Over at the IP Asset Maximizer Blog, guest blogger Scott Garrison provides a dramatic story of wasted IP within a large corporation. Basically, after spending a large sum of money for IP in a breakthrough area, a major corporation took a series of missteps that eroded much of the value of the acquired patents. Ultimately, they had to give royalty-free licenses for the technology. The disaster came as a result of multiple parties taking independent steps without communicating with each other, and without central oversight and strategy. Garrison wisely suggests that a Chief IP Officer would have helped.

In addition, our experience suggests that when there is a moribund lack of communication between entities that ought to be communicating, there may be cultural and other issues that also need to be corrected. Sometimes fixing the org chart by adding central oversight isn’t enough. We have found that Value Network Analysis can be an extremely useful tool in mapping out the exchanges of intangibles (knowledge, tips, informal communication, relationships, trust, loyalty, etc.) as well as tangibles (required reports, funds, formalized exchanges) that define the ecosystem — in this case, the internal ecosystem. When healthy networks of intangible exchanges do not exist between parties such as business units and legal departments, steps must be taken to nurture the ecosystem and to help create stronger ties, better information exchange, and alignment of objectives and goals. When the ecosystem becomes healthy, a lot of things happen that make the corporation look a lot smarter than it used to be.

Increasingly, experts in knowledge management are learning that easily overlooked and often invisible intangibles can dominate corporate value and performance. Numerous intangible transactions may be essential to the success of a company, including casual information sharing between trusted friends, helpful exchanges of tips and best practices between employees or between external partners and internal employees, or loyalty that is gained when people are included in decision making. The invisible linkages and hard-to-observe exchanges in a company’s internal an external ecosystems may be the real engines of value creation, regardless of what is on a process map or workstream. By not understanding the value of such intangibles, corporations can easily break key linkages and crush subtle engines of value creation.

Many companies focus on their visible “value chains” – a term popularized by Michael Porter in his seminal 1985 work, Competitive Advantage. The value chain describes the linear chain of events as materials and products move from sourcing through manufacturing and out to the market. It is a highly useful paradigm for manufacturing and was highly applicable to much of the economy in the era when Porter was doing his research. But since that time, the explosion of the knowledge economy has changed the way we work and create value. One of my favorite authors, Verna Allee, a revolutionary expert in knowledge management, has detailed the move from the value chain to modern ecosystems and Value Networks in her book, The Future of Knowledge: Increasing Prosperity through Value Networks (Burlington, MA: Elsevier Science, 2003). Verna Allee and Associates have introduced a clever, methodical tool called Value Network Analysis for analyzing and visualizing the transactions of intangibles and tangibles that affect a business.

After my training in Value Network Analysis by Verna and her associate, Oliver Schwabe, an exciting new perspective on business and human behavior opened up. I have been highly impressed with the power of Value Network Analysis and the insights that it can rapidly deliver for a company. The Value Network Analysis work that Innovationedge has done as part of larger projects for some of our clients has been a very exciting part of my work since joining Cheryl Perkins’ company. We value the tool enough that we had Verna Allee speak at the 2008 CoDev conference to introduce other business leaders to the basic concepts behind Value Network Analysis. I’m very pleased to see a community emerging of people using Value Network Analysis and developing exciting tools for it.

Here are some resources that you may find helpful in further exploring this area:

• Value-Networks.com
• Hosted Value Network Tools
• A Value Network Approach (PDF) – 2002 Whitepaper by Verna Allee
• ValueNet Works™ Analysis for the Discovery of Viagra (PDF)

Part of the initial output in Value Network Analysis are maps, called “holomaps,” showing human entities as nodes and transactions of tangible or intangible items between them. There is much that can be learned from such holomaps – a topic for later discussion.