Value Architecture – Building an Innovative Enterprise

2014

As I think more about Enterprise Innovation, I am of the opinion that the place to start is the Architecture of Value. I was researching what others might have said about the topic, when I came across this post – Value Architecture – Building an Innovative Organization.

The article gets close to my thinking but still has some significant differences. Here are some highlights from the article:

Even though the context of business has changed, strategic thinking, creativity and innovation remain on the minds of executives. In particular innovation needs to be incorporated at the highest levels and executive education programs have started reflecting that emphasis. It goes on to say that it is not enough to focus on product and service innovation, and focus on business models. It then brings up the concept of “value architecture”.

“Every company has ‘value architecture,’” says Williams whose research focuses on business model innovation. According to Williams, this value architecture defines how a company manages its resources and the unique ways it adapts and changes according to the external environment. Today’s leading companies are redefining their value architecture and building new business models, now becoming predators not the protectors of the traditional models that made them.”

I have a different notion of what that term means. Perhaps drawing from “Designing Interactive Strategy – Normann and Ramirez“, I would like to consider the ‘Architecture of Value’ in terms of its dimensions, the attributes that matter, the end-users and other stakeholders that form the extended constellation, and the distribution of activities among the various players. It is the understanding of what is important, the extended ecosystem that value touches, and therefore who participates and how in the lifecycle of value creation, that begins the process of strategic innovation.

Clearly the enterprise is one player in this ecosystem and must understand this relationship. The allocation of activities in the constellation is the first step in the design of the value creating system. Once we understand the role that the enterprise will play, only then can be begin to design an enterprise that manages its resources effectively while it flexes and adapts in response to its environment.

Often the opportunities for innovation begin with the re-architecture of the value constellation. Business models only relate to your specific role in the redesigned constellation.

I do agree with the fact that innovation is a pervasive practice. It applies to everything an enterprise does, and certainly therefore to business models. What differs though is the extent of impact that you can expect. Business Model Innovation is strategic and therefore it has the potential of creating significant impact. It is therefore also the most challenging and non-trivial. Without executive sponsorship, such innovation would be impossible to execute. The focus on business model innovation in executive education therefore makes perfect sense.