Journal of Information, Control and Management Systems, Vol. 5, (2007), No.

241

THE VALUE NET

Viliam LENDEL
University of ilina, Faculty of Management Science and Informatics,
Slovak Republic
e-mail: viliam.lendel@fri.uniza.sk
Abstract
Co-opetition provides a framework, based in game theory, from which to
reassess the uncertainties of your strategic position and alternatives in any given
situation. It amplifies the field of vision to include customers, competitors,
suppliers and, a new one, complements. The Value Net is a high level view of the
key relationships that drive any companys ability to succeed sustainably.
Interestingly, sustainability is more critical than economic profit. In order to
succeed in this framework, the principles of adding value over time,
understanding and creating the rules of engagement, awareness of different
perspective all come into play. This article deals with the model Value Net and
its application in the selected transport company.
Keywords: value net, complements, competitors, suppliers, customers, players,
added value, rules, tactics, scope, parts model, transport, cost
1

INTRODUCTION
Managers can benefit by using the insights from game theory to design a game
that is right for their companies. The rewards that can come from changing a game may
be far greater than those from maintaining the status quo. Sometimes the best way to
succeed is to let others be successful. Including your competitors.
The basic idea is that business is a game where you are sometimes competing and
sometimes cooperating with other players in industry. Cooperation generally leads to
an expansion of the business pie and competition to a slicing up of the pie. Both
cooperation and competition are necessary and desirable aspects of a business
enterprise. An exclusive focus on competition (which is the predominant mindset of
much that has been written about strategy in recent years) largely ignores the potential
for changing the nature of business relationships, and thus the potential for expanding
the market or creating new profitable forms of enterprise. A 'co-opetition' mindset
actively looks for ways to change and expand the business, as well as newer and better
ways to compete.

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The Value Net

THE VALUE NET

This is a way of looking at a business situation that recognizes that the company
(or industry) operates in an environment having four main groups that influence the
course of any business. These four groups are:
1. Suppliers,
2. Customers,
3. Competitors and
4. Complements.
The basic framework is illustrated in the diagram below:
CUSTOMERS

SUBSTITUTORS
COMPETITORS

COMPANY

COMPLEMENTS

SUPPLIERS

Figure 1 The Value Net [1]

The Value Net is a schematic map designed to represent all the players in the
game and the interdependencies among them. Interactions take place along two
dimensions. Along the vertical dimension are the company's customers and suppliers.
Along the horizontal dimension are the players with whom the company interacts but
does not transact. They are its competitors and complements.
Competitors are alternative players from whom customers may purchase
products. Or to whom suppliers may sell their resources.
Complements are players from whom customers buy complementary products.
Or to whom suppliers sell complementary resources.
3

STEPS IN USING THE VALUE NET

1. The Value Net describes the various roles of the players. It is possible for the
same player to occupy more than one role simultaneously. Designing the
Value Net for business is the first step toward changing the game.

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2. The second step is identifying all the elements of the game. There are five
(the PARTS model):
- Players
- Added Values
- Rules
- Tactics
- Scope
'PARTS' is an acronym:
- P stands for the players in the game (following the 'Value Map' approach
outlined earlier),
- A stands for the added value that a company can bring to any of the
players,
- R represents the rules of the game or business in which a company or
organization is participating,
- T represents tactics, which are essentially ways of influencing perceptions
of how your organization fits into the game and
- S stands for the scope of the business, or the linkages between company
and any of the other players in its Value Net.
3.1 Players
When a company enters a market, is has to 'pay to play'. Sometimes, if its just
being asked to submit a quote on a piece of work, the price to play can be fairly low. In
other cases, for example if it has to build a new factory to compete, the price can be
quite high. Another way to view market entry, though, is from a game theory
perspective. Here the view is that companys entry into the game may benefit
somebody else - for example, company may be an alternative source of supply to a
customer, or provide a complementary good or service. This added value (to whomever
it is benefiting) that it brings to the game of business may be worth something.
Recognizing this, a company may be able to get the beneficiaries to 'pay it to play'.
Players Questions
- Have you written out the Value Net for your organization, taking care to
make the list of players as complete as possible?
- What are the opportunities for cooperation and competition in your
relationships with customers and suppliers, competitors and complements?
- Would you like to change the cast of players? In particular, what new
players would you like to bring into the game?
- Who stands to gain if you become a player in a game? Who stands to lose?

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3.2 Added values

Company has to develop a relationship with the customer (for example, through
affinity programs such as frequent flyer schemes which create added value to the
customer at little cost to the company, while at the same time enhancing customer
loyalty).
Added Values Questions
- What is your added value?
- How can you increase your added value? In particular, can you create loyal
customers and suppliers?
- What are the added values of the other players in the game?
- Is it in your interest to limit their added values?
3.3 Rules
The basic idea is, that if a company can alter the rules to the game, then it can
change the game itself in its favour.
Rules Questions
- Which rules are helping you? Which are hurting you?
- What new rules would you like to have? In particular, what contracts do
you want to write with your customers and suppliers?
- Do you have the power to make these rules? Does someone else have the
power to overturn them?
3.4 Tactics
Tactics are defined as "actions that players take to shape the perceptions of other
players". The game of business is played in an arena of uncertainty, where each of the
players has an idea (perception) of the situation and strategies of the other players, but
ultimately is uncertain about the reality of those players' situations and strategies. Thus
there is a certain 'fog' in which the game of business is played.
Tactics Questions
- How do other players perceive the game? How do these perceptions affect
the play of the game?
- Which perceptions would you like to preserve? Which perceptions would
you like to change?
- Do you want the game to be transparent or opaque?
3.5 Scope
Scope is simply the link that exists between the game of business that is company
currently playing, and other games being played by those in the given Value Net. The

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underlying logic here is that other enterprises in given Value Net, in addition to being
part of the this game, are also parts of other games that company is not in, and that
linking to them in various ways can expand its scope. If this can create a larger pie, in
which the company can have a significant added value, then its profitability is
potentially enhanced.
Scope Questions
- What is the current scope of the game? Do you want to change it?
- Do you want to link the game to other games?
- Do you want to de-link the game from other games?
4

THE VALUE NET OF THE SELECTED TRANSPORT COMPANY

The company DPM, s. r. o. offers its customers the following services:
- Urban mass transportation on the urban area of ilina,
- Accommodation services (tourist hostel),
- Random bus transport,
- Motor vehicle service and repair,
- Advertising activity.
CUSTOMERS
townspeoples, town ilina,
tourists, abroad tourists,
students, education
institutions

SUBSTITUTORS
COMPETITORS

DPM, s. r. o.

COMPLEMENTS
electric energy,
driving fuel

transport by taxi,
transport by walking,
transport by bike,
transport by car ,
transport by bus (SAD ilina, a. s.)

SUPPLIERS
SSE, a. s.,
Slovnaft, a. s.,
other requisite firms for safety
of the urban mass transportation

Figure 2 The Value Net of the company DPM, s. r. o.

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For every service is possible to work out the separate Value Net. In the following
part is the Value Net working out for principal activity of the company. DPM, s. r. o.
as principal activity has the urban mass transportation on the urban area of ilina.
Figure 2 illustrates the Value Net for principal activity of the company DPM, s. r. o.
It is needed to analyse detail every group of this schematic map (suppliers,
customers, competitors and complements). The company must know the information
about its market position and who are the players in its Value Net.
5

SUBSTITUTORS (COMPETITORS) AND THE SELECTED COMPANY

The company DPM, s. r. o. has the following competitors (substitutors) in the
area of transport in ilina:
- Transport by bus (SAD ilina, a. s.),
- Transport by car,
- Transport by bike,
- Transport by taxi,
- Transport by walking.
The attention is devoted to passenger transport in Vlince, the largest housing
estate in ilina. In the following part is analyzed to passenger in this housing estate by
two main criteria:
- Time transport,
- Price transport.
Table 1 Transport by car (data from [5])
Route
ilina, centre Ul. Sv. Cyrila a Metoda
ilina, centre Obchodn ul.
ilina, centre Ul. Matice Slovenskej
ilina, centre Fatransk ul.

Distance
(in km)
2,5
2,5
3
3

Petrol cost
(in Sk)
11,86
11,18
14,57
15,24

Time
(in min)
5
5
6
6

Real petrol costs depend in the first place on the automobile type and traffic
concentration. Final costs of transport by car are advanced. It is needed to include in
this transport other costs (parking fee, amortization, third-party insurance, etc.).

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Figure 3 Transport by car - routes

Table 2 Transport by bus - SAD ilina, a. s. (data from [6], [8])
Route
eleznin stanica
Zvolensk ul.
eleznin stanica
Plemenrsky podnik

coarse

Fare (in Sk)

transport card

reduced

Time
(in min)

12

10,50

12

10,50

Table 3 Transport by trolley-bus line 14 (data from [7])

Route
eleznin stanica
Ul. Sv. Cyrila a Metoda
eleznin stanica
Obchodn ul.
eleznin stanica
Ul. Matice Slovenskej
eleznin stanica
Fatransk ul.

Fare (in Sk)

coarse
reduced
normal city card normal city card

Time
(in min)

10

6,5

11

12

7,2

13

12

7,2

15

12

7,2

18

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The Value Net

Table 4 Transport by trolley-bus line 4 (data from [7])

Route
trovo nmestie
Ul. Sv. Cyrila a Metoda
trovo nmestie
Obchodn ul.
trovo nmestie
Ul. Matice Slovenskej
trovo nmestie
Fatransk ul.

Fare (in Sk)

coarse
reduced
normal city card normal city card

Time
(in min)

10

6,5

10

6,5

10

10

6,5

12

12

7,2

15

Figure 4 Price and time transport by several ways transport (route ilina Vlince III)

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249

Table 5 Transport by bike and walking

Route
ilina, centre Ul. Sv. Cyrila a Metoda
ilina, centre Obchodn ul.
ilina, centre Ul. Matice Slovenskej
ilina, centre Fatransk ul.

Petrol cost
(in Sk)
0
0
0
0

Time (in min)

bike walking
10
20
13
25
15
30
20
35

Other groups of this schematic map (suppliers, customers, competitors and

complements) are needed to be analyzed equally way. Obtained data from the Value
Net provide to the company DPM, s. r. o. precious information for decision of
managers in the area of planning of bus and trolley - bus routes and of fare set.
6

CONCLUSION
The model Value Net is an invaluable tool for managers in the companies. The
company gets precious information for the area of decision in management. The Value
Net is used in the first place in the firm and marketing strategy. Makes it possible to
know the information about its market position and who are the players in its Value
Net. The Value Net has strengths:
- Useful when considering complex markets involving integrated players
and non-integrated players,
- Recognizing that sometimes the best way to succeed is: to let others be
successful. Including your competitors.
This model is not used much in the Slovak firm, primarily on the ground of
insufficient knowing of managers about this specific tool. The model is used primarily
in foreign firms functioning in Slovakia.
REFERENCES
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]

BRANDENBURGER, A. J., NALEBUFF, B. J.: Co-opetition, Doubleday, New

York 1997.
http://www.12manage.com
BRANDENBURGER, A. J., NALEBUFF, B. J.: The Right Game: Use Game
Theory to Shape Strategy, Harvard Business Review, July-August 1995.
RABBINO H.: Applying the Principles of Co-opetition With System Dynamics
Tools.
http://www.viamichelin.com/viamichelin/int/dyn/controller/Driving_directions
http://www.sadza.sk
http://www.dpmz.sk
http://www.cp.sk

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