ecolead summer school 2006 vbe value system and metrics itesm arturo molina, david romero, nathalie...

ECOLEAD SUMMER SCHOOL 2006

VBE Value System and Metrics

ITESM

Arturo Molina, David Romero, Nathalie Galeano [email protected], [email protected], [email protected]

Course DetailsObjectives• The course aims to characterize a generic Value System and its Metrics,

to describe the approaches to develop a Value System for VBEs. • At the end of course the lecture should understand the concept of Value,

Value System and Performance Measurement in the context of VBEs.

Target audience• SMEs, academic community, governmental organizations, non governmental

organizations and public in general, interested on Virtual Breeding Environments and related topics.

Level of the Programme• Introductory

Module Introduction• The present training model gives an introduction of the elements involved in the definition of a Value System

for Virtual Breeding Environments (VBEs); such definition is an important aspect in the VBE operation, because it allows:

– The Identification of the main elements that generate value in a VBE (measured in terms of capitals) and the forms of value in each VBE member.

– The improvement of the overall performance of VBEs and its members by providing meaningful performances indicators to evaluate and manage their strategies and processes.

– The identification VBE member’s capacity to generate value by combing its capitals with other VBE members (VO Creation).

– The identification of the total value generated by a VBE, to evaluate the increase/decrease of value in the VBE during its life-cycle.

– The involvement of social values (behaviour, ethics and culture) with operational performance in order to create a common functioning environment to better respond in business collaboration.

– The support of the decisions about adding/retreating members by evaluating their performance through a pre-established indicator system.

• The Value Generation Process in a VBE will be evaluated from different perspectives: the different values that can be generated (economical, ethical, cultural, social and strategic) and the different stakeholders that the VBE has (members, support institution, VBE administrator, opportunity broker, VO planner, VO Coordinator).

Content of Presentation• Basic Concepts

– Value– Value System– Performance Measurement

• VBE Value System and its Elements– VBE Value Generation Objects: Capitals in an Organization– VBE Performance Measurement System– VBE Ethical Values: Culture and Ethical Code

• VBE Value Transfer (Branding and Marketing)• Relations Between the Value System Elements• Tools to support the VBE Value System

Basic Concepts: ValueEconomic Value

An amount, as of goods, services, or money, considered to be a fair and suitable equivalent for something else; a fair price or return. What a customer gets in exchange

for the price it pays.

Economic ValueAn amount, as of goods, services, or

money, considered to be a fair and suitable equivalent for something else; a fair price or return. What a customer gets in exchange

for the price it pays.

Culture ValueEach individual has a core of underlying

values that contribute to a system of beliefs, ideas and opinions

Culture ValueEach individual has a core of underlying

values that contribute to a system of beliefs, ideas and opinions

Ethical ValueAre those

values which serve to

distinguish between good and bad, right

and wrong, and moral and

immoral. At a societal level, these values

frequently form a basis for what is permitted and

what is prohibited.

Ethical ValueAre those

values which serve to

distinguish between good and bad, right

and wrong, and moral and

immoral. At a societal level, these values

frequently form a basis for what is permitted and

what is prohibited.

Value Is a "fuzzy term", value is the quality of things to be exchangeable, important or

useful to someone

Value Is a "fuzzy term", value is the quality of things to be exchangeable, important or

useful to someone

Source: D21.4a - ECOLEAD (2005)

BasicConcepts

Value

Value System

PerformanceMeasurement


BasicConcepts

Basic Concepts: Value System

Value

Value System



Value System Is in essence the ordering and prioritization of a set of values that an actor holds, exchanges and creates, in this case the

“actor” is the VBE (D21.1 – ECOLEAD)

Value System Is in essence the ordering and prioritization of a set of values that an actor holds, exchanges and creates, in this case the

“actor” is the VBE (D21.1 – ECOLEAD)

Value → Value System Since Value is multidimensional, the Value System in a VBE

considers economic, ethical and cultural values.

Value → Value System Since Value is multidimensional, the Value System in a VBE

considers economic, ethical and cultural values.

Value System → its main ElementsA Value System includes the following main elements:

1) Value Generation Objects: Capitals in a Organization 2) Performance Measurement System: VBE Value Generation

3) VBE Ethical Values: Culture and Ethical Code

Value System → its main ElementsA Value System includes the following main elements:

1) Value Generation Objects: Capitals in a Organization 2) Performance Measurement System: VBE Value Generation

3) VBE Ethical Values: Culture and Ethical Code


BasicConcepts

Value


Performance Management Is the systematic process of planning work and setting

expectations and continually monitoring performance by evolving/developing the capacity to perform periodically rating of performance in a summary fashion and rewarding for any

good performance.

Performance Management Is the systematic process of planning work and setting

expectations and continually monitoring performance by evolving/developing the capacity to perform periodically rating of performance in a summary fashion and rewarding for any

good performance.

Value System

Performance Measurement Is the selection and use of quantitative and qualitative

measures of capacities, processes, and outcomes to develop information about critical aspects of activities, including their

effect on the achievement of the goals and the public.

Performance Measurement Is the selection and use of quantitative and qualitative

measures of capacities, processes, and outcomes to develop information about critical aspects of activities, including their

effect on the achievement of the goals and the public.

Metrics Are standards of measurements that are used to scale and provide meaningful interpretation of quantities measured for

each criterion.

Metrics Are standards of measurements that are used to scale and provide meaningful interpretation of quantities measured for

each criterion.Source: Lichiello, et al (2002)

Basic Concepts: Performance Measurement

• The The Value Generation Objects as the different as the different types of capitals that the VBE members holds. types of capitals that the VBE members holds.

• The The Performance Measurement System which which should measure the value generation in the should measure the value generation in the VBE. VBE.

• The The VBE Culture and Ethical Code as the as the guidelines for the value exchange among its guidelines for the value exchange among its actors.actors.

VBE Value System and its Elements

VBE Value System elements support the trust building process among actors by providing an inventory of its value generation objects inside the

VBE, guaranteeing the effective use of them to create wealth (value), and a set of functional rules that guarantee the ethical viability of the VBE

business operation.


VBE Value Generation Objects• The purpose of the Value System is to identify main values and benefits,

such as economic success, and other types of valuable benefits (productivity related, strategic, social) for VBE members and their stakeholders.

• VBE members participate in a VBE by converting their competences and knowledge into tangible and intangible deliverables that should have value for other VBE members, VO clients and VBE stakeholders.

• In a successful VBE every VBE member contributes and receives value in ways that sustain their own success and the success of the VBE as a whole system.


VBE Value Generation Objects Components• The Value Generation Objects in organizations are the different types of capitals

that the organization holds.

“Capitals in an organization represent its bag of assets”.

• Two types of capitals are identified: – Financial capital is related to all physical assets (that generates tangible values).– Intellectual capital is related to all the knowledge-based assets (that generates

intangible and tangible values).


Social CapitalFinancial Capital

Financial Capital

Intellectual Capital

Financial Capital

Human Capital

Structure Capital

Innovation & Learning

Capital

Human Capital

Infrastructure Capital

Culture Capital

Financial Capital

Expert Human Capital

Integrated Infrastructure

Capital

Community Interaction

Capital

VBE Platform Capital

VBEMemberCapital

VBE SystemCapital

VBE Value Generation Objects

Relational Capital

IdentityCapital

VBE Value Generation Model

VBE Performance Measurement System“The Performance Measurement System should measure

the value generation in the VBE”.

• The VBE Performance Measurement System is a formed by a set of Performance Indicators. The role of a Performance Indicator is to translate the VBE value generation process in “numbers”.

• Without meaningful performances indicators, the VBEs will find a difficult way to evaluate their strategies, members, processes, quality of products and/or services.

“Organisations that measure and manage its performance can be better focused in the achievement of their operational and financial goals”.


VBE Performance Measurement System

The VBE Performance Measurement System will permit to the VBE actors and the VBE members to calculate the value relations in the VBE, for taking the

right and strategic collaborative or business decisions.

The VBE Performance Indicators will make easier to monitor the progress of value creation in the VBE, reflecting the nature of the VBE activities.


BSC View

EFQM View

… View

GraphicsReports

StaticallyReports

BenchmarkReports

VBE memberIndicators

VOIndicators

VBEIndicators

Monitoring Performance

Reporting & Analyzing

VBE Performance Measure System

Define Indicators

Performance MeasureDimensions

Financial

Productivity

Social

Strategic

Trust

MeasureBenefits

Incentives

Measure effectsin VBE actors

Sanctions

VBEMeasureEffects

VBE Performance Measurement System • In order to monitor the VBE performance the Performance

Measurement System (PMS) can be supported by the BSC model.

• BSC is a model that shows the balance between the present and the future of an organisation, including its internal and external perspectives. It permits the organisations to analyze their final results (financial and non financial) and at the same time to monitor the progress of the construction of intangible assets for which the organisation need to create more value.

• The measures depend on the indicators, which need to be aligned to the activities originated by the organisation strategy.


Le

arn

ing

an

dG

row

th

Pe

rsp

ec

tiv

e

Financial Capital

Culture Leadership Alignment of goals Collaboration

Adapted: Kaplan & Norton 2004


Integrated Infrastructure Capital

Community Interaction Capital

Inte

rna

l P

ers

pe

cti

ve

*VO Creation Services Management*Trust & Relationship Management

*ICT Management

Delivery of Services

*VBE Members Management*Branding & Marketing Management*VO Creation Services Management

Creation of Demand

*VBE Administrative Management*Support Institutions Management

*Governance Management*Knowledge Management

Planning & Development

Sta

ke

ho

lde

rP

ers

pe

cti

ve

VBE Member

CompetenceDeployment

PartnershipDevelopmentImprove

Competitiveness

VO Brokerage Team

Improve Brokerage Process

Support CompetenceIntegration

VO Customer

CompetitivePrice Quality

ExcellenceQuick

Response Service/ProductDiversity

Support Institutions

Improve Client Portfolio

ICT ServiceIntegration

Expand MarketDevelop

Collaborative Opportunities

Ou

tco

me

sP

ers

pe

cti

ve

Boost Innovation

Increase Flexibility

Monitoring Performance in the VBE-PMS

• Four perspectives are identified from the VBE Generic Strategic Map point of view:

– Outcomes Perspective: Constitute the final outcomes that are the result of the actions taken by the VBE. The measures of outcomes indicate how the strategies have lead to results for the organisation.

Outcome PerspectiveElements Goal Indicators

Expand Market Annual VBE salesDevelop Collaborative Opportunity Annual # of VOs createdBoost Innovation Annual # of new products/services developed in the VBE

Increase Flexibility Annual # of products/services developed in the VBE # of members in the VBE # of services available for VBE members


Performance Indicators in the VBE-PMS

Performance Indicators in the VBE-PMS

Stakeholders PerspectiveElements Indicators

VBEmember

Competence deployment # of services available for the VBE members # of competencies available in the VBE

Partnership development Annual incomes to VBE as result of VOs creation Annual # of business/collaborative opportunities identified

Improve competitiveness Annual # of new products/services developed in the VBE

VO Brokerage

team

Improve brokerage process

Annual % of business/collaborative opportunities answered over the opportunities identified

Support competences integration

Average # of participations of a VBE member in VOs

VO customer

Competitive price Customer satisfaction evaluation

Quality excellenceCustomer satisfaction evaluation % collaborative opportunities rejected by the customer for quality reasons

Quick Response % collaborative opportunities attended on time

Service/product diversity Annual # of patents registered Annual # of new products/services developed in the VBE Annual investment in research & development

Support institutions

Improve client portfolio # of members in the VBE

ICT services integration # of services offered to VBE members Annual # of new services developed for VBE members

– Stakeholder Perspective: In this perspective, the organisation identifies the market segments in which it wants to compete. Among the more common measurements for this perspective are the client satisfaction, client retention, number of new clients and market segments.


Performance Indicators in the VBE-PMS – Internal Processes Perspective: In this perspective the processes which must be

precisely executed and improve continuously are identified. Theses processes help the VBE to develop a value proposition to on one hand sustain and obtain members, create VOs, and on the other hand, to satisfy the expectations of all its stakeholders.

Internal perspectiveElements Internal Indicators

Marketing & Branding Management

Annual investment in marketing & branding Annual # of business/collaborative opportunities identified Level of satisfaction of VO Customers

VBE Members Management

Annual # of participations of a VBE member in VOs Annual VBE incomes derived from memberships # of competencies available in the VBE

VO creation service Management Annual incomes to VBE as result of VO services offer # of VO creation services available in the VBE

Trust relationship Management # of trustable relation in the VBE

ICT Management % of coverage of services demanded by VBE members

Governance Management Annual # of conflict resolutions in the VBE

Knowledge Management # of accesses to the VBE knowledge/ontology sources

Support Institution Management # of support institutions in the VBE

VBE Administrative Management Annual expenses in VBE operation

ICT Management Annual cost of maintenance of VBE infrastructure


Performance Indicators in the VBE-PMS – Leaning and Growth Perspective: It refers to the infrastructure that the VBE must

construct to create growth in long term. This infrastructure is supported by the values generation objects that are present in a VBE.

VBE System Value Generation Objects

Financial Capital


Physical &Monetary

Assets

Expert HumanCapital

IntegratedInfrastructure

Capital

CommunityInteraction Capital

- Cash- Bank accounts- Insures- Tools- Equipment- Inventories- Physical assets

Human Competences (VBE members + VBE staff = Expert teams): Skills Talent Capabilities Knowledge Know-how

Combined resources of: Human Technology FinancialFor increment VO capacity and develop new products or services.

VBE strategies focused on: Integration of competencies, capacities and capabilities of VBE members Creation of VO Strategies for develop collaborative opportunities Development of trust relationships among VBE members and external customers


VBE Culture and Ethical Code

“The VBE Ethical Code defines values and accepted standards of conduct of actors related to VBE activities in market and

society”.

• Some expected values ethical related from VBE stakeholders are:– Collaboration (cooperative

network)– Sharing attitude (knowledge,

business and contacts sharing)

– Fairness (non-opportunistic behaviour)

– Quality and reliability (guarantee high level quality in products and process)

– Continuous competence improvement (certification, education and training)

– Innovation (ability to create new solutions and attract future business to VBE)


Source: Latvian Information System Cluster - http://www.is.lv/upload_file/Code%20of%20Ethics.pdf

Preamble. We, the VBE actors of the VBE example, that has been established as…

Scope of Code:The VBE example ethical code defines values and accepted standards of conduct of actors related to VBE activities in market and society. The values expected in all VBE actors are:Values

• Collaboration• Sharing attitude • Fairness

• Quality and reliability• Competence • Innovation

General IssuesVBE actors own Ethical Code: Respect of VBE actors’ values and idiosyncrasy in their isolated form as independent individuals and organisations.

• Responsibility to Clients - Sales Conducts

• Responsibility of VBE actors (VBE administrator and Broker) - VBE Promotion - Respectful Competition - Professional Integrity - Compliance with legislation - Usage of legal products/services

• Responsibility to VBE actors (VBE members) - Sharing of experience - Confidentiality - Business use of “know-how” - Standards of Use - Quality Level - Quality Improvement

• Responsibility to VBE partners - VBE actors and members information - Hiring joint project members

Breach of Code.In the event that any activity of the VBE actor can be interpreted as a variance with one or more norms of the code, the VBE actor shall agree to the following procedures…

• Responsibility to Employees (VBE administrator)

- VBE members and staff Training- Restricted Hiring Practice- Employee transfer between VBE members (organisations)- Service Rates

• Responsibility to Society- Environment care- Community care

• Business Operation Issues- Rules- Policies


VBE Culture + Ethical CodeVBE Culture

VBE members share values like: • Strategy• Style• Staff • Skills

Culture is a collectionof uniform & enduring:• Values• Beliefs• Customs• Traditions• Practices

Good Culture represents:• Commitment• Experience exchange• Long-term partnership• Freedom

Trust-building approach:• Round Tables• On-the-job training• Disclosure of Internals• Independent controls• Legal Fundamentals

Shared Behaviour

Responsibility of VBE Members:• Sharing of experience• Confidentiality• Business use of “know-how”• Standards of Use• Quality Level• Quality Improvement

Responsibility of VBE Administrator&Brokers:• VBE Promotion• Respectful Competition• Professional Integrity• Compliance with legislation• Usage of legal products and services

Responsibility to Clients:• Sales Conducts

Business Operation Issues:• Rules• Policies

Responsibility to the Society:• Environment care• Community care

Responsibility to the VBE partner:• VBE actors & members information• Hiring joint project members• Restricted Hiring Practice• Employee transfer between VBE members • Service Rates

VBE actors own Ethical Code

General Issues:

Scope of Code: Accepted standards of conduct of VBE actorsPreamble: VBE objectives and strategy statements

Values:FairnessSharing attitudeCollaboration

InnovationCompetenceQuality and reliability

Guidelines for Create a VBE Ethical Code

• The value transfer process comprises the elements of the VBE Value System in terms of Branding and Marketing, as means to transfer the values of the VBE to: new members, potential VO customers, society and in general to main VBE customers.

• In the collaborative network context (e.g. the VBE), applying the concept of co-branding and relationship marketing to the VBE Value System has resulted in a recognition model.


VBE Value Transfer (MKT & Branding)


VBE Value System Recognition Model

• The VBE Value System Recognition Model describes a co-branding strategy for VBE members to combine their brands, organisational prestige and reputation in a unique trademark with high market penetration and positioning in customers minds.

• This unique and powerful trademark will be marketed using the network structure of the VBE, through a relationship marketing strategy whose objective it is to reach all possible stakeholders and customers in the global market. This large-scale market can be reached thanks to the global conception of the VBE that supports distributed VBE members around the world.

VBE Product/Service

VBE Marketing

VBE Pricing

VBE Promotion

VBE Placement(Distribution)

MarketPenetration

Positioning in Organisations Minds

VBEMember 1

Brand,Prestige andReputation

VBE trademark, Prestige and Reputation

=Inheritance ofVBE members

Brand, Prestige and Reputation

VBEMember 2


VBEMember #


VBE Value Generation Objects + VBE Performance Measurement System


BSC View

EFQM View

… View

GraphicsReports

StaticallyReports

BenchmarkReports

VBE memberIndicators

VOIndicators

VBEIndicators

Monitoring Performance

Reporting & Analyzing

VBE Performance Measure System

Define Indicators

Performance MeasureDimensions

Financial

Productivity

Social

Strategic

Trust

MeasureBenefits

Incentives

Measure effectsin VBE actors

Sanctions

VBEMeasureEffects

Identify VBE Values

& Actors

Social CapitalFinancial Capital

Financial Capital


Financial Capital

Human Capital

Structure Capital

Innovation & Learning

Capital

Human Capital

Infrastructure Capital

Culture Capital

Financial Capital


Integrated Infrastructure

Capital

Community Interaction

Capital

VBE Platform Capital

VBEMemberCapital

VBE SystemCapital

VBE Value Generation Objects

Relational Capital

IdentityCapital

VBE Value Generation Objects + VBE Performance Measurement System• The VBE Value System combine the Value Generation Objects

(financial capitals and intellectual capitals) of the VBE platform (the system that support the VBE operation) and VBE members in meta-value; thanks to the value exchange (e.g. collaborative and business opportunities) that take place between VBE members.

• The values generated in the VBE should be measured to encompass the assessment of performance and results achieved by VBE actors; five dimensions are defined for measure the value generation: financial, productivity, strategic, social and trust.

• The VBE Performance Measurement System include indicators, monitoring and reporting tools. Performance indicators should focus in the VBE members, the VO and the VBE itself in the five dimensions. Monitoring tools could be based on actual valuation models (such as BSC and EFQM) and reporting tools should support graphic, statistics and/or benchmark reports.


Supporting Tools for the VBE Value System• Various tools or components of tools must be

defined to support the following important issues as far as value systems in VBE are concerned: strategic plan, key business processes customers, VBE administration, VBE members, accountability measures, communication and sense of urgency.

• A generic IT tool can be defined for supporting the VBE Value System: a VBE Performance Measure System.

• This system is focused in performing the proper measurement and monitoring of the forms of value involved in the VBE value creation process.

• This VBE Performance Measurement System can be implemented using a dashboard, which that can take many formats, from reports to highly strategic business scorecards.


THANK YOU FOR YOUR ATTENTION

References• ECOLEAD D21.4 - Romero, D. and Galeano, N. (ed.) (2005).

“Characterization of VBE Value System and Metrics”. ECOLEAD internal document deliverable 21.4,

• Lichiello, P. and Turnock B.J.. “Guidebook for Performance measurement”. Turning Point - Collaboration for a New Century in Public Health. 2002.

ecolead summer school 2006 vbe value system and metrics itesm arturo molina, david romero, nathalie...

Documents

value economic value

vbe value system slide

forms of value

concept of value

total value

increasedecrease of

generic value system

value system elements