An introduction to Wardley 'Value Chain' Mapping

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Step 5. Adjust

Once you've challenged the map by removing duplication and bias, you need to adjust it to suit the people involved. Hence, you take your map, point out all the areas where you can use the work of other groups and also provide the evidence that we're going about things in the wrong way. This is always a fraught time because people may well have inertia to change and hence will resist.

Maps are also great for identifying what can be built as common services in an organisation and what can be reused from elsewhere. Hence don't forget to use your maps to make agreements between groups; for example, this group will build the rules engine for all the other six groups, and so on. You can't remove such duplication without a communication mechanism such as mapping. Relying on people to simply talk over the water cooler in a large organisation is how most companies get into a mess of duplication. Let us, however, assume that you have persuaded everyone on the adjustments necessary and made agreement to consume and supply components to other groups. I've provided an adjusted map here (Figure 7).

From the map, we have identified the user need (the 'visible' elements at the top of the map), we know the components involved in creating those needs (the value chain), we've got some idea of the context and how evolved the components are, and we've challenged the map by identifying any bias we might have in the treatment of components. We've worked out that other groups have built several components and these are things we should consume from them. We've also agreed with other groups what components we could look to provide.

We now have a good understanding of the landscape and have removed potential duplication and bias. The next step is about putting some measurements in place (transaction costs and revenues) and sharing the maps with others. However, I thought I'd jump ahead to my next favourite topic, which is strategic play or the art of thinking.

Step 6. Think

This is the stage in which we add a bit of strategy to the conversation. I tend to abolish the word strategy from the lexicon, because strategy without an understanding of the context (without situational awareness) is worthless.

The key step is to determine where to attack. Why is a relative statement – for example, why here over there. This is critical to understand because many companies try to determine why with no understanding of context.

There is a lot to strategy from anticipation of change to competitor moves, from inertia to tactical plays, and so on. Maps help you learn what works and what doesn't over time through practice. As with military campaigns, maps are an incredibly useful tool for organisational learning.

The key to their use is to think about the environment (the board), to attempt to manipulate the environment (move pieces) and to practice. Don't worry about being perfect, you'll get better. So, back to our TV company example. There are numerous where's that you could attack. I'm not going to list them all, but instead give a simple example known as 'Fool's mate'.

The problem is that the TV company has to commission shows from creative studios. These are limited in number and hence programs tend to be expensive. What we want to do is drive the creative studios to more of a commodity. Alas, the creative studios will resist this and hence have inertia to such a change (marked as a black bar below in Figure 8).

Fortunately, creative studios themselves have constraints in terms of production talent and production systems. By driving production systems to more of a commodity (ideally through an open approach), you can reduce these constraints and encourage more creative studios to form, hence driving creative studios to more of a commodity. The beauty of this approach is that creative studios are likely to support you in your efforts because production systems will be seen as a cost to the business rather than a barrier protecting the business.

Of course, the vendors of production systems won't be happy (they'll have inertia), but with the creative studios backing you up, this can be overcome.

So, in the above, you have two wheres and the why now becomes easy to identify. You attack the production systems with an open source effort because this will ultimately commoditise creative studios hence further reducing your programme costs for commissioning. The benefit of attacking this space is that the creative studios are likely to support your effort rather than resist it. This is why you attack production system over attacking directly the creative studios.

In Figure 8 above there's a range of potential points of attacks and some strategic games that can be played. However, it's enough for the moment to simply understand the basics of where and why through the Fool's mate example.

Step 7. Methods

Once you have the map and the initial strategic play, you can start to examine how you're going to do this. You'll need multiple methods for any complex business. Remember that as things evolve their characteristics change and the techniques you need to use will evolve, too.

You could at this point create a map to represent your target operating model (TOM). I don't tend to bother because your map will change with time and competitor moves. TOMs tend to be more wishful thinking and I have a preference to keep it adaptive.

In Figure 9 below, I've added method and use arrows to show a direction of intended travel (as opposed to a TOM). This gives a view of the environment based upon user needs, the components involved, the context (how things are changing), the strategic plays, how I can reduce duplication, what I can provide, a mechanism to overcome bias, and the methods involved (from agile to lean to six sigma).

This map is something that I can discuss at the board level right down to individual project managers. Hence I tend to have a strong preference for maps within an organisation.

Step 8. Organise

At this point, I normally break the map into teams. I tend to require a focus on FIST (Fast, Inexpensive, Simple and Tiny) principles and the use small, self – organising, cell-based teams (ideally less than 12 people) combined with small, focused contracts (see Figure 10 below).

Once completed, I use a SWOT or Business Model Canvas (BMC) to refine a few more details or to validate the map and make sure I've not missed anything.

Once you become comfortable with the approach, the entire process of mapping out a line of business from user needs, removing duplication, removing bias, identifying strategic plays, putting in measurements, breaking out into methods and teams shouldn't take more than a day or two. Given the scale of most projects, it's usually time well spent.

At this point, I'll move on to getting stuff done, often using Kanban as a scheduling tool and using the map as a guide. Obviously, maps evolve over time and there's a lot to learn about mapping.

I prefer not to make grand claims of how much it's going to save you or how much it'll improve your strategic play. The proof of the pudding is in the eating, so I suggest you try it for a few days and make up your own mind.

About the author:

Simon Wardley is a Researcher for the Leading Edge Forum and his focus is on the intersection of IT strategy and new technologies. Simon's most recent published research, entitled Of Wonders and Disruption where he attempts to predict the nature of technological and business change over the next 20 years. His previous published research covers topics including The Future is More Predictable Than You Think - A Workbook for Value Chain Mapping, Beware of Geeks Bearing Gifts: Strategies for an Increasingly Open Economy, Learning from Web 2.0 and A Lifecycle Approach to Cloud Computing.

Wardley has spent the last 15 years defining future IT strategies for companies in the FMCG, Retail and IT industries.

As a geneticist with a love of mathematics and a fascination in economics, Wardley has always found himself dealing with complex systems, whether it’s in behavioural patterns, environmental risks of chemical pollution, developing novel computer systems or managing companies.  He is a passionate advocate and researcher in the fields of open source, commoditisation, innovation, organisational structure and cybernetics.

Copyright © 2015 IDG Communications, Inc.

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