Is the Value Concept a Valuable Concept for Information Systems?
Coen Suurmond
RBK Group, Keulenstraat 18, Deventer, The Netherlands
Keywords: Value, Value Chain, Supply Chain, Lean.
Abstract: The creation of value and value chains are popular terms in business management literature. The question is
what is exactly meant by value, and what the usefulness of the concept is for operational information
systems. In the paper different uses of the term value will be analysed. Subsequently the creation of value
for customers will be analysed from a business point of view. The conclusion is that operational processes
deal with specifications and norms, which are themselves translations of a background notion of value for
the customer in combination with value for the company itself.
1 INTRODUCTION
VAT. Value Added Tax. This fiscal construct shows
in its simplicity the core of two aspects of the
concept of value in enterprises: value is a financial
concept and value is known after the fact. The
principle of taxing added value is very simple: an
enterprise pays tax over the difference between the
total amount billed by its suppliers and the total
amount billed to its customers per period of time.
The difference between these two values is assumed
to be the added value over this period. The present
inventory does not factor into determining the added
value.
However, when the same tax authorities tax the
profits of an enterprise, the situation is very
different. In this context it is of great importance to
correctly value the present inventory and all other
assets of an enterprise. In speculative trade an
enterprise can exclusively buy and stockpile goods
during a given period, without selling anything, but
still make a profit if the inventory is valued at a
higher price than the purchase price + purchasing
costs + storage costs (e.g. when the current price of
the goods is higher than the purchase price paid, this
principle forms the foundation for futures trading).
These two fiscal points of view indicate the two
different principles of judging value. In the case of
VAT only the value of actual sales matters, and this
can be objectively determined (although tax
consultants can make a nice profit by creatively
using fiscal entities and transnational intercompany
constructions to ‘optimise’ VAT taxations). For the
determination of profits both tangible and intangible
assets have to be valued within the boundaries of a
framework of fiscal rules (again, subject to
‘optimisation’ by tax consultants).
In the literature about the creation of value and
analysing the value chain in a supply chain the same
basis seems to be used as that underlying the fiscal
principle of VAT. The value of a good is the sum of
the costs and the added value is the difference
between costs and revenues. At the same time one
would expect this approach to add something new
to the time-honoured questions of costs and the
optimisation of business processes (increasing the
efficiency, producing at the lowest cost per produced
unit). A reductive view of value as the margin
between sales and costs do not address the value-
related issues of the attractiveness of the products
for the customers before the sales, and the
satisfaction of the customers with the products
afterwards. Indeed, customer attractiveness and
customer satisfaction is an important issue in e.g. the
balanced scorecard approach.
In the last few decennia there has been a lot of
attention for the efficient set up and execution of
business processes in its entirety in management
science. This used to be different (or less explicit),
the focus used to be much more on performing
individual tasks as efficiently as possible. Think of
concepts as economy of scale and specialisation or
the model of an assembly line as an ideal image of
the production process. The transition from “task
thinking” to “process thinking” coincides with the
analysis of Japanese success stories (that were in
94
Suurmond C.
Is the Value Concept a Valuable Concept for Information Systems?.
DOI: 10.5220/0005424700940102
In Proceedings of the Fourth International Symposium on Business Modeling and Software Design (BMSD 2014), pages 94-102
ISBN: 978-989-758-032-1
Copyright
c
 2014 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

turn based on an analysis of Western success
stories!) and with the attention for the added value of
a process step and the so-called value chain.
Nowadays, the term “value” is used many times
and in many ways in the literature about
organisations and business processes. It is after all a
“valuable” term, it has a very positive connotation.
Few people will campaign against the addition of
value in business processes, or against eliminating
activities that do not add value. At the same time,
this is the weakness of the term: what does someone
mean when he speaks about the value of a product or
service or about the value chain? And if someone
discusses the addition of value, what is it that the
value is added to? For whom is the value added?
Packaging and labelling of crates do not add value to
the product itself, but contribute to the efficiency of
logistics. Who are the stakeholders in the value
chain?
The main part of this paper will discuss the
possible role of the value concept in the design of an
enterprise information system. How can the value
chain approach help in the modelling of business
processes, and what kind of information should the
information system provide to monitor the value
chain? More specifically, how can the value chain
approach help in the daily operational control loops
in the primary processes?
A prerequisite for the analysis of the possible
contribution of the value chain approach is the
analysis of the value concept itself. This will be
done in a short discussion of the literature about the
value chain. Here, three different scopes will be
identified: the strategic scope, the business process
management scope, and the operational scope.
2 VALUE CONCEPTS AND
VALUE MEANINGS IN
LITERATURE
Among its meanings of ‘value’ the OED lists: (1)
“That amount of a commodity, medium of exchange,
etc., considered to be an equivalent for something
else; a fair or satisfactory equivalent or return” (2)
“The material or monetary worth of a thing; the
amount of money, goods, etc., for which a thing can
be exchanged or traded” (3) “The extent or amount
of a specified standard or measure of length,
quantity, etc” (4) “valour” (5) “The worth,
usefulness, or importance of a thing; relative merit
or status according to the estimated desirability or
utility of a thing” (OED, 2007). The first two entries
relate to the exchange value or more specifically the
monetary value of a good, the third entry is the
objective meaning of the value according to a
specific measurement scale while the final entry
relates to the utility of a good.
An example of a very reductive application of
the value chain concept is the work of Markus Baum
about the value chain in the service industry. He
cites the definition of Kaplinky and Morris of the
value chain “The value chain describes the full
range of activities which are required to bring a
product or service from conception, through the
different phases of production (involving a
combination of physical transformation and the
input of various producer services), delivery to final
consumers, and final disposal after use.” (Baum
2013, Kaplinsky and Morris 2002), and
subsequently analysis the value chain in consulting
firms exclusively in terms of a costing model. The
value chain approach is used for the classification of
the activities in the consulting company as either
value adding (billable) or value enabling (non-
billable), without any reference to the value of the
service to the customer.
In Western literature the emphasis is on the first
two meanings and the analysis of the value chain is
primarily concerned with cutting costs to improve
the competitive position and the financial results. In
Japanese literature the emphasis is much more on
the final meanings and the focus is on avoiding
waste of any kind to improve the quality of the
processes. The latter can in part lead to a direct
improvement of the financial results, but will always
be beneficial to the continuity of the enterprise.
For further analysis of the concept of value it is
useful to distinguish a number of scopes where the
value concept is employed. Firstly the strategic
scope, where entrepreneurs together with internal
and external strategic consultants analyse and design
corporate strategies. This is the field of Michael
Porter, who devised the concept of the value chain
as an instrument for strategic analysis. The unit of
analysis is the business unit, and Porter states
“differences among competitor value chains are a
key source of competitive advantage” and “the value
chains of such subsets [variations within a business
unit for different items] of a firm are closely related,
however, and can only be understood in the context
of the business unit chain” (Porter, 1985).
Secondly we have the process scope, where
business processes are analysed, modelled, and
perhaps reengineered. Remarkably, in the seminal
work of Business Process Reengineering no mention
is made of the value chain. Here reengineering is
Is the Value Concept a Valuable Concept for Information Systems?
95

defined as “starting over” and rejecting conventional
wisdom and to keep processes simple “in order to
meet the contemporary demands of quality, service,
flexibility, and low cost” (Hammer and Champy,
1993). Later on, in Beyond Reengineering, Hammer
discusses an exhaustive classification of all work
activities in three types: (1) value adding, (2) value
enabling, and (3) waste (Hammer, 1996), but the
book contains no further use of the value chain
concept. In Value Stream Mapping, Martin and
Osterling propagate the value stream approach. The
relationship with the value chain concept is not
discussed, despite the semantic kinship of the two
concepts. Like the value chain, the value stream is
about the added value of the business processes.
Unlike the strategic focus of the value chain, the
value stream focuses on business processes and
workflows. A value stream is defined as “the
sequence of activities an organisation undertakes to
deliver on a customer request” (Martin and
Osterling, 2014). Moreover, an extended value
stream includes those activities that precede or
follow on the actual customer request, and the value-
enabling value streams support the delivery of value.
In other words: the same classification of work
activities as we find with Hammer, and a strong
connection to the lean movement as initiated by
Womack and Jones.
The third scope is concerned with the application
of the value chain concept in business modelling for
IT systems, for example in the Business Process
Management by Mathias Weske. First, he discusses
value chains as “a well known approach in business
administration to organize the work that a company
conducts to achieve its business goals” (Weske,
2013). In the next chapter, Weske presents a
hierarchy of the value system, which is composed of
value chains, which in turn are composed of
business functions. Instead of the decomposition of
high level business functions, this approach
decomposes the high level business processes, as
represented by the value chain. The business
functions themselves are further decomposed in
business processes and in the next step the business
processes are decomposed in activities.
All scopes have two characteristics in common:
(1) process orientation and (2) ambiguity or non-
specificity of the value concept. It is clear that
activities in business processes should contribute to
the adding of value to products either directly (value
adding activities) or indirectly (value enabling
activities). The meaning of the term value itself,
however, is mostly lacking. From the literature it can
be derived that the meaning of value as in “exchange
value” is always present. In value adding activities
the assumption is that the value of labour and other
resources flows directly into the products. In value
enabling activities the value of labour and other
resources is transferred later on to the products. The
value of the products is expressed in the price the
customer pays for the product, but the intrinsic value
of the product is its usability and attractiveness with
regard to the consumer.
3 USABILITY OF THE VALUE
CONCEPT
3.1 Analysis of Value Enabling
Activities
The strategy of a company determines on which
markets the company will be present, in which role,
and with which products. For the development of a
new strategy, or for the evaluation of an existing
strategy, Porter’s value chain approach might be
used, amongst other approaches. The resulting
strategy will be expressed in a number of
quantitative targets and a number of high level
organisational norms. The latter will reflect the non-
quantitative values that the company wants to create
for the customer and for all other internal and
external stakeholders.
The targets and norms will have to be translated
into operational facilities, specifications and
procedures. These are value enabling activities in the
company. Activities can be differentiated according
to their nature and horizon. Bigger investments in
production and storage facilities have a horizon of
several years; minor changes of the physical layout
and changes in the organisation of the business
processes have a typical horizon of a month up to a
year; small changes in the organisation of resources
might have a horizon of several days or weeks. The
common factor in all these activities is their
orientation on expected volumes of production, and
on expected variability and volatility of demand.
These activities are bigger or smaller investments in
intangible assets, in order to improve the
effectiveness and efficiency of the primary processes
(just as a reminder: a fixed asset represent a value on
the balance sheet of the company). Sound
management requires that the presuppositions on
which these value enabling activities are based are
carefully checked before and after, in that sense
creating a control loop to be supported by the
enterprise information system.
Fourth International Symposium on Business Modeling and Software Design
96

Apart from availability of the physical facilities
and the organisation of the business processes, a
further prerequisite for the actual execution of value
creating activities is the determination of the range
of products, the definition of each product, and the
specification of the production processes, the raw
materials and the resources. These definitions and
specifications will bring forth further operational
norms for inbound logistics, operations, and
outbound logistics; and a calculation of the cost
price. Product development, process development,
and the marketing of the products are all value
enabling activities. The marketing function (often
both in a marketing department and in actual sales)
translates the strategy in actual products for actual
markets, and specifies the product qualities and
possible (‘tolerable’) cost prices. This is the
translation of value for the customer into
specifications and norms for production.
Note: obviously, the marketing function often
clashes with the production function, and in a
healthy company product and process development
is an iterative process in which marketing, sales,
production, and quality assurance functions are
involved. Nevertheless, the main point is that the
marketing function translates perceived customer
value into product specifications.
3.2 Analysis of Value Creating
Activities
In de daily operation, actual products are produced,
shipped, and billed to actual customers. The
organisation of production might be make to order,
make to stock, finish to order, and many other
possibilities, but the bottom line is the fulfilment of
customer orders. In most situations, the balancing of
demand and supply is a major challenge. The
simplest model is pure make to order: the primary
processes are only processing actual orders, and all
resources are made available on demand. However,
the normal situation is that primary processes are
executed based on expected demand. When the
expectation is correct, customer orders can be
delivered quickly and the company has minimal
stocks. A mismatch of expectation and actual
demand results in bigger stocks and later delivery of
customer orders. Clearly, elements of customer
value are involved here. Shorter lead times are better
for the customer, and stocks cost money and erode
profits. The ideal situation for the customer is a
storage facility nearby, and his demand can be
fulfilled immediately (indeed, this involves both the
Just-In-Time concept and the Vendor-Managed-
Inventory concept). These customer values are
formally or informally translated into a kind of
service level agreement, where lead times and
delivery frequencies are specified. Production
planning will seek the balance between (1)
fulfilment of customer orders within the specified
lead times, (2) minimal stocks; and (3) maximum
efficiency. Production itself must be efficient and it
must deliver quality (as specified).
Given all the talk about value creating processes,
it a strange phenomenon that conventional
information systems use concepts such as Demand
Management and Sales and Operations Planning
(Vollman e.a. 2005). Demand and sales are
externally triggered by the market. What is managed
and planned by the company is the availability of
products for the markets, given the variability and
volatility of the markets (Packowski, 2014). Rigid
“sales planning” will yield suboptimal responses to
market forces and cause less availability of products
and higher costs in the supply chain.
3.3 Management and Control of Value
Creating Activities
The value creating activities are controlled by two
objectives: creating value for the customer, and
creating value for the company itself (margin). The
direct indicators for the creation of customer value
are the checks on the quality of the product, on the
quality of the production processes, and on the
quality of the delivery processes. The direct
indicators for the creation of value for the company
itself are production data about inputs and outputs
for the various process steps. In the daily execution
of the primary processes, the creation of the
customer values within agreed and reasonable
boundaries have priority, and operational costs come
in second place. However, all deviations of
production costs from the standards outside a
reasonable bandwidth should be explained, and all
explanations should be categorised and kept for
periodical analysis. Any deviation is an indicator for
either a faulty specification or norm, or some
unforeseen irregularity in the outside world that
forced an adaptation in the primary processes. Small
but regular deviations with internal causes might be
more important than big and irregular deviations
from outside causes. Incidentally, all deviations
should be explained, not only the negative ones.
When consumption of resources is below the
specification, it might indicate that the process was
not correctly executed, or data was not correctly
captured, or that under certain circumstances fewer
resources are needed than specified. In all cases, the
Is the Value Concept a Valuable Concept for Information Systems?
97

deviation should be explained.
Over a longer period of time, however, the value
for the company itself has priority in the evaluation
of the deviations from the specifications. Analysis of
the differences will suggest causes in one or more of
the following categories: substandard execution of
the primary processes themselves, too many
disturbances of the primary processes from the
ordering processes within the agreed and reasonable
boundaries (caused either externally or internally!) ,
or too many unforeseen or unallowed disturbances
from the ordering processes. The company will act
to improve the internal processes, to adapt the
specifications and norms, to agree different terms
with the customer, or to adapt the ordering
processes.
Besides consumption and net output all kinds of
waste will have to be measured as well as an integral
part of the capturing of production data. The OEE
approach forms a good example of this for
individual production lines (Hansen, 2001). For non-
line processes all kinds of stoppage, rejection,
degradation and waste will have to be measured as
well. By also recording the cause (no resources
available, no removal of output possible, machine
defects in the line, insufficient quality of raw
materials) and verifying these causes a continuous
PDCA cycle will come into effect. For example
consider production losses due to rush orders. The
first step is specifically writing the additional set up
times against this specific rush order. The second
step is checking where the rush order originated
from: internal laxity (by whom?), or a late order by a
customer. When it concerns an incidental rush order
by this customer and this falls within the commercial
agreements, then there is no problem. When the
same customer keeps on placing rush orders, sales
will have to take action with this customer. When
continuously incidental rush orders by different
customers lead to process losses that are not taken
into account in the cost price, then action will have
to be taken on the production side, on the
commercial side, or both. In each of these
considerations and actions “value for the customer”
plays an essential part by its influence on the price
of the product and, especially, by its influence on
service levels, but these are background norms.
Human considerations and interpretation leads to the
establishment of standards for the production, and
deviations from these standards will have to be
noted and explained. Individual employees might do
valuable things for creating value for the customer
by dealing with disruptions, at the expense of extra
consumption of resources. These disruptions can
originate from the customers themselves (last minute
changes in orders), from internal departments
upstream or downstream, or from suppliers. The
more the enterprise is able to deal with disruptions
and to dampen their effects, the more the enterprise
will contribute to the stability of the processes of its
customers, and in this way create value for them.
3.4 Management and Control of Value
Enabling Activities
The value enabling activities are instigated by a set
of expectations or plans of future events.
Management of the value enabling activities requires
a continuous check on the actual course of events
and on the actual contribution to the creation of
value. Signs of possible drift, slow and continuous
changes in the business environment, should be
observed carefully, because an accumulation of tiny
changes under the radar might have a big impact.
More important, the value enabling activities should
be checked continuously for their contribution to the
value creating processes. It means searching for
patterns in the deviations in the daily operations, and
searching for operational improvement. The
deviations might be found either in defective
products, processing problems, or meeting customer
demands.
Each and every check, however, deals with
specifications and norms. Value in itself is not
measurable, only its translations in specifications
and norms (and an expectation is an implicit,
unexpressed, norm). As the creation of value for
both the customer and the company itself is the
ultimate objective, a major management issue is the
validity of the translation itself. A further issue is the
way the organisation measures deviations from the
specification or norm. A body mass index does not
measure the health of an individual, it is just an
indicator for health risks. A best before date does not
represent the freshness of the food, it represents just
an amount of days after production date as an
indicator for freshness (under the assumption the
product is kept in the right environment).
3.5 Margin Management
Margin management is an instrument for managing
both value creating and value enabling activities by
monitoring the service levels in combination with
the differences between normative and actual
consumption of resources. The final outcome of
margin management is ultimately expressed in the
financial results (normative and actual). The real
Fourth International Symposium on Business Modeling and Software Design
98

value however lies in analyses of causes and
explanations of deviations. Daily checks and daily
questions about anomalies and differences keep the
employees alert and provides valuable information
to the “value enablers” about the primary processes
as executed under pressure of reality (this is an
example of elicitation of possible relevant
differences between model and reality). Searching
for patterns over time can bring trends to the fore
that require adaptations in the way the primary
processes are set up.
In analysis of deviations both causes and
explanations are important. Cause and effect belongs
to causal chains, “Y happened because of X”.
Explanations have a different nature, explanations
are about intentions and norms. The organisation of
the primary processes and the specifications of
products and processes are the cause of chains of
events with input and output. A malfunctioning
machine is the cause of an amount of rejected
finished product. An unreliable forecast causes loss
of net production time. A late customer order,
however, might be the explanation of a late
departure of a truck. Or the first order of a new
customer can be the explanation of extra
consumption of resources (the salesperson had
emphasised that “first time right” was an absolute
requirement for this order). To put it differently,
explanations, not causes, give information about
intended value for a stakeholder in the value chain.
Important is that margin management does not
necessary operate on the level of the individual order
or job. It operates on the level where production data
can be captured meaningfully and reliable, which is
often on a higher aggregation level than capturing
the consumption of each and every resource per each
and every job. For different resources different
levels of aggregation might be used. E.g., quantities
of raw materials, semi-finished products and
finished products are captured per job, or output per
job and input per line; labor is captured per
department, energy is captured per area, and waste
per line. In margin management this does not really
matter for the management mechanism itself: just
calculate the normative consumption on the
aggregation level on which the consumption data are
captured, make the comparisons, analyse the
deviations, and record causes and explanations. Here
again, value created is not the prime focus, but
consumption service levels. The creation of value
can be an important issue, but only in an explanation
of a difference. A refinement of this mechanism is
the capturing of losses (compared with the general
norm) with cause and/or explanation as an integral
part of the primary processes, with checking of the
actual differences afterwards.
3.6 Recapitulation
The concept of value has no place in an operational
information system. It might be a very useful
concept in the determination of the strategy of a
company, but it has to be translated into concrete
specifications and norms to be of operational use.
Management should continuously check the
translation of values in specifications and norms,
and analyse the patterns in deviations. Operational
people do not create value; operational people create
products according to specifications and behave
according to norms. Customer value and corporate
value are the indirect results of the work of
operational people.
However, norms and specifications may conflict.
In these cases the behaviour of the employees in the
business processes is no longer a routine of
following rules, but values and priorities have to be
weighed. It is here that the values for the customer
and the values for the company that lie behind all the
specifications and rules come into play. Both in
making the judgement and in accounting for the
choice afterwards, it is important that the values as
perceived by the employee are made explicit and are
evaluated. Just because the people in the primary
processes have different information and are dealing
directly with the products or the customer, they may
shed a valuable light on the perception of value.
4 EXAMPLE: RETAILER
As an example case we consider a big retailer that
operates nationwide and has a market share over
20%. The main product segments are fresh products
with a short shelf life (meat, vegetables, fruit,
bread), food products with a longer shelf life, dry
grocery products, and non-food products. The
operation of such a retailer is composed of the
stores, distribution facilities consisting of
distribution centres and transport from the
distribution centres to the stores, and the supply to
the distribution centres.
The category management department
determines which products of which brands are
carried at what prices, as well as the way in which
the products are offered to the customer. The
replenishment function can be located at the
individual stores (ordering procedure) or it can be
centralised (pushing of products to the stores). The
Is the Value Concept a Valuable Concept for Information Systems?
99

grocery and non-food products are always supplied
by third parties. Fresh products such as bread or
meat can either be supplied by third parties or
produced by the retailer itself. Food products with a
longer shelf life are usually supplied by third parties.
For the retailer as a company two primary values
can be distinguished: the contribution of the
different product segment to the financial results,
and the importance and reputation of the product
segment by the customer. The latter is a contribution
to the pull of the retailer to get the customers into the
store and as such is also a factor in the revenue of
other segments. The former contribution has a direct
financial nature and can be determined by the usual
means (which have to a certain extent a
discretionary component). The second contribution
is primarily of a qualitative nature and has financial
effects besides. The attractiveness and image of a
retailer determine in part whether a customer is
going to do his shopping there, thus contributing to
the results. The attractiveness to the customer is
determined by the presentation and availability of
products in the stores and by the quality and price of
the products. The responsibility for these aspects is
located partly with category management and partly
with the replenishment processes.
The replenishment function is supported by a
number of logistic processes. Distribution logistics is
a trade-off of on the one hand lead times, frequency
and size of the deliveries and costs on the other
hand. The shorter the lead times, the more frequent
delivery can be and the lower the ordering volume,
the better the replenishment process can be
performed. However, the logistic costs will be
lowest when the number of deliveries is as low as
possible, when the utilisation of the capacity of the
vehicles is as high as possible, and when handling
costs in the preparation of the branch order, in order
picking, and in transport are as low as possible. In
planning the deliveries a longer lead time means
more efficient processes in the preparation of the
order fulfilment and transport.
The options for the consumer are determined by
the number of products on offer and is expressed by
the number of different articles, the different article
variants (low cost, premium, organic, …) and/or
brands (national brands, store brands, no-brands)
and the various packaging sizes. The other side of
the coin is that sometimes the consumer cannot see
the forest for the trees anymore and gets lost among
the options. At this point the freedom of choice flips
to a necessity of choosing and the diversity on offer
can become a negative feature for the consumer.
This is why the presentation of products is of such
importance in category management: a logical
division of products with the right presentation both
on the product itself and on the shelves helps the
consumer to make a choice; a multitude of
overlapping product categories with poor consumer
information (such as unclear logo’s) will deter
customers.
Value for the customer of the retailer means an
attractive shop, and full shelves with the right
products. Who creates this value? Primarily the shop
designer, category management and replenishment.
What are the employees doing in the primary
processes of the internal and external suppliers of
the retailer? They produce the right products, not
directly according to the wishes of the consumer, but
by producing in accordance with the specifications.
Part of the specifications are determined by the end
product itself, and are meant to be appreciated by the
consumer. Part of the specifications are determined
by the logistic processes (both packaging and
information issues), and contribute to lower logistic
costs and a faster throughput. The first element
contributes to value for money for the consumer
and/or the profit of the retailer, the second element
contributes to availability and freshness of the
products, another value for the consumer. Evidently,
as any healthy company the retailer strives for
profits and market share. Consumer value is a means
to an end. Perceived value is boosted by marketing
campaigns, attractiveness is enhanced by sport
sponsoring. A retailer is no charity institution, and
talk about consumer value sometimes is quite
hollow. What matters is that the retailer must
provide value for money, and translates this abstract
concept via category managements and
replenishment functions in operational specifications
and norms.
5 RELATED WORK
The “value chain” concept is strongly process-
oriented, while at the same time the determination of
value is strongly product-oriented. In the literature,
the value of a product in a business sense is mainly
seen as the difference between costs and revenue
(and the costing model is considered unproblematic).
On the other hand, the literature often discusses the
creation of value for the customer. This means that
the product has characteristics that make it valuable
to the customer. The process approach of the value
chain claims to analyse the business processes
according to their contribution to the value of the
product for the customer. This approach has strong
Fourth International Symposium on Business Modeling and Software Design
100

connections to the lean philosophy originating in
Japan. However, there is a difference in emphasis:
while the value chain analysis is primarily concerned
with the contribution to value, the lean approach
emphasises the avoidance of waste of any kind. This
is an important distinction: the contribution of value
looks at the difference between costs and revenues;
the lean approach looks at all kinds of waste,
regardless of value, in order to arrive at a product
with the right characteristics. Both tend to take the
usability and attractiveness for the customer for
granted.
For the application of the value concept for
operational processes two approaches must be
considered, namely the supply chain approach and
the lean approach. The supply chain approach is in
part dealing with the same issues as the value chain
concept, and the value chain could be described as
encompassing the value chain. The problem with the
supply chain, however, is the ostensible denial of the
market mechanism. Take the following definition:
“Supply Chain Management can be redefined as a
strategic channel management of networks of
business integrated together through information
technologies and empowered to execute superlative,
customer-winning value at the lowest cost through
the digital, real-time synchronisation of products and
services, vital marketplace information, and logistics
delivery capabilities with demand priorities” (Ross
2011). A very ambitious and verbose definition, but
what does it mean in our real world? Who are the
actors, and what is the relationship between the
actors? The supposition is that the actors are
interdependent companies, acting for the greater
good of the optimal supply chain as a whole. But,
low level market-oriented questions remain: who
orchestrates the supply chain? Which companies
take the profit from the surplus value of the supply
chain? Power relations between companies matter,
and when a weaker company cooperates with a
stronger market power, chances are that the weaker
company is squeezed to the point of barely surviving
(or pushed beyond that point). Co-creation of value
is a very nice idea when you are the stronger partner,
for the weaker partner it implies the denial of
independent value creation for its own good.
The connection of the value chain with the lean
approach is much more fruitful. But where the value
chain talks about the creation of value, one of the
main focal points of the lean approach is the
elimination of waste. Another main focal point is the
quality of both process and product. These two
forces result in the effective and efficient production
of the specified products. Provided that the specified
products are of value for the customer, the creation
of value is unavoidable outcome of the lean process.
6 CONCLUSIONS
The concepts of “value” and “value chain” have
been introduced by Porter as an approach to support
strategic decision making by the enterprise.
Afterwards, these concepts have been applied
increasingly to the analysis of business processes,
with a strong connection to the ideas of the lean
approach. The concepts seem to focus primarily on
financial issues, translated to results as the
difference between costs and revenues. This
inclination to cost aspects has two implications for
the usability in an operational context. Firstly,
people in operational processes are not primarily
engaged with cost as such, they are doing their job in
an effective and efficient way. Both the organisation
of the processes and the execution of the processes
contribute to low costs, but people are accountable
for working according to specification and for
avoiding waste of resources. The second implication
is that the usability of the products is not determined
by the processes themselves, but by the product
specification. This is the area of product
development and marketing, where the issues of
offering the right products for the right price for the
target markets are addressed.
An important aspect of the value chain is the
interaction of the company with the customers. In
this context, the primary processes should be able to
adapt to some degree of variability and volatility of
demand. To which degree is determined by the
market strategy of the company, and translated into
operational norms for the primary processes. Again,
value for the customer is decoupled from the
operational processes via operational norms.
Operational people are dealing with these norms and
not with their own individual perception of value for
the customer (unless the company attributes this
specifically to some employees).
The value concept is a fuzzy concept, in the
sense that the concept has different meanings that
are used in a fuzzy way. One core meaning is
practically useless as it will not add value to any
discussion: value as the margin between cost and
revenues. Another core meaning is usability for the
customer, and this is an important notion (and has
always been so). The value chain seems to be using
this notion, but does not clearly say so. In
determining the strategy of a company this meaning
of value (and value chain) might well be used.
Is the Value Concept a Valuable Concept for Information Systems?
101

In the analysis of the processes and activities
within the company the classification of value
creating, value enabling, and other (wasted)
activities can provide a useful vocabulary. For the
actual activities, however, the value notion is no
more than a background notion. The ‘usability for
the customer’ must be translated in specifications
and norms, that are the guidelines for the execution
of the primary processes. In resolving conflicting
norms in the execution of the primary processes the
value for the customer (and the value for the
company) might be factored in, both in making
choices in the process and in defending them
afterwards.
REFERENCES
OED, 2007. Shorter Oxford English Dictionary, Oxford
University Press. Oxford, 6th edition
Baum, B.B., 2013. Service Business Costing, Springer
Gabler. Wiesbaden.
Kaplinsky, R., Morris, M., 2002. A Handbook for Value
Chain Research, Institute for Development Studies.
Available at
http://www.globalvaluechains.org/tools.html
Porter, M.E., 1985. Competitive Advantage, Free Press.
New York.
Hammer, M., Champy J., 1993. Reengineering the
Corporation, Nicholas Brealey. London.
Hammer, M. 1996. Beyond Reengineering, Harper.New
York.
Martin, K., Osterling, M., 2014. Value Stream Mapping,
McGraw-Hill. New York.
Womack, J.P., Jones, D.T., Roos, D., 1990. The Machine
that Changed the World, Free Press. New York.
Womack, J.P., Jones, D.T., 1996. Lean Thinking, Simeon
Schuster. London.
Weske, M., 2007. Business Process Management,
Springer. Berlin.
Vollmann, T.E., Berry, W.L., Whybark, D.C., Jacobs,
F.R., 2005. Manufacturing Planning & Control
Systems for Supply Chain Management, McGraw-Hill.
New York, 5
th
edition.
Pachlowski,, J., 2014. Lean Supply Chain Planning, CRC
Press. Boca Raton.
Hansen, R.C., 2001. Overall Equipment Effectiveness,
Industrial Press. New York.
Fernie, J., Sparks, L., 2014. Retail Logistics: changes and
challenges. In: Logistics and Retail Management,
Kogan Page. London.
Nielsen, A.C., 2006. Consumer-Centric Category
Management, John Wiley. Hoboken NJ.
Ross, D.F. 2011. Introduction to Supply Chain
Management Technologies, CRC Press. Boca Raton,
2
nd
edition
Fourth International Symposium on Business Modeling and Software Design
102