Saturday, November 10, 2012

How value networks can articulate with the present economy - an example in food preparation and distribution

Yesterday I had a conversation with my friend Paul about the advantages of value network over classical structures, including co-ops.

picture comes from this website
Paul is involved in #occupy Montreal and they are now organizing a center for preparation and distribution of vegan food in Montreal. They also want it to be very local. This operation would require gathering products from different local farmers, cooking/preparing, packaging and distributing raw or prepared food. 

Should they create a co-op or a value network

My answer 
They can have a co-op embedded within a value network. 
Before I go any further please allow me to put this on the table: The new information technology, which also includes the Internet, allows instant access to individuals with no physical barriers, many-to-many communication and coordination, collaboration... This causes a new pattern of production to emerge, the long tail. Old forms of organization have been optimized to manage the bell curve pattern, also called the "normal distribution". In other words, in a world deprived of effective means of communication, coordination, and collaboration, in a world poor in information systems, access to talent was scarce, simply because of physical barriers. There is a limited amount of individuals that can do a given job within a 50 km radius, and only a small percentage of those are actually available when they are needed. In this regime of scarcity organizations need large commitments from individuals, the 8 to 10 hours work-day. The bell curve pattern means that old organizations (co-ops, corporations, etc.) involve a small number of individuals and try to have the majority of them produce a large amount of value. Few of them produce a lot more or a lot less than the majority. These organizations have evolved internal mechanisms for motivation and time management, to make sure that everyone gives the maximum within the work-day. The new information technology creates an abundance of skills and allows massive amounts of micro-contributions to pile up coherently. This is what Wikipedia is doing, this is also how open source software projects operate. 

Now, the value network model we are designing allows extraction of value from the long tail. The value accounting system can capture small and large contributions from a large number of contributors. 

If the operation is small and must stay small it is not in the long tail regime, which is a large scale regime. In this case a co-op can be suitable. But mixed operations can also exist, and I think this is the case of Paul's project. 

Preparing and packaging food for local distribution is a small operation. It requires around 10 full time workers or 30 part-time workers. A co-op can manage that. Moreover, a co-op can also be used to hold material assets like the space, equipment, etc. But what about transportation? Suppose that the supply chain is very distributed, including 100 local farms, from which the co-op gathers products to build variety and quantity. The co-op would need to invest in a large truck and to organize the transportation logistics from all these farms to the preparation plant. I believe that transportation can be decentralized in a value network fashion, to allow participation of private individuals who commute by car to the city, every day. 

An online and smart phone application can allow the co-op OR the farmer to signal a transportation request and subscribers to commit to requests in exchange of good consciousness, good food, OR some money for the gas. If the number of subscribers to the transportation system is large enough the entire system becomes statistically stable, therefore reliable/deterministic. The co-op can still invest in a small pickup truck to fill in the gaps. This system must also integrate a reputation system, a fast payment mechanism, tracking technology with GPS, etc. 

This is a very good example of how a classical organization, a co-op in this case, which is tuned for the bell curve pattern, can be used with a value network, which is designed for the long tail pattern. The value network includes food producers, the farmers and the co-op, the individuals involved in transportation, and the consumers. The value accounting system manages all the transactions among these agents.  

By t!b!

By AllOfUs

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