EXPLOITING THE VIRTUAL VALUE CHAIN

Every business today competes in two worlds: a physical world of resou rces that managers can see and touch and a virtual world made of infor mation. Executives must pay attention to how their companies create va lue in both arenas - the marketplace and the marketspace. But the proc esses for accomplishing this are not the same in the two worlds. Manag ers who understand how to master both can create and extract value in the most efficient and effective manner. The stages involved in creati ng value in the physical world are often referred to as links in a val ue chain. The value chain is a model that describes a series of value- adding activities connecting a company's supply side with its demand s ide. By analyzing the stages of a value chain, managers have been able to redesign their internal and external processes to improve efficien cy and effectiveness. However, the value chain model treats informatio n as a supporting element of the value-adding process not as a source of value itself. To create value with information, managers must look to the marketspace. The value-adding processes that companies must emp loy to turn raw information into new marketspace services and products are unique to the information world. In other words, the value-adding steps are virtual in that they are performed through and with informa tion. Creating value in any stage of a virtual value chain involves a sequence of five activities: gathering, organizing, selecting, synthes izing, and distributing information. lust as someone takes raw materia l and refines it into something useful, so a manager today collects ra w information and adds value through these five steps.