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Jay Cross helps people work and live smarter. Jay is the Johnny Appleseed of informal learning. He wrote the book on it. He was the first person to use the term eLearning on the web. He has challenged conventional wisdom about how adults learn since designing the first business degree program offered by the University of Phoenix.

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Value Networks


posted on
January 11th, 2010
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2 comments

In yestserday’s New York Times, Gretchen Morgenstern explained one reason Why All Earnings Are Not Equal. Corporate managers have lots of elbow room as to whether an item is an expense or an investment, and some push the limits of discretion.

More puzzling to me is why businesses are not permitted to account for social capital (such as know-how, relationships, and talent) which makes up more than half of their value. Hey, financiers, this emperor has no clothes!

Verna Allee is the only person I’m aware of who has a viable solution for describing and monitoring the role of intangibles in value creation.

Verna sees organizations as value networks. A value network is a web of relationships that generates economic value and other benefits through complex dynamic exchanges between two or more individuals, groups, or organizations. Any organization or group of organizations engaged in both tangible and intangible exchanges can be viewed as a value network, whether private industry, government, or public sector.

Rather than counting accounting’s funny-money, Verna directly tracks the flow of value through the organization’s circuitry. Her Value Network Analysis is the missing link that unites the formal organization, business process modeling, asset management, and social networks.

Let me take another run at what Verna does: She evaluates an entity as a living system. Every living system is a self-renewing network. Its structure is its best description. The focus is on the people, who are the nodes in the network. Verna connects the nodes with arrows (for direction) and labels (describing exchanges of matter, energy, and ideas between the nodes). Each node is linked to a scorecard that tallies the value of its exchanges. She uses the system map to spot bottlenecks and relationships that need improvement; managers need to focus on the white space between the nodes.

Emerge, converge, and know.I captured a few minutes of Verna leading a workshop on Value Networks last fall:

Might Value Networks be the appropriate measurement system for optimizing Wirearchy?

Related links:
Value Networks Library
Value Networks.com
Open Value Networks

2comments

  • Stuart Henshall - January 11, 2010 at 11:00 pm -

    Jay, I think there are other faster, cheaper, more effective ways to “monitor” the organization without trying to “track” these value flows. IOW look at the rate of change, and how “trust” is reflected. I’d love to be convinced otherwise…. I suspect that one of the key generators of “value” is to use these “knowledge tools” for discussion. In this case I’m not sure how they have evolved. My question… do they involve the external market,customers, supplier etc. That today is an increasingly important part and the “people” or community network significantly outnumbers those that are in the company/organization. Years ago I wrote and tried to develop a community around tools to build / work towards a “Network Capital Monitor”. Like you identify I believe the need still exists. This field has been neglected for many years and IMHO was always better understood in Europe where the Accounting rules etc and discussion developed along more “social” lines.

  • Sundar Nathan - January 18, 2010 at 11:50 am -

    Jay, very thought-provoking question. One approach to measuring value created by individuals might be to tie the effectiveness of education imparted and shared by the individual with other individuals and teams.

    Their value shared is evaluated by the receivers of value.

    What do you think?

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