Value network analysis and value conversion of tangible and intangible assets
| Date | 18 January 2008 |
| DOI | https://doi.org/10.1108/14691930810845777 |
| Published date | 18 January 2008 |
| Pages | 5-24 |
| Author | Verna Allee |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Value network analysis and value
conversion of tangible and
intangible assets
Verna Allee
Verna Allee Associates, Martinez, California, USA
Abstract
Purpose – The purpose of this paper is to provide examples and technical details for conducting a
value network analysis that addresses the conversion and utilisation of intangible assets.
Design/methodology/approach – Value network analysis was first developed in 1993 and was
adapted in 1997 for intangible asset management. It has been tested in applications from shop floor
work groups to business webs and economic regions. It draws from a theory based in living systems,
knowledge management, complexity theory, system dynamics, and intangible asset management.
Findings – The paper provides a high level of detail on the analysis method and insights from its
practical application across a range of business issues. Tips are provided for how to integrate the
methodology with other business analysis approaches.
Research limitations/implications – The paper does not provide a comparative analysis with
other methods because most other value network models are process views, social network analysis or
clustering techniques.
Practical implications – Sufficient detail is provided so researchers and practitioners will be able
to apply the method in their own investigations. Further resources are noted, as well as access points
to the global user community and open source tools.
Originality/value – This paper is the first detailed publication of the value network analysis
method, which has been acclaimed by experts in intangibles, network analysis, knowledge
management, and process analysis. It fills a gap between theory and practice for managers, executives,
analysts, and researchers.
Keywords Value analysis,Intangible assets, Adaptive systemtheory, Complexity theory
Paper type Conceptual paper
Introduction
One of the most important and challenging questions in working with intangibles is
“How do we convert intangible assets such as human knowledge, internal structures,
ways of working, reputation, and business relationships into negotiable forms of
value?”. Value network analysis offers a way to model, analyse, evaluate, and improve
the capability of a business to convert both tangible and intangible assets into other
forms of negotiable value, and to realise greater value for itself. Underlying this
approach is an understanding that intangible, but nonetheless strong and dynamic
relationships, and the intangible assets that make up and have an impact on those
relationships, are the foundation of any successful business endeavor. Indeed, the
future success of a company or organisation as a whole depends on how efficiently a
company can convert one form of value into another.
An example of value conversion occurs when an intangible asset such as
professional expertise is converted into a more negotiable form of value, perhaps in the
form of consulting services. The conversion dynamic also applies to value realisation.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
Value network
analysis
5
Journal of Intellectual Capital
Vol. 9 No. 1, 2008
pp. 5-24
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930810845777
An example is when a tangible value input, such as purchased market intelligence
reports, is converted into a non-financial asset of increased levels of marketing
competency.
A decade of research and practice in intellectual capital has demonstrated that the
impact of organisational (or purposeful network) interventions and actions must be
understood in both tangible and intangible terms (Sveiby, 1997; Edvinsson and
Malone, 1997; Wallman and Blair, 2000; Lev, 2001; Eccles et al., 2001). In particular, the
intellectual capital field has raised awareness about the importance of intangib le
assets. Intangible assets include relationships, employee know-how and compete ncy,
the effectiveness of the organisation’s work groups and structure, the efficiency of the
organisation’s production and service processes, and the level of trust between the
people or organisations forming the relationships. Trust is an expression of high
degrees of social capital, both within the organisation and externally expressed as
reputation and brand. Tangible assets are financial resources and other capital -based
resources that are controlled by the firm.
Networks and roles as value conversion mechanisms
Understanding the dynamics of value conversion requires expanding beyond the asset
view of intangibles to understand the function of intangibles as negotiable goods and
as deliverables. At the macro level, the primary conversion mechanism for converting
one form of value to another is the network. There are many different kinds of
conversion enablers for networks, of course, such as alternative currencies (Lieta er,
2001). But these are only effective when a healthy value exchange network supports
them. Because the network is the primary economic mechanism for value conversion,
network analysis can be used to describe the value creation dynamics of work groups,
organisations, business webs, and purposeful networks engaging in both tangib le and
intangible value exchanges to support the achievement of specific outcomes and to
generate economic and social good (MacCauley, 1963; Granovetter and Swedberg,
2001; Allee, 2002, 2003).
Purposeful networks, such as organisations, consist of specific roles and value
interactions oriented toward the achievement of a particular task or outcome. The
active agents of the network are real people who participate in the network by playing
particular roles in which they convert both tangible and intangible assets into
negotiable offerings and fulfill different functions.
These activity-focused networks, therefore, can be considered value conversion
networks, or value networks. A value network is any set of roles and interactions in
which people engage in both tangible and intangible exchanges to achieve economic or
social good. Internal value networks include activity-focused sets of relationships
between individuals (e.g. the chief executive officer and the chief financial officer or
team members) within and among work groups (e.g. those within and between the
manufacturing, research and development, or sales departments), and between and
among the various work groups that make up the organization.
External-facing value networks include those between the organization and its
suppliers, its investors (including venture capitalists); its strategic business partners
(e.g. a business with a complementary product); and its customers. Other kinds of
networks cross organizational and industry boundaries, such as innovation networks
or networks of people with the shared purpose of creating a particular social good or
JIC
9,1
6
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