Value Architecture – Snapshot of the Company’s Business Model

For an entrepreneur is very important organize his key operational activities to make fundamental business decisions with respect to ‘focus’ — the strategic relevance and prioritization of these activities to achieve a developmental milestone; ‘locus’ — where you should geographically conduct these activities; and ‘modus’ — the way in which these different activities are executed. At the business model level, the focus, locus, and modus of the entrepreneur’s activities represent the company’s output, so represents the unique way in which a business executes its strategy to the market.

  1. Focus: Focus decisions are related to the strategic importance and allocation of a company’s resources to business activities, like where to invest additional resources or disinvest resources. The entrepreneur has to focus his attention on what business activities demand priority, resources, and attention. The key decision process here is to prioritize which activities to focus on during a specific stage of growth and development, so the entrepreneur has to analyze the business environment and determine the priority of all the activities that he has identified. It is very important to identify and analyze all the possible activities that can produce value for the business and give returns to the entrepreneur. Focus decisions should be all about completing the activities plan and getting the products to the market as soon as possible. The base decisions of the entrepreneur in the early stage of his company are the strength of his business proposal, so where he has distinctive core competencies and where he is better than the competitors. When the entrepreneur is focus on something, he is giving an identity to his company and a clear perception of his business to the eyes of the market and the potential investors. Obviously, the focus if the entrepreneur may change as the company evolves and the market conditions change.
  2. Locus: Locus decisions are among the company’s primary differentiation’s and are those that concern in which geographical areas or industrial clusters to locate the company’s value-adding activities. These decisions refer to what market to address, but also to where to locate the company and where to locate the operating activities, in order to make the difference in terms of company’s ability to access key resources, develop distinctive competencies, create a network, and that is related to the ability to execute a successful strategy of innovation. Those decisions are not just about where the company is based, but also where the company’s business activities take place. Location choices are very relevant for an entrepreneur because he has multiple options for locating all the different activities with different cost/quality implications, so need to be planned very carefully. In fact, locus decisions determine the geographical configuration of the company’s internal and external value chain.
  3. Modus: Modus decisions are relatively close to locus decisions, and they are related to the mode or modus operandi that the entrepreneur choose to conduct his business activities. Modus decisions are related to the way companies operate, as they define which activities companies handle in-house and which ones they outsource. For activities handled in-house the business model also defines how companies should approach activities, they can be brain-intensive, labor-intensive or technology-intensive. For activities outsourced the business model identifies the relations among companies.

Value Architecture - Snapshot of the Company’s Business Model

Those three key decisions can be represented through the value architecture, which is a sort of snapshot of the company’s business model. The value architecture summarizes the key elements of focus, locus and modus and can communicate the business model decisions at a particular stage of company growth and development. The value architecture can be very important for the entrepreneur because let to understand the current position of the firm, and the implications of the new decisions that can be made; also, it is important to better communicate the company’s position and business model in an effective way.

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