Value Creation in Knowledge-Based Firms: Aligning Problems and Resources

Abstract

Executive Overview The best known framework for analyzing value creation is the value chain, which shows how to align resources and activities to convert raw materials into finished products and deliver them to markets. The value chain model works well for firms that produce and sell standardized goods and services through a sequential, routine chain of activities. It does not, however, offer guidance to knowledge-based firms that do not manufacture and sell goods. Such firms and units, including those in architecture, law, health care, and even energy exploration (which we studied), can be modeled using the “value shop” approach, one that creates customer value by applying knowledge and technology to solve unique problems. We build on the value shop model by identifying resources firms require for problem solving (knowledge base, value attached to knowledge, networks, and technical and managerial systems) and by examining how those resources are aligned, and realigned, into bundles to match specific problems and the firms' strategies, to enhance problem solving and value creation. Guidelines for achieving such alignments are provided.

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