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06/28/2010

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Verna Allee

David, this is an excellent series of blogs and I am enjoying them very much. Your questions are excellent. When we evaluate a value network we compare two views of the value network - one is the role-based value network to determine the overall value creation capacity of the network itself. The other analysis is the participant view of the network - looking at how individuals who play those roles actually execute their value interactions. Both views are needed.

A very tricky thing about the value of an individual to a network is the risk you so rightly point out - that if there is too much dependency on a particular individual to play a critical role in the network then there is a systemic risk if that person leaves.

The challenge with taking a compensation approach is that it is a manipulation of the natural network dynamics and can easily cause more harm than good. If the value exchanges are not of benefit to an individual they will leave. It is not about compensating individuals - rather it is about optimizing value flows and exchanges in ways that make it attractive for people to play a role in the network.

David Friedman

Verna -
We are in agreement that it's critical for the value network manager to make it attractive for people to play in the network. A good way to have plenty for each member of the network is for the overall network to be highly productive.

But I still see a challenge keeping network members happy - if the network isn't productive enough to provide more than any other opportunity does - because people are always at least potentially choosing between opportunities. Here's some examples, and I welcome your thoughts on them.

In professional service firms, big "rainmakers" know (or at least think) that they could affiliate with a different firm. ( and so the firm needs to either compensate them or find ways to bind the clients to the firms rather than to the individuals. The rainmakers are playing the system -- but that's a dynamic that has to be considered in most networks. Similarly, value added resellers have to decide which software firms to partner with -- a firm cannot work with all so it tries to figure out whose ecosystem (e.g., SAP's, Oracle's, Microsoft's) offers the best options for it. Which is best depends on both the health of the overall ecosystem and the different structure/size of the compensation available to them in each network. While both rainmaker and Value Added Reseller wants his/her network to remain successful, they also want at least as good a deal as they could get somewhere else.

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