Value Shop

A value shop is an organization designed to solve customer or client problems rather than creating value by producing output from an input of raw materials. The principles of value shop were first conceptualized by Thompson in 1967 and properly defined by Stabell and Fjeldstad (1998), who also created the name. Compared to Michael Porter's concept of the value chain, there is no sequential fixed set of activities or resources utilized to create value. Each problem is treated uniquely and activities and resources are allocated specifically to cater to the problem in question. According to the research of Charles B. Stabell and Øystein D. Fjeldstad, the value configuration analysis (1998), five main generic activities are carried out in the organization:

  • Problem Finding and acquisition
  • Problem-Solving
  • Choice of problem solution
  • Execution of solution
  • Control and evaluation

Value is created in the shop by several mechanisms allowing the organization to solve problems better or faster than the client. These are variables such as:

  • The organization is in possession of more information about the problem than the client
  • The organization is specialized to deal with the problem at hand with specific methods to cover analysis
  • Strong expertise with expert professionals is available.[1]

Value shops are focused on a value creation logic, where resources and activities are used to solve unique customer problems. Value networks are used as a value creation logic where relationships and interaction between inter-firm entities are the value creation logic. Since the value chain doesn't cover the other configurations well, value chain analysis should be superseded by the more generic activity of value configuration analysis, which in turn makes use of the specific logic of chains, shops, and networks. The Value Shop configures resources and activities according to a specific customer problem. The order, amount, selection, and intensity of activities vary according to unique customer needs. Professional services, such as law, medicine, and consulting are examples of value shops. It also makes sense to model value chain supporting activities as value shops to gain a better perspective on their value creation logic. The value creation logic of shops is about changing states. Turning an ill patient into a healthy one, or an ignorant student into a knowledgeable (object metaphor ;-). Or creating something that wasn't there: a building, a system, etc. Value creation logic is dependent on knowledge/information asymmetry between the customer and supplier, it is configured to deal with unique cases, and the process is cyclical, iterative, and interruptable. For example, if a diagnosis turns out that there is no problem to solve. There is a significant interdependence and reciprocity between activities. Each change influences the others. Often a single professional is in charge to manage all this.[2]

The model of the value chain does not fit every firm. For example, you are sick and you go to the doctor. He makes observations and emits a diagnostic. He makes a choice and proposes medicines which you have to take. Some days later, you return to this doctor for an evaluation to see if the proposed action was effective. If it is not the case, you begin again until the problem is resolved. The main activities do not have a "linear progress" (by the opposition at the value chain!) but are "iterative" and cyclic for the whole model. (See Figure below)

Value Shop
source: HEC Lausanne

See Also

Value Creation Index