A NEW CHINESE PUBLIC WELFARE OPERATION MODE
BASED ON VALUE NETWORK MODEL
Dongpo Xiao, Zhenji Zhang
China Agriculture Film and Television Center, Beijing, China
Beijing Jiaotong University, Beijing, China
Zhihong Tian, Jingyuan Zeng, Feng Cao
Beijing Jiaotong University, Beijing, China
Sinotrans Guangdong CO.LTD., Guangdong, China
General Office of CPC Qingdao Committee, Beijing, China
Keywords: Value network theory, Operation mode, Public welfare organization, Fund raising ability, Increment of
value.
Abstract: Chinese public welfare organizations have some main defects which are backward operation mode and low
fund-raising capacity and others. In order to solve these problems, we propose an innovation model based
on the value network theory. The model draws on the evolution context which is from the value chain
theory to the value network theory, breaks through the traditional public welfare models which are "donate”
and "give". We propose a value network model of the Chinese public welfare operation mode and point out
two features of public welfare value network " customer-focused " and " increment of value ". Customers
"consume" public welfare goods to get economic and psychological benefits, and pay the costs of the public
welfare system which is the input of the public welfare value network. Based on the increment of value, it
provides resources to the recipients system as the system output. Public welfare organizations achieve the
increment of value of system with the means of public welfare operation, as the material basis for the
system output. Our research provides a new way to renovate the operation mode of the Chinese public
welfare organizations and to improve the ability of fund raising.
1 INTRODUCTION
Chinese public welfare organizations were born in
the planned economy era, and they have not been
given the environment and duties for
market-oriented operation. Even todaythe second
decade of the 21st century, many new public welfare
organizations also have the idea of the planned
economy. As the government-affiliated agencies,
one of their hands obtains materials from the state
and enterprises directly, and the other hand directly
sends these materials to people who need help.
Now, the simple public welfare operation mode
of "donate" and "give "are facing the enormous
impacts of the market and customers, and the
impacts are shown as follows. Firstly, the
organizations alone can not meet the more and more
diverse interest and demands of customers. Secondly,
with more and more public welfare organizations
entering the market, the market is more competitive,
and the trend of industry division began to appear.
Thirdly, the pressure of increasing the value of
donated material is increasing. Under the complex
market environmental conditions, the maintenance
and development of customers and meeting the
competition have become common problems faced
by public organizations.
2 FROM THE VALUE CHAIN TO
THE VALUE NETWORK
In western countries where the market economy is
highly developed, public welfare organizations and
510
Xiao D., Zhang Z., Tian Z., Zeng J. and Cao F..
A NEW CHINESE PUBLIC WELFARE OPERATION MODE BASED ON VALUE NETWORK MODEL .
DOI: 10.5220/0003585705100514
In Proceedings of the 13th International Conference on Enterprise Information Systems (SSE-2011), pages 510-514
ISBN: 978-989-8425-53-9
Copyright
c
2011 SCITEPRESS (Science and Technology Publications, Lda.)
enterprises are treated equally, and the
director/chairman/president himself of many
charitable foundations is also a successful
entrepreneur. The operational concepts,
organizational structure and management system of
the foundation and these of business are exactly the
same. This is because that they keenly aware that the
operation purposes of public welfare organizations
and business are differentthe operation purpose of
public welfare organizations is to achieve maximum
social benefit and that of enterprises is to achieve
maximum economic efficiency, but the processes
pursued are not different the competition and
integration of social resources. Therefore, public
welfare projects and enterprise products are both the
manifestations of resources integration. The business
operations can also be applied to public welfare
organizations. Can we find the answer to solve the
problems of public welfare organizations from the
company?
2.1 The Value Chain Theory
Value Chain theory was proposed by Michael E.
Potter in 1985. He considers that the company's
value creation process consists of a number of
linked corporate activities which make the raw
material into final products, and continuously
transfer the value in use to meet customer needs and
realize increment of value.
Within 20 years after the value chain theory was
brought forward, the theory has been considered as a
powerful weapon. The coordination among the
internal organization of enterprises, the value chain
alliances among enterprises and the evaluation of
competitive advantage derived from the value chain
theory have become new competitiveness strategy of
enterprises
However, because the information technology
and other technological rapidly are developing,
economic globalization speed up, and market
demands change quickly, the survival of enterprises
may more and more rely on the innovative
capabilities and the external response and
coordination.
In the new situation, the value chain theory can
not provide the basic framework for modern
e-business innovation strategy, and the thought of
profit pursuit is more and more difficult to meet the
diverse needs of customers. And because of too
much attention to their own commercial enterprise,
product and market, they easily overlook the role
and status in the market collaboration network and
they will be marginalized by the market.
2.2 The Value Network Theory
In Adrian Slywotzky’s book "profit zone", he
proposed the value network theory to accommodate
the development and change. In the value network
theory, the value of products or services is provided
by each network member, and the value created by
each member of the network is an integral part of
the overall value. The interaction of the value
improves the collaboration efficiency and ultimately
benefits of the value network. The most important
feature in the value network theory is the increment
of value in the cooperative system. In addition, one
feature of the value network is customer-focused.
When the value network theory was put forth, it
quickly replaced the value chain theory, and became
the strategic thinking for enterprises in many
industries. Under the guidance of the value network
theory, companies began to organize other nodes in
the industry net with the “customer focused”.
According to their advantages of labor division, they
reconstructed the industrial cooperation system to
achieve the increment of value.
3 THE TRADITIONAL PUBLIC
WELFARE OPERATION MODE
Known from the above, Chinese public welfare
organizations and businesses face the same
challenges, which are diverse needs of customers,
changes of environment, industry competition,
increasing pressure of increment of value.
Enterprises began to transfer the thinking from the
value chain to the value network. Can public welfare
organizations also draw lessons from the value
network theory, and get rid of the original simple
model of "donate" and "give" to find a new
development model?
Figure 1 is the process of enterprises’ increment
of value. In the figure, A represents the customer's
investment which is also the input of the system. Z
is the use value which the enterprise alienates to the
customer, which is also the repay on the customer’s
investment. X is the remaining resources after the
system operation, and here it is the company's
profitsthe output of the whole system. The rate of
the increment of value is expressed by a leverage
ratio B. In addition, the cost of business operation is
expressed by Y.
According to figure 1, there is a balance
equation:
A·B-Z-Y=X (1)
A NEW CHINESE PUBLIC WELFARE OPERATION MODE BASED ON VALUE NETWORK MODEL
511
Figure 1: The process of enterprises’ increment of value.
In the equation, there are:
1) A>0
2) Y>0
Assumptions:
1) The operation of the enterprise system can
increase value, and that is B> 1;
2) Enterprise achieves the use value alienation of
customers, and that is Z> 0.
Obviously, figure 1 and equation 1 and its
subsidiary assumptions are also applied to public
welfare organizations.
Figure 2 is a traditional public welfare operation
mode. The only difference with figure 1 is that the
output of system becomes a donation from profits,
which is due to the different ultimate goal of public
welfare organizations and companies. The purpose
of enterprises is to achieve the highest income with
minimum cost and the output is corporate profits.
However, the purpose of public welfare
organizations is to achieve the highest social value
with minimum cost, and the output will be donated
to the recipients.
Figure 2: The traditional public welfare operation mode.
There is also a balance equation in figure2:
ORCLI =
(2)
In the equation, I indicates the customers’
donations, as well as the input of the system. R is a
return that the system provides to customers. O is
the resources which can be used to service the
recipients of public welfare system after the system
operation, and it is the output. Resources can
increase value in the system, as a transistor in a
circuit system, and it is represented by leverageL.
In addition, the cost of the system operation is
represented by C, the same as the resistance of
circuit system.
In the equation, there are:
1) I.>0
2) L>1
3) R>0
4) There is the scale effect in the operation of
public welfare organizations. With the expansion of
the scale, the marginal cost reduces. In order to
facilitate the discussion here, we assume that C (cost)
is a constant and C> 0.
In addition, we introduce the economic system
hypothesis of "economic man" into the paper. In the
hypothesis, we treat people as "economic animals ",
and we think all actions of human are designed to
meet their own interest and people want to pay as
little as possible to obtain maximize harvest. In the
public welfare system, people pursue economic
value and social value at the same time. This means
that only if what the customer obtains is not less
than what he donates, the donation could take place.
In here, the return is not only financial rewards, but
also honor and psychological rewards. The equation
is as follows.
I
R
(3)
The more economic value and social value
customers get, the more donation willing the donors
have. The economic value and social value given to
the customers from the public welfare organization
and the donation are positively correlated. The
equation is as follows.
RI
ξ
=
ξ
is a constant (4)
From the equation 2, 3, 4, we can get:
CLRO
=
)1(
(5)
In the equation, C
ξ
are constants, and C>0.
Because the goal of public welfare organizations
is maximize social value which is max O. From the
equation 5, there is:
max (max , max )Of R L
=
(6)
R represents the return of donors from public
welfare organizations. L represents the leverage of
public welfare which is the maximize value of
system input resources. In new economic situation,
traditional public welfare industrial chain can not
last long, because it can not meet the requirements
of the formula 6. The value network theory is the
best way to implement the formula 6.
4 PUBLIC WELFARE VALUE
NETWORK
David Bouvet describes the value network
management model as a co-ring structure consisting
of customers, businesses, suppliers and
manufacturers. Wu Haiping introduces the value
network theory into the upgrading of the enterprise
value chain, and proposes a dynamic competitive
ICEIS 2011 - 13th International Conference on Enterprise Information Systems
512
enterprise value network model. Jiang Zhenjian
introduces the value network theory into
construction industry, and proposes a supply chain
collaboration model based on value network of
construction enterprises. Zhao Xuefeng, Dong
Shuang and Li Dianwei introduce environment
structure of value network into telecommunication
service industry. Zhao Xuefeng proposes the
collaborative innovation partner selection theory of
telecommunication products based on value network
theory. Dong Shuang and Li Dianwei propose the
innovation mode of operation theory of the
telecommunication industry. We introduce the ring
model into public welfare industry, and change it to
build the value network model of public welfare
operation mode. The model is shown as figure 3.
Figure 3: The value network model of public welfare
operation mode.
There are two important points in the mode.
1) Customer-focused. Customers "consume"
public welfare goods to get economic and
psychological benefits, and pay the costs of the
public welfare system which is the input of the
public welfare value network.
2) Based on the increment of value, it provides
resources to the recipients system as the system
output. Public welfare organizations achieve the
increment of value of system with the means of
public welfare operation, as the material basis for
the system output.
According to the formula 7 and figure 3, in order
to achieve the maximization of R, public welfare
organizations should establish a thinking of
customer-focused, and provide both moral and
material reward, which must be greater than or equal
to the customers' donation amount. The more return
customers get, the more donation willing they have.
In the actual operation of public welfare projects,
public welfare organizations must provide two
aspects of both material and spirit rewards. On the
one hand, they should strive to improve public
confidence and information transparency of public
welfare organizations, and mine moving and typical
stories to increase the power of spirit. On the other
hand, by the name of public welfare, they should
integrate social resources with low or even zero-idle
costs, and then package and classify these resources
to give to the customers as feedback.
In order to achieve the maximization of L, public
welfare organizations should strive to achieve the
increment of value of goods donated by customers.
This increment of value is different from the capital
operation and financial operation in financial sense.
The goal of the increment of value in public welfare
is to achieve a higher integration level of social
resources by the operation of public welfare way
than commercial operations. Specific operation is to
change commercial products into public welfare
products, and to make customers participate in the
commerce and public welfare process at the same
time, during which there is no additional burden or
economic costs for these customers and no changes
in the existing deal flow. Public welfare industrial
and commercial products are seamlessly combined.
Take the project "Love orchard action for
helping handicapped" launched by Beijing
Foundation for Disabled Persons as an example. The
project is a public welfare projects based on public
welfare operation value network model. The project
called on people to adopt fruit trees and participate
in actions for helping handicapped.
In the aspect of customers’ return, the fruits from
trees adopted by one are also owned to him. The
Foundation will also provide exquisite packaging of
fruits, in which there are practical art works made by
handicapped and theatrical performance tickets, etc.
Customers have received material rewards which are
higher than the donation. At the same time, the
orchard also has arranged for the employment of
handicapped. The caring people and handicapped
could interact when picking fruits, and help them
integrating into society. The project enhanced the
actions' transparency and credibility, return
customers spiritual reward. In the aspect of
increment of value, using leverage of customers’
donation, the Foundation brought the media,
cooperative enterprises, caring people, caring
agencies and government along. Through the
interaction of resources, a stable, open and huge
cooperation system formed, and the increment of
value is large.
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5 CONCLUSIONS
The traditional public welfare operation mode
"donate " and "give " can not resolve the problem of
the return for customers and increment of value, and
the mode faces huge impact from the market and
customers. However, the public welfare operation
value network model can solve the both problems,
and provide a new way of operation mode and
resource development mode for public welfare
organizations.
REFERENCES
Chi Xiaoying, System research on value net and its node
value chain, PhD thesis, Shanghai Jiao Tong
University, 2003.
Wu Haiping, Studies on value nets based on dynamic
competitive advantage - rebuilding value chain after
China's entry into WTO, PhD thesis, Shanghai Jiao
Tong University 2003.
Jiang Zhenjian, Study on the Supply Chain Collaboration
of Construction Enterprises Based on Value Net
Theory, PhD thesis, Tongji University, 2003.
Adrian Slywotzky, The Profit Zone : How Strategic
Business Design Will Lead You to Tomorrow's Profits
[M], Boston, Three Rivers Press, 2002.
Michael E. Porter, Competitive Advantage, Freepress
1990-09-01.
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