Horizontal and Vertical Business Value Creation

Vertical & Horizontal diagram

Digital technologies offer organizations new innovative ways to create value by utilizing digital business strategies, processes, and digital products.

Whether you are a supplier, manufacturer, distributor or even a customer  the traditional horizontal and vertical chain is developed further with digital.  Proposing new ways in which traders could innovate their business processes to enhance value creation beyond traditional approaches to business. The key is collaboration among strategic partners, this has been made a little more seamless across organisational boundaries with the use of SMAC digital technologies. Take for instance online  goods retailer TakeaLot.com strategically teaming up with Mr Delivery (Mr. D) as its last mile distributor to the final customer in 2011. Eventually by 2014, Mr D. Courier was fully owned by Takealot.com which is the African equivalent of Amazon.com and this turned out to be a very successful vertical value chain partnership.

Now vertical value creation is understandable as these value chain partners have different functions , supplier to manufacturer to distributor to end customer right.  Horizontal is a bit different, as your partners on the chain are playing the same role , and could be in the same or different industry adding value creation on your services or products to the final customer. Mars Chocolates and Wrigley Inc comes to mind, the two sweets companies partnered from 2008 .  But In 2016 Mars fully acquired the gum and sweet maker simplifying its confectionery operations by giving retail clients just one supplier with one broad portfolio of products to deal with called Mars Wrigley Confectionery.

“Study the past if you would define the future.”
― Confucius

The final value proposition for goods or services is the offering made after the product has been through various value addition activities between multiple players along the chain, and you have made some of them your strategic partners and can not do with out them. So what are the strategic benefits of horizontal or vertical value creation leveraging SMAC? Collaboration is made easier, most certainly digital has improved  internal and external communications across functional teams such as Finance, IT, Sales & Marketing, Product, Warehouse & Logistics and Customer Services extending the organisation across its own boundaries to its partners and customers.

“Strategy without tactics is the slowest route to victory, tactics without strategy is the noise before defeat.” —Sun Tsu, Ancient Chinese Military strategist

The digital edge is the internet-enabled capabilities where new value co-creation can be generated. Some Enterprise Resource Planning systems (ERP) offer connected applications with internet connectivity. It has driven value co-creation and efficiency through big data analytics shared between strategic partners. The core enterprise systems can be  extended to the digital edge (cloud computing, social media and mobile apps) through  application programming interfaces (API). By leveraging SMAC with strategic partners, visibility of shared business processes you want them to see is easier so that opinions re shared on how to improve them . By sharing tactfully with the strategic stakeholders, Likewise keeping those aspects of the value chain securely invisible,  is also very possible to keep  an organisation’s differential value in tact.

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Horizontal and Vertical Business Value Creation

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