receiving System, which in common language is usually referred to as the client or the customer. In reality, both Value Creating and Value Receiving Systems are actually complex networks of collaborating and competing entities, which actually quite contributes to their intrigue and charm.

I also like Elke den Ouden’s representation of Value:

I use the term ‘System’ rather deliberately. Thinking of these two entities as systems provides us with interesting perspectives and insights into the nature of the whole value enterprise. It provides us an understanding not only of Value but also what it means to create and introduce new value, topics of great concern in the domain of Innovation.

The notion of Value Receiving Systems is perhaps new, for I have not seen any reference in literature to such an idea. In very simple terms, no target of an offering stands alone, but rather, is embedded in a system, social or socio-technical. Sometimes these systems happen to be another enterprise. Having stated it this way, it seems obvious that indeed we must see the receivers of our value as embedded in systems.

These targeted receivers of value, are multi-faceted and multi-dimensional entities, even though we might be thinking of individuals, and have a complex set of needs, most of which they have a way of satisfying using services within the ecosystem in which they are embedded and operate.

It is important for us as value creators to understand this system or perhaps even many systems, for while the value they receive currently might not be perfect in its individual dimensions, the totality might indeed be quite substantial.

We are therefore challenged with having to understand the architecture of the current Value to begin with, and understand the systems that currently produce and receive it. That Value, even today, we must recognize, is occurring at the intersection of a complex of producing and receiving systems. Unless, this value is substantially dysfunctional, the system will not easily reconfigure to accept a new architecture of Value.

So not only must be have a better solution for a need, but we must be able to displace an incumbent value offering.

I have argued elsewhere, that an offering is always a solution. (I will write another post that describes how I understand offerings as generative design systems). We sometimes hear of people describing this in terms of offerings, products or services, doing a job for the client. I use the term solution, for just like in the case of the term system, it allows us to see the offering as a resolution of a set of intersecting and often contradictory vectors.

It is this perspective of displacing incumbents and introducing something new into a Value Receiving System that are critical ideas for thinking of disruptive innovation and innovation management. When we think of disruptive or radical innovation, that is what we are up against. The more we master these perspectives, the better we will be at being disrupters, for while simple offerings might afford to not invest in such understanding, nobody can nurture ambitions of being disruptors without a deep understanding of their Value Receiving Systems.

The Architecture of Value as an emergent idea and the Architecture and Design of the Value Creating System, follow from this first step.