Ruyport and Sviokla (1995) conclude that a new update to the traditional physical Value Chain theory, known as the Virtual Value Chain, runs in parallel with the physical one. They point out that more and more businesses, while still adhering to the old paradigm of creating value in the marketplace with tangible capital and labor, are becoming more dependent on the marketplace for gathering information resources, handling their customers and suppliers contact, and the marketing and servicing of their real and virtual products. Understanding the difference in the processes for each world and the interplay between the two can help managers comprehensively see the strategic issues facing their corporations. Those who understand how to master both can create and extract value in the most efficient and effective ways.
3.3.2 Differences between the Physical Value Chain (PVC) and the Virtual Value Chain (VVC)
Ruyport and Sviokla suggest that the Value Chain model treats information as a supporting element of the value-adding process of the business process, not as a source of value itself. "Information at physical value chain allows managers to redesign internal and external process and achieve the goal of efficiency and effectiveness. Managers often made use of the captured information such as inventory, production, or logistics to help the control of those processes, but they rarely use information itself to create new value for customers" (Ruyport and Sviokla, 1995, 66).
Figure 6. The Value Matrix (source: Ruyport, F.J. & Sviokla, J.J. 1995, Exploiting the Virtual Value Chain, pp82, HBR Nov-Dec, 1995)
The process for creating value is not the same in these two worlds. In the PVC world, value is created by improving quality of material and adding efficient labor. Creating value in the VVC involves sequences of gathering, organizing, selecting, synthesizing and distributing information. In effect, these five sequences of a...