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2022 | Book

Value in Business

A Holistic, Systems-based Approach to Creating and Achieving Value

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About this book

This book uses a system-based approach to decipher and organize the concepts and conclusions relevant for creating and capturing value in business. It develops a scientific theory based on systems science and logical reasoning that is commonly employed in mathematics and natural science. The resulting new theory focuses on the organizational nature of the world and the organic and holistic feature of human organizations and their interactions. To this end, this book identifies a few axioms, instead of empirical discoveries, on which it reliably constructs the entire theory.

Table of Contents

Frontmatter
Chapter 1. Some Challenges Encountered in Value Creation and Capture
Abstract
As the title suggests, this chapter introduces the reader to the exciting journey this book is about to embark on by outlining how this volume contributes to the existent knowledge on value creation and capture. It describes important gaps that exist in the knowledge of value and deficiencies the commonly and widely employed methods of analysis and reasoning experience. Collectively, these gaps and deficiencies point to the need to adopt systems science and methodology as the next best tool for analyzing situations of value and for developing a cohesive theory of value. After all these objectives are accomplished, this chapter turns its attention to briefly introduce some of the fundamentals of systems thinking and relevant methodologies needed for the rest of this volume.
Jeffrey Yi-Lin Forrest, Yong Liu

Preparation

Frontmatter
Chapter 2. Introduction to Systems Research and Systemic Reasoning
Abstract
Because the systems research and systemic reasoning employed herein are not commonly used by the scholars who work in areas this book touches, this chapter introduces the relevant basics in order to make this volume self-contained. On the other hand, for those readers who are not mathematically oriented, those of the following sections that are heavy with mathematical symbols, notations, and terminologies, can be skipped without causing any trouble with the reading of the rest of this book.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 3. Evolution of a Market of Free Competition: A Symbolic Approach
Abstract
The mainstream developmental economics has conventionally provided inconsistent lists of factors considered crucial for kick-starting a lasting economic growth (e.g., Lipton, 1977, Why Poor People Stay Poor: Urban Bias in Developing Countries. London: Temple Smith; Rostow, 1960, The Stages of Economic Growth: A Non-communist Manifesto. Cambridge, UK: Cambridge University Press; Studwell, 2013, How Asia Works: Success and Failure in the World’s Most Dynamic Region. New York: Grove Press). For example, the most common among these identified factors include high rates of investment in modern technology, democracy, universal suffrage, property right, and others. However, by anecdotally studying the respective successes of economic development in England, the United States of America, Japan, and modern China during different times of history, Wen (2016, The Making of an Economic Superpower: Unlocking China’s Secret of Rapid Industrialization. Singapore: World Scientific) discovers that these factors are actually not relevant much. Instead, what really matters is the sequence and process of economic buildup; and this anecdotal discovery is then theoretically confirmed by Forrest et al. (2018, Theoretical Economics Letters, 8,2594–2640) through employing systemic yoyo model and game theory. Other than these recent theoretical developments which invalidate earlier claims of developmental economics, the practical front also empirically validates this end. For example, many countries’ failures in their attempts to modernize and to industrialize themselves in the twentieth century are vivid evidence confirming that the conventional wisdom of developmental economics is incorrect. In particular, some of the trying nations, based on what was concluded in the mainstream developmental economics, attracted foreign direct investments and established modern industries in major cities and commercial centers based on most current technologies (Acemoglu & Robinson, 2012, Why nations fail—the origins of power, prosperity, and poverty. New York: Crown Business; Breslin, 2009, The Beijing Forum; Chang, 2003, Kicking Away the Ladder: Development Strategies in Historical Perspective. London: Anthem Press). But, instead of achieving desired sustaining economic growth, they failed to emulate the successes of the developed nations (Rostow, 1960, The stages of economic growth: A non-communist manifesto. Cambridge, UK: Cambridge University Press). Examples of such failures include many Latin American and East and Southeast Asian nations. Although these nations enjoyed annual economic growth of around or above 5% for decades in the middle of the twentieth century, their phenomenal growths quickly dissipated within short periods of time (Studwell, 2013, How Asia works: Success and failure in the world’s most dynamic region. New York: Grove Press).
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 4. Axiomatization of the Resource View: The Firm and Markets
Abstract
Resource-based theory or resource-based view of the firm has been in recent decades widely applied by scholars in areas of marketing and management in their studies of various topics. Because of the implicit power of this view, relevant studies are able to establish useful explanations and predictions about competitive advantages and outcomes of firms’ performance. Instead of continuously relying on such a prima facie view for reasoning, this chapter, mainly based on (Forrest et al., 2020, International Journal of Business and Systems Research), attempts to axiomatize it by using systems science in general and the systemic yoyo model in particular so that organizations and their interactions can be more adequately modeled and investigated. Specifically, this chapter shows, among others, when a firm advances its competitive advantage, why capabilities are also resources, how by including time capabilities become dynamic capabilities naturally, when a firm can improve its performance, and why the risk of expanding into new markets is worth taking. Because the approach used in this chapter is generally valid without suffering from the constraints of statistics- and anecdote-based methods, results and conclusions established in this chapter can be generally employed in practical applications unless given conditions are violated.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 5. Evolution of Resources: An Axiomatized Resource View
Abstract
Riding on the increasing importance of the resource-based theory or the resource-based view of the firm of the past decades in the research of management and marketing, this chapter, which is mainly based on (Forrest, et al., 2019, Proceedings of the 2019 annual conference of Pennsylvania Economic Association), continues what has been started in the previous chapter to develop a cohesive theory of resources by employing the thinking logic of systems science. In particular, this chapter establishes definite results on the exploitation and exploration of resources; firm’s technological opportunism, innovativeness, and performance; development, interactions, and decay of resources; and conditions under which a firm would fail to consistently exploit its available resources. Because all the conclusions established herein are developed by logical reasoning based on clearly true axioms, their truthfulness is not affected by any of the constraints and uncertainties of data analysis; and they are expected to be universally applicable in practice.
Jeffrey Yi-Lin Forrest, Yong Liu

Demand- and Supply-Side Strategies

Frontmatter
Chapter 6. The Supply-Chain Ecosystem of a Firm
Abstract
This chapter, which is mainly based on (Forrest et al., 2019, Proceedings of the 2019 annual conference of decision sciences institute, New Orleans, LA), investigates holistically such a business system that consists of market invitations, the ecosystem of a focal firm’s supply chain, the firm’s innovative recognition of the market signals, and challenges consequently imposed on the ecosystem. By employing the thinking logic and methodology of systems science, we establish a series of general conclusions regarding innovative firms’ internal and environmental challenges. In particular, we show that a firm’s upstream component challenges and downstream complement challenges place respectively a cap on how much “value” the firm can create and capture. Thus, the more capable a focal firm is at identifying these challenges, the more adept this firm will be in creating and sustaining marketplace advantage as well as imposing greater challenges on its ecosystem. A firm’s strong capability to learn and act accordingly is, in itself, an advantage. Upon the conclusion of our analysis, practical managerial significance of this chapter and open questions for future research are given.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 7. Upstream/Downstream Impacts on a Firm’s Performance
Abstract
This chapter, based mainly on (Forrest et al., 2019, Proceedings of the 2019 Annual meeting of National Association of business, Economics and Technology (pp. 83–100)), studies holistically the supply-chain ecosystem of a focal firm, when the firm innovatively deciphers a market invitation. It employs the thinking logic and methodology of systems science to establish a series of generally true conclusions regarding the challenges facing either the suppliers or the complementors. In particular, this chapter shows among results that (1) challenges upstream components face help build performance advantage for the focal firm over its competitors; however, if the firm’s challenges are mostly on its upstream suppliers, then the performance advantage’s lifespan will be greatly shortened. (2) An innovative firm has to consider the availability and development of appropriate complements in its introduction of innovative products. (3) In contracting with upstream suppliers, a focal firm has to deal with technological uncertainty and suppliers’ behavioral uncertainty with the former affects the firm’s ability to create value and the latter impacts its ability to capture value. And (4) a firm’s performance advantage, as a consequence of applying vertical integration within the firm’s ecosystem, increases over time within the life cycle of the technology developed to meet the firm’s innovative need. At the conclusion of this chapter, practical managerial recommendations and open questions for future research are given.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 8. Sufficient Conditions that Lead to Synergistic Innovations
Abstract
This chapter, which is mainly based on (Forrest et al., 2019, Proceedings of the 2019 Annual Conference of Decision Sciences Institute (pp. 2061–2080)), investigates issues related to the following questions: (1) how can producer-side synergies be created by employing the strategy of economies of scope? And (2) how can demand-side synergies be developed by making use of simultaneous consumer utilities and multi-sided markets? Because of the different approach taken, we are able to describe how resources interact with each other and how simultaneous consumer utilities, two-sided markets and consumers’ willingness to pay react to each other. We first look at how such economic entities and basic concepts as business firm, resource, innovation, diversification, synergy, segment of consumers, etc., can be respectively modeled as interacting systems. We then address the previous two questions by establishing a series of 8 propositions by examining how relevant systems exert forces on each other so that some general conclusions follow. Because of the systemic certainty our discussions offer, this chapter is expected to provide practically useful guidance for managers, entrepreneurs, and retailers to create values for consumers and capture values for their companies.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 9. Consumer Synergies: Simultaneous Utilities and Multi-Sided Markets
Abstract
By employing a systemic approach, which is completely dissimilar to those used in the literature, this chapter, which is mainly based on (Forrest et al., 2019, Proceedings of the 2019 annual meeting of national association of business, economics and technology (pp. 101–121)), scrutinizes issues related to the following problems: (1) What are the most fundamental decisions a retailer can make in terms of its offers to consumers? (2) When can simultaneous consumer utilities be produced by collocating products and/or services? (3) When can a positively correlated multi-sided market be formed? And (4) without particular talent and luck how can a synergistic innovation be introduced? Due to the specific approach taken, we are able to describe how simultaneous consumer utilities, two-sided markets, and consumers’ willingness to pay additional react with one another and how the previous problems can be addressed by establishing a series of 6 propositions. To explore the possibility of systemically generating new ideas instead of waiting for the seemingly sudden and random appearance of disruptive technologies, a mechanical procedure is developed for the potential of producing synergistic innovations on either the producer or the demand side. Because of the certainty systems science offers, the general conclusions developed in this chapter are expected to provide practically useful recommendations for entrepreneurs, managers, and retailers to create and to capture values for consumers and their companies.
Jeffrey Yi-Lin Forrest, Yong Liu

Value-Chain Framework

Frontmatter
Chapter 10. The Systemic, Hierarchical Structure of the Mind
Abstract
This and the next chapter, which are mainly based on Wajda et al. (to appear, The inclusiveness dimension of human cognition and categorization paradigm), form a two-part sequel of a recent study on how people dissimilarly categorize a given set of stimulus targets by mobilizing different areas of their cognitive systems. In particular, this current chapter develops a general theory on how each human being is a goal-oriented system, the mechanism underneath the operation of the four human endowments—self-awareness, imagination, conscience, and free will, and the systemic structure of the general human cognitive system. For related discussions, see Lin and Forrest (2012, Systemic structure behind human organizations: From civilizations to individuals. New York: Springer).
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 11. Preferred Taxonomies and Inclusive Classification of Consumers
Abstract
This and the previous chapter, which are mainly based on Wajda et al. (to appear, The inclusiveness dimension of human cognition and categorization paradigm), jointly investigate how people with different focuses of attention tend to mobilize unlike areas of their cognitive systems; such different focuses naturally lead to dissimilar categorizations of given stimulus targets. Specifically, based on what have been established in the previous chapter regarding human mind and the general cognitive system of people, this chapter explains why and how people demonstrate their respectively different preferences for their correspondingly varied levels of taxonomic abstraction. Then, it uses an empirical case study to confirm some of the main conclusions developed in these two chapters theoretically.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 12. Value Creation out of Innovation and Resources
Abstract
Along with the development of modern technology, there have appeared unprecedented kinds of markets participated by traditional and nontraditional players. These new markets have simultaneously bought forward unparalleled challenges to the academic world and decision-making managers and entrepreneurs. To meet these challenges, this chapter, which is mainly based on (Forrest et al., to appear, Potentials of value creation and capture based on innovation, resources, strategic networks and blocks), explore potentials of value creation at the firm level from several diverse vantage points, and the next chapter looks at potentials of value capture at the firm level.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 13. Potentials of Value Capture and General Value-Chain Framework
Abstract
With the emergence of new kinds of markets, there have also appeared nontraditional players in the marketplace. These new kinds of markets and players have created unparalleled challenges to the world of learning and business decision-making, while scholars recognized that Porter’s (1985, Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: Free Press) value-chain framework is no longer sufficient for analyzing business firms. To meet these challenges, this chapter, which is partially based on Forrest et al. (2020, Advances in Systems Science and Applications, 20(3), 50–72) and Forrest et al. (2020, Journal of Business and Economic Studies), continues the previous chapter by exploring potentials of value capture at the firm level from several diverse angles—interorganizational network, close association between sellers and buyers, and then generalizes Porter’s value-chain framework that is equally applicable to the analysis of firms that offer tangible products, services, or informational goods. Accordingly, practical and reliable general recommendations, as well as a few unsettled questions for future research, are offered.
Jeffrey Yi-Lin Forrest, Yong Liu

Customer Values

Frontmatter
Chapter 14. When Effective Consumer Value Propositions Emerge
Abstract
Customer value proposition (CVP) is the key for a startup to be launched and foundation for a company to direct its business efforts. However, as of the present day, no systematic theory exists regarding how an effective CVP can be potentially formulated and strategically employed in real life. As a matter of fact, the very concept of CVP is still not properly defined; although the term has been widely used in the literature, it is only nonchalantly tossed around. Considering the importance of this concept in the area of marketing, this chapter, mainly based on (Forrest et al., to appear, Conditions under which adopted consumer value propositions are effective), attempts to lie down the first step towards the development of the badly needed theory of customer value propositions (CVP). It establishes four generally true facts on the use and effectiveness of CVPs based on Theorem 3.2 regarding how an oligopoly market signals its invitation for additional competition and new innovation.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 15. Values and Competitive Advantages Based on Customer Value Propositions
Abstract
Continuing the effort of the previous chapter to develop a theoretically rigorous and practically useful theory of customer value propositions (CVP), as called for repeatedly by the extant literature, this chapter, mainly based on (Forrest et al., 2021, Studies in Business and Economics Journal, 16(2)), establishes eight generally true facts that do not suffer from the constraints of data-based and anecdote-based approaches, as widely used in the relevant literature.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 16. Market-Sensing Capabilities and Their Vital Importance in Firm Performance
Abstract
This chapter, which is mainly based on (Forrest et al., to appear, Market-sensing capabilities, profitability within stagnant industries and crafting of customer value propositions), studies the concept of market-sensing capability and its impact on a company from the perspective of market competition. Then it looks at, as a case analysis, sources of profits within a slow growth industry. As a second case analysis, results, developed in this chapter, are employed to reveal how a company can formulate effective customer value propositions (CVPs). This chapter shows, among others, that (1) the capability of market-sensing permits a company to classify customers into various classes, (2) it lowers operational costs while increasing expected profits, (3) the profit of a company within such an industry that experiences slow growth can grow only through a combination of raising unit price and lowering unit cost, and (4) how market knowledge and its innovative understanding can potentially lead to the formulation of effective CVPs. Other than employing any approach that is either statistics- or anecdote-based, this chapter makes use of the rigor of game theory to establish its results. Therefore, compared to empirical studies, results established in this chapter are generally true unless given conditions are violated. At the conclusion, managerial recommendations are listed for decision-makers and potential questions for future research are given.
Jeffrey Yi-Lin Forrest, Yong Liu

Some Roles of Manufacturing and Artificial Intelligence

Frontmatter
Chapter 17. Manufacturing in Industrial Transformations
Abstract
At the present time, the world is expecting the arrival of another new era of industrial development. To position themselves appropriately in order to either maintain or acquire their leadership in the world, some nations, either developed or developing, have introduced and adopted their individually different plans on how to transform their current states of industrial manufacturing by focusing on innovations.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 18. How Artificial Intelligence Affects Technological Innovations
Abstract
This chapter investigates how artificial intelligence (AI) may impact technological innovation. It first defines what technological innovation entails, and then it establishes 10 general propositions. At the end, this chapter empirically validates some of these results by using provincial panel data of China from 2003 to 2015.
Jeffrey Yi-Lin Forrest, Yong Liu

Government Policies and Supports

Frontmatter
Chapter 19. How the Government Can Help Stimulate Economic Growth
Abstract
This chapter, which is mainly based on Forrest et al. (to appear, The role government policy and supports play to stimulate economic growth), studies the following three issues: (1) why policy tools of the government might work in real life; (2) when they do work, what the underlying mechanism is through which implemented policies play their roles; and (3) why it is necessary for the government to design and implement policies and provide supports for the purpose of stimulating economic growth.
Jeffrey Yi-Lin Forrest, Yong Liu
Chapter 20. When Government Policies Improve Firm Performance
Abstract
Based on the theoretical studies in Chap. 3, this chapter, which is mainly based on (Forrest et al., to appear, Market competition and economic effects of government policies), investigates conditions under which government policies can be expected to improve the economic performance of firms through their market offers that can be either physical products, services, or informational goods.
Jeffrey Yi-Lin Forrest, Yong Liu
Backmatter
Metadata
Title
Value in Business
Authors
Jeffrey Yi-Lin Forrest
Yong Liu
Copyright Year
2022
Electronic ISBN
978-3-030-82898-1
Print ISBN
978-3-030-82897-4
DOI
https://doi.org/10.1007/978-3-030-82898-1

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