A value model shows which commercial transactions are done to satisfy a consumer need, but does not show in which order they occur nor what detailed actions must be performed to realize the transactions. The transactions in a value model are commercial, and show only that money, property rights and the rights to a service change hand. It does not show how this happens. Coordination process design is the design of processes by which companies realize these transfers.
For example, in the following business model, shops must hand over a product to a logistics provider; the logistics provider carries the product in a truck; the customer takes the product and puts it somewhere.
The first thing to do when designing a coordination process is to analyze the flow of physical possession of goods. For example, to get the product to the customer, it must be collected from the shop by the logistics provider, who loads it in a truck, may store it at some place, and finally physically transport it to the customer’s location. The customer must take the product from the logistics provider and put it at the place where they desire it. These physical processes are not shown in the value model, but they can be shown in a process model as we will illustrate in a moment.
Analyzing the physical activities needed to realize a commercial transaction is closely related to analyzing the capabilities of a technology. The technology choice page gives more examples.In general we should realize that all technology is physical and requires physical activities of its users. Even smartphones, tablets and virtual reality sets are physical. The user must pick them up, carry them around, swipe a screen, tap a screen, and perform other physical activities that may be relevant to include in a process model.
Once we have identified the physical activities, including the physical flow of goods necessary to realize a commercial transaction, we must evaluate our trust assumptions about the actors in the model.
For example a seller who distrusts a buyer will first ask to be paid before he delivers a product, but a buyer who distrusts a seller will first ask for the product before he pays for it. If both parties distrust each other, they must hire the services of a trusted third party, who can guarantee that the buyer will pay, and an insurance company, who can reimburse the buyer’s losses if the product is not delivered. These third parties must then be added to the value network, and tir actions must be included in the process design.
Making trust assumptions is part of risk assessment and we here see that it is also crucial in process design.
For the above value model, we assume that the shop distrusts the logistics provider but the logistics provider trusts the shop. The following BPMN diagram shows a possible coordination process for the transactions of the business model. It ignores internal activities performed by the actors, such as financial administration. And just as the business model above, it assumes the simplest possible payment technology, namely payment in cash by paper money.
The coordination process model shows that the product is not delivered to the customer by the shop but by the logistics provider. It also shows that the logistics provider is not paid before the product is delivered, and that the logistics provider receives evidence of delivery in the form of a reception confirmation by the buyer.
In general, the design of a coordination process across the actors of a value network proceeds by defining one resource pool for each actor in the model, and asking what physical activities must be performed by the actors to perform the transactions. The ordering of these activities partly depends on trust relations among actors. If necessary, trusted third parties can be included in the value model to break a deadlock created by mutual mistrust.