Friday, October 16, 2015

The Question of Value

Let us start by trying to define Value, and by this I don’t mean value as in ethics. So, if you put your mind to work, even without trying too hard, you might come up with Value as:

·         The worth of something
·         The fee or price for something
·         Something of importance or significance, etc.

These are not entirely incorrect and there might be these plus many more different descriptions that you could come up with if you tried a little harder to define Value. You won’t be far off the mark, but if you look close enough at these statements, you will find that there are two implicit factors that are common across the set:

1.       The explanations are as perceived by the recipient of the item or service; and
2.       The degree of value is proportional to the quantum of perceived or experienced benefit

Therefore, combining the two descriptions, we could perhaps come up with a simple yet powerful definition of value, as below:

“Value is the amount of benefit received”

“Not so fast” you might say and add, “why not simply say ‘Value is the amount of benefit’ and leave it at that because, surely the amount of benefit received is the same as the amount of benefit delivered?”! The counter to that is that the amount of benefit received turning out to being the same as the amount of benefit delivered is not true always, except when you tailor the delivery of value to exactly to the expectation of the recipient. Otherwise, even if you think that you are delivering more value, if the receiver doesn’t think so, then there is not net value created.

The implicit but very important factor here is that the beneficiary almost always determines whether value has been created or delivered, and, by the same token, whether value has been destroyed or under-delivered. For example, if a person receives a simple birthday greeting text message from a friend on the birthday, they might value that more than a box of chocolates sent a week or so later. Of course, in personal relationships one could always talk and sort things out, but in business, it is a little more complicated because it is a commercial transaction between remote parties.

So, now that we know that “Value is the amount of benefit received” and that since the beneficiary sets the benchmark, is it not imperative that when, as a business, you want to create and deliver value to your customers, you should find out exactly what the customer wants? Also, it seems pretty straightforward that if you ask the customer and deliver to their expectations, you should be on track. Perhaps, but the only hitch is that consumer behavior is not linear and therefore complex to understand and the expectations of a customer can be dynamic and manifold based on a multitude of factors. 

Therefore, given this scenario, it is vital for businesses to have a continuous “conversation” with the target beneficiaries to understand their current state of expectations and be one step ahead in delivering to those expectations. This is a reliable way to create & deliver value and be profitable.

Let’s go, create and deliver value!

ps: Stay tuned for my next piece on the type of “conversations” businesses can have that would give a more dependable idea of what customers expect.

Kall Ramanathan
ValueStrat Consulting @ValueStrat helps businesses understand where they are currently and what they need to do to get where they want to go. For this, we provide essential strategic plans and approaches, called “Keys”, to enable businesses to open up competencies, create value and deliver profitability.

ValueStrat gets to the DNA of business - Desire, Need and Ability - to help you ask some critical questions such as discussed above. Check out for more