CHAPTER 2

The Fundamentals of Value

Nuances of Value

In this discussion, we use Value to mean the Value of a product (or what is the worth of a product), service, or the Value of an institution (like society, or a company, or a person, or a group of persons) and the Value created for the institution. Value can also mean creating good and well being for various actors.

We can ask whether your Value is based on how much money you make? How many people you influence? What gender you are? What country you come from? What gifts and talents you have? Your physical and intellectual abilities?

Is Value an absolute term? The only place “absolute” Value is used is in determining the Value of a firm through discounted cash flow. So economic Value can be absolute though generally it is based on part-perceptions and may not be absolute. Value does not exist in the absence of consciousness; ergo Value is relative.¹

Value exists in some form or other, waiting to be perceived, and when perceived, the Value is enhanced or diminished depending on the viewer of the Value, on the perception of the user or recipient of Value. Value is perception defined; it can be created, it migrates, it is captured, it is co-created, and it can also be lost and found.

The term surplus Value is really what we call Value added.

If Value exists in some form or another, it is potential or latent Value. When perceived, worked on, enhanced, or improved, Value becomes different, maybe less potential and more useful.

If there is innate, inherent, or latent Value in an item it is called intrinsic Value. Latent Value is a concept of intrinsic Value, which is the Value that something has “in itself,” or “for its own sake,” or “as such,” or “in its own right.”

Michael Zimmerman states there is “extrinsic Value,” where we look at something not for its own sake but for the sake of others (are things good or bad for themselves or for the sake of others?).

So we deal with intrinsic Value and Value which is perceived is extrinsic. This is also been referred to as phenomenological Value.

Moreover, Value depends on context and the user. Value creation for one may be Value destruction for another.

For our discussion, we can say that Value exists in some form or other, waiting to be noticed and perceived, before it can be worked on.

Value in an ethical sense is whether it improves, or is good for someone. So pleasure could be good and pain bad, and one has more intrinsic Value than the other. But if pleasure in use causes pain (to someone including the user), its intrinsic Value is lower. So there could be intrinsic Value in a painting or in nature.

The Elements of Value

Eric Almquist² and others from Bain built the Elements of Value, which is reproduced here with permission of Bain and Company. More Value is created as one goes up the pyramid (Figure 2.1).

Value Waiting to Happen

We have all heard of the phrase “disaster waiting to happen.” Just as much is the term, Value waiting to happen. We just have to look for this Value, be aware of it, and create Value from Value waiting to happen.

As an example, Bumble modified a common dating app to start business dating. The business feature was Value waiting to happen.

Plant microbial fuel cells that generate electricity by tapping the electricity found between plants and microorganisms in the soil are an example of Value waiting to happen.

The ability to make plants glow (and be used as a table lamp) by using the plant itself to create electricity is another idea.

Source: © 2015 Bain & Company, Inc. Icons by Nik Schulz.

From “The elements of value,” by Eric Almquist et al., September 2016

Figure 2.1 The Elements of Value

Jeff Karp³ of Bioinspirationalist is making Value and ideas waiting to happen really happen. He learns from nature (plants, animals, birds, etc.) to create products of Value, from porcupine quills inspired surgical staples, using gecko feet for sealing surgical cuts, and for developing methods for sealing intestines cut during surgery with an animal-inspired tape.

At IIT Guwahati, scientists have created a polymer superhydrophobic coating that mimics lotus leaves and rose petals. Water just runs off, and forms drops. The coating can be modified in situ.

Thus Value also exists in a larger ecosystem than a classic business/social ecosystem. And it runs the risk of being destroyed by being overtaken by a better product, idea, or system. This is shown in Figure 2.2.

This thought process is valid for society, people, institutions, and others outside these boundaries. Take a student. He may have Value potential. He creates some Value for himself by studying alone. His school adds further Value to him. His Value is perceived by an employer, and with him further Value is co-created. If the person gets outdated, or the need for his service is reduced (such as professional drivers who become redundant in a driverless car system), he becomes jobless and Value is destroyed for him, and may have to look beyond his traditional boundary for a new job, or to get re-trained. Later we will examine the Value destruction/creation outside the classic business boundary.

There are times when the Value is potential, such as in a painting. When the artist goes to sell it, then it has potential Value in his mind. If Value is recognized and someone buys it, then the potential Value is converted to Value-in-exchange for the artist. Then we have to think of increasing the Value potential, and how is that done? Just by facilitation and Value creation, to improve the potential (such as showing in an exhibition or adding a frame to the picture to make it more attractive or through advertising). If he does not want to sell it, he has still created/destroyed Value for himself, and the exchange has no meaning. The Value potential may still exist in the future.

Figure 2.2 The expanded Value ecosystem (from author) (Latent Value is potential Value or Value waiting to happen. Service includes services and goods)

VI suggests you must also look outside your ecosystem to prevent the impact of obsolescence and disruption.

Vince Papale, then a 30-year-old bartender from Philadelphia, overcame long odds to play for the NFL’s Philadelphia Eagles in 1976. He was Value waiting to happen.

In India, the once helpless service people like independent plumbers and electricians who could not own phones are now connected to the customer (and using their time effectively). This was Value waiting to happen, and it did not happen by design but happened as these people acquired cell phones and became connected.

Educated Indians were leaving India after studying in premier government-subsidized institutions like the Indian Institutes of Technology and the Indian Institutes of Management, and this was called the brain drain. Today, everyone says “wow!” How smart to allow brain drain. We have Indians around the world contributing in so many different spheres, and becoming recognized. Most send money back to India. Some have become leaders in business, technology, entrepreneurship and its funding, and education around the world. Others come back and contribute to India. The latent Value of brain drain was not developed and not harnessed. It just happened.

Getting more out of data is an example of Value waiting to happen. There is much data and information and knowledge tucked away from years of research, development, unfructified projects, clinical trials, and nuggets of information on what to do and what not to do for a particular project or research area. Billions of research dollars have gone into this. As a society we have generated more information and databases than we could use. Such information is huge compared to our ability to utilize this information into worthwhile action.

Randy Guard, Executive VP for SAS Data Management, states that the not-for-profit Project Data Sphere, LLC, an initiative of the CEO Roundtable on Cancer’s Life Sciences Consortium, is a “free digital library and laboratory that provides a single place for researchers to share, integrate and analyze historical, de-identified patient-level data from academic and industry clinical trials.” In fact, anyone interested in cancer research can apply to become an authorized user.

Project Data Sphere enabled the first ever crowdsourced prostate cancer data mining competition. This effort identified new models to predict patient outcomes and has provided doctors with treatment options that help to positively impact patient outcomes.

Value Imperative is all about creating good for and improving the well-being of each other as in the Project Data Sphere example.

The first cell-based gene therapy drug (from Novartis) for leukemia has an estimated cost of $475,000, a “whopping price tag” according to Dr. Kenneth Thorpe. Based on the benefits, price is not high for the patient given potential remission, reduced long-term health care costs, an improvement in lifestyle and rewards for the manufacturer at the same time.

Security systems add Value for those seeking security or those seeking to penetrate security. From invisibility solutions to overwritten videos, from molecular keys for locks to… (Let your imagination run. See what you’d like to see, and ask why it isn’t there).

Thus Value is being created on all fronts.

Disruption and Value Waiting to Happen

Become aware of potential Value (Value exists but it has to be noticed and appreciated, like beauty). Latent Value has to be nurtured and built into real Value by you. It then has to be shared (or co-created with customers).

Disruption is the waking up of people, becoming aware of latent Value. And when this latent or potential Value is noticed, we call it disruptive technology or innovation.

You can be a disruptor, too. Look for potential Value. Value is everywhere around you. You have to notice it and build the latent Value to real Value. Here are examples:

A seed is a plant waiting to happen. Can we learn from the seed system and come up with products that just erupt. Like seeds? Or seeds that can absorb huge amounts of water?

Learning from nature can show us Value waiting to happen, like root systems of trees. A Danish scientist has used technology of roots’ ability to detect content in soil to detect mines.

Disasters waiting to happen are another aspect of Value destruction. You just have to look at climate/weather change or lack of safety (accidents waiting to happen).

Every product is a service waiting to happen. Rolls-Royce engines being installed as a service on planes, rather than being sold is an example. Rolls-Royce owns the engines, services and maintains them, and has a revenue model for a fixed fee and a per mile usage charge. The entire worry of the airline on the engine is transferred back to the engine manufacturer.

Another example is FlixBus where Flix has aggregated different buses, drivers, and bus companies by standardizing operations and selling the service on the Net.

VI and Value Waiting to Happen

Most people think of Value as happening during the course of a business or an activity. We wish to also look at Value waiting to happen. This can happen when there is a Value potential in a good, service, object but is not noticed. Or when we start to work on something, Value is waiting to happen. It is important to note that Value has to be noticed, and that we have to become aware of it.

Thus, you could own a property, not knowing there is oil under the property. The Value of the property is not enhanced in your mind. On the other hand if you are aware of the oil, the Value increases.

The Value of a family heirloom may be high in your mind but not in the mind of others. But if you did not know it was an heirloom, you could have little Value for it.

Two important ideas come out of this:

Chasing stars or thinking blue oceans is good, but not good enough. Because in the process we ignore even greater ideas that are all around us, just waiting to happen.

Value is all around us. It is waiting to happen, it is being created. We become Value blue oceaners by looking around us, and finding Value waiting to happen.

An example is the discovery that ulcers were treatable by antibiotics by the Australian doctor Gerry Marshall who started work in 1981 and discovered that gut infections led to peptic ulcers. He was ignored and heckled by gastroenterologists who thought ulcers came from stress, spicy foods, and acid.

Marshall got a Nobel Prize in 2005 for this. Why did people not see this? He was able to see or became aware of something that existed but others refused to see it. This was Value waiting to happen.

So we come up with two more thoughts apart from being aware and having a perception, you have to ask why is it not this way or why is it this way? If you want to develop the Value or the idea you have to ask how (be aware and be curious).

An example we can all relate to is driverless cars. We can all imagine or see these cars in our minds, but previously, we or our minds refused to see them, and so they did not exist. Some who thought of such cars discarded them as impractical. Value was waiting to happen till someone picked up the concept of driverless cars and why they were important and how to make them happen. An Elon Musk asking why cars need drivers and seeing in his mind driverless cars. Such an obvious Value waiting to happen, which none of us saw (or those that saw it considered the idea ridiculous or discarded this as not practical). A Value stream then follows, which is a sequence of Value-adding activities that achieve a specific result that is of Value to a stakeholder: New Value, more Value, better Value. Some think Elon Musk wins because of deep rooted passion, first principles, and transformative thought. That too, but also the ability to see Value waiting to happen and creating Value.

Other examples of Value waiting to happen:

So look for Value around you and become aware of Value and its potential, and your potential as a Value creator.

You could create Value for yourself. You could use your potential Value for your kids and family, for your business and colleagues or for yourself in business.

What Value can you create for your kid? What is he good at, how can you develop that, how can you drop your preconceived notions of what is good or right for him? Can he be a drummer or a tennis star? Are you willing to create Value for him?

Or at business, you think of a company that you could do business with but your colleagues don’t see it. You grab this Value waiting to happen and run with it.

Or you are a cricketer and discover an unconventional shot that is Value waiting to happen like the helicopter shot.

Or you are a housewife and start baking and become famous like Cheryl Kumar of Chocolate Log Hut in Dharamsala, India.

Value and You

We have a program to create entrepreneurs at the bottom of the pyramid (BOP). People who don’t even know they can be entrepreneurs or even be something special, till someone comes along and shows them how. They learn nothing is impossible.

Impossible is a word you use when you aren’t able to do something, or when you do not perceive the Value that could ensue or you do not consider it necessary, according to Drew Long.⁴ It is a case of the impossible being necessary; and the necessary being impossible! Impossible is something we haven’t been able to do before, until it becomes necessary. The fall of the Berlin wall and Soviet Russia eradicated impossible from my dictionary, because till then I felt it was impossible these things could happen.

Thus imagine the Value that could happen, and then how you could create some of or all of that Value even if it is seems impossible. Tell yourself it is necessary, and therefore it must be done. So many impossible looking things can happen or should happen: eradication of poverty, equitable education to all, education that is meaningful, giving opportunity to people, driverless cars, eradication of cancer, extinction of child trafficking, businesses for society before profits, making the human race multiplanetary like Elon Musk is trying.

Next time you see Value waiting to happen, think of how it can become possible. Make people’s lives easier. Make a difference in people’s lives.

Creating Value for Yourself

Value, apart from being all around you, is also resident in you. You first have to recognize the Value in you, latent, inherent, or otherwise and figure out your potential. You have to grow this Value and create Value for yourself. You must understand how to create Value for yourself. Doing this will help you differentiate yourself from others.

To do this you must view Value as a resource and look at potential resources you can use. One of these resources is knowledge. Resources can be tangible or intangible.

When you start creating Value for yourself, you will soon realize that you can create only so much Value for yourself. To create greater Value for yourself you have to interact with others and create Value for them. You will learn that this process will create (co-create) greater Value for you through awareness and creating Value for others (for whom you have created Value) will create for you.

A great investment for your success is adding Value for others, who will help you later. By adding Value, gain more experience and learn more and become more effective. You learn to seek Value, to recognize it, add and create more Value.

What helps you create or destroy Value? It is your thoughts, feelings, beliefs, and behaviors? Traits like keeping promises, being nice, praising others, make Value creation a priority for whom and how. Work on a Value creation mindset.

We know that from birth as babies we have our self-worth or Value.⁵ As babies our interaction with and being exposed to people’s comments, attitudes, and expectations start changing our concept of our own Value. Our concept of our own Value makes us believe in ourselves and gives us a sense of our capabilities and what we can do with them. We need to grow this sense of Value. It is a natural phenomenon and helps us develop and contribute in society. Building it up again is therefore natural, essential, and healthy.

Improve your attitude toward yourself and understand how important this is for you. Have healthy self-love, trust yourself, and analyze yourself. This will build your self-image, and tell yourself you matter. Learn to forgive others and forgive yourself. Value yourself, your time, and live in the present. In essence be positive to yourself and others.

Your perception of your own Value, and the attitude toward this perception (whether realistic or unrealistic) helps you create more or less Value. This is also true of self-belief and self-love, your attitude toward yourself, and whether you can realistically analyze yourself, your development, your future, and the Value you can create.

Creating Value for yourself is also dependent on the expectations of others and their perception of you and the Value you have in you. Learning to forgive others and yourself helps you also create your self-esteem and self-worth, and a positive self-image of your own Value. In this process, you will notice what creates self-worth and Value of others, your respect for them, their time, their energy, their psychic needs, and their self-image can all create or destroy Value for you and those around you.⁶

To create Value for yourself, you can also look at yourself as a brand and how you can improve your brand equity; it could be grooming or it could be your interaction with others. And it depends on the perception of others. When you create Value for others your brand equity and Value goes up.

Some people will say think of yourself as a product and service whose Value you wish to increase. Do you need to get coaching, increase skills such as communications, oratory/speaking skills, listening, and knowledge? Eventually, as you Value yourself, you will be able to price yourself, remembering Value is always relative to others (or your competitors). Keep learning and increase your knowledge, the 6A’s (attitude, awareness, ability, agility, ambidextrousness, anticipation), and skills. You will then differentiate yourself and be seen by others as a Value creator and will become successful.

Value Explained

In our definition of Value, Value is relative (to other alternatives, or to the perceiver depending on his context). Value could be latent or potential and has to be perceived.

Why is this of interest to us? Something is valuable for its own sake as opposed to being valuable for the sake of something else. These are issues we often face in life or business.

For our discussion, we can say that Value exists in some form or other, waiting to be noticed and perceived, before it can be worked on.

In the real world, such Value is worked on and further Value is added so that the Value can be readied to be perceived (awareness) and then exchanged.

Values

So what are Values? Your Values represent what is important to you. As mentioned earlier, they are the driving force behind why you get up in the morning, and the choices you make and why you behave the way you do. Examples of Values are integrity, honesty, belonging, and morals. Some people suggest that other activities such as reading, swimming, or socializing are Values; however, these would be symptoms of your Values. For example, if you feel reading is a Value, it is probably more accurate to assume that your actual Value is learning, or relaxing. Think about the actual reason that led you to read? Similar to swimming, is this truly your Value or is it that you Value health, well-being, or success? Perhaps you socialize while swimming and your true Value is friendship. These are the reasons that made you choose to go swimming. Understanding exactly what it is that you Value is the perfect starting point for understanding yourself and understanding your motivators.

In this book, Values are your ethics, integrity, morals and the like. Values is plural, and what you create, Value is singular.

Creating Value for Yourself Means Creating Value for Others

Look at successful people, and people of Value. You will see they are adding Value to others, doing good for others, and increasing the well-being or worth of others. These people sometimes do it unintentionally but the truly successful ones do this consciously. One of the greatest success strategies is creating Value for others. Think of someone who recommends you, or introduces you.

Create Value for others; don’t worry whether it will create Value for you or come back to you.

The reverse is also true; many people are adding Value to you and to your life.

Jonathan Wells⁷ says when you create Value for others, you become more valuable to them. It is like putting a deposit in a bank and getting returns from it. It also enhances your Value creation as you do it consciously. Creating Value for others is the best investment you can make for yourself. Note the following:

People with high self-Value necessarily Value others.

Valuing others increases our own Value.

Ask yourself how you can understand and create Value for others including your clients, make them achieve more and become happier, and help your partners and others in whatever way you can to create Value for them (doing good, improving their well-being, or improving their worth including self-worth).

You can increase your Value to yourself and others through physical and emotional well-being, being good, and having Values.

Value, Values, and Happiness

What is the Value of happiness? Priceless!

It often is difficult to be happy under trying circumstances, but if you can make the best of everything you are on your way to happiness.

Is Value related to happiness? The answer is yes and no, and it depends on the Value you receive and perceive, and whether you feel good about it. More people equate happiness to well-being and therefore to Value. Some equate happiness to pleasure (happiness being of a longer duration). Harry Walker⁸ states that the power (Value?) of happiness is in the difficulty of defining it. Happiness just like Value is a perception and depends on circumstances and context. Happiness is not easy to define (the result is). To many, happiness means feeling good, and if Value as defined increases your good, well-being and contentment then happiness is caused. Wells asks if morals and Values are in conflict with happiness.

Some actions give you Value such as playing with your grandkids, sipping a drink in a relaxed state, meeting special friends.

Doing good and improving the well-being of people should really be the pursuit of politicians and governments, a goal not always met. Creating Value is a way of creating happiness. The U.S. Constitution talks about the Pursuit of Happiness. Does Creating Value build happiness?

Happiness is related to Values or what matters to people. Happiness is a perception and depends on culture, context, and circumstances, and of course the people involved. Is happiness the most important good in every circumstance? In fact, happiness may not be the ultimate good. Chasing happiness does not create happiness.

Is happiness the ultimate need of a person, or does it also depend on the many goals a person may have? Different Value we create could create happiness (peacefulness, money stability, good feelings, family).

Thus Bhutan’s Gross National Happiness is difficult to define and therefore, measure.

Some Values may be in conflict, as seen in the Bhagvad Gita, Arjun is told by Krishna to fight and kill his enemies, whom he valued as his family and teachers. Fighting against the enemy was fighting against evil, and to do so he had to kill people he revered or respected. This is a conflict of Values.

Virtues are innate good qualities or morals within people. To get great Values, virtue is a prerequisite.

Deborah Mills-Scofield⁹ says happiness is not the same as Value. While it is important to find happiness in life, she says, business is all about Value, not emotion. Business must first and foremost create and deliver real Value to customers (and then to other stakeholders, like shareholders). The way Tony Hsieh has run Zappos is a great example of a “happy” culture, which delivers significant Value.

What if that meant creating something truly good, truly valuable, consistently, for someone else? Isn’t that what companies should be doing? If they don’t, we won’t need to worry about happy employees and customers. So, in this 21^st century, let’s focus our energies, time, and resources on providing real and significant Value.

That is why companies are now employing Chief Happiness Officers.

Being happy is a great goal, but can we do this by ignoring the lack of sustenance for poor people, which we might ignore to keep our happiness secure? Do Value spheres have to intersect?¹⁰ Should they be independent? There are ethical Values that may conflict with others on a daily basis, and we are forced to make judgments and prioritize.

Like Value, more happiness is created when you create happiness for others.

Understanding What You Find of Value to You

It becomes important to understand what you Value and what Values you stand for. While searching for these, one finds that most people list Value and Values without differentiating them. One has also to differentiate between Value and a desirable trait and Values. One has to see if those considered Value are motivators and happiness creators. Aristotle felt that one’s well-being is linked to others. This is our view that creating Value for others creates Value for you.

Well-being is also called prudential Value to differentiate from Values of a person. Well-being is eventually what is good for you and goes beyond happiness.

Thus you may think things important to you are wealth, career, recognition, power, learning, determination, fitness, honesty, individuality, fun, friendship, and family. These are as much traits as things that can create Value for you.

Value Dissipated, Discarded, Used

Value Imperative remains germane when Value starts to dissipate or gets reduced or discarded, or indeed is destroyed. People, businesses, and society have to pay heed to this, notice or become aware of such possibilities to avoid Value dissipation or destruction. This is one way of staying ahead of disruption. If your thought process is positive and just not defensive, you can become a potential disruptor.

Remember, Value creation is an unfolding, continuous process, with no end point. Disruption is successful if it creates Value.

Value dissipation is a case of people or systems getting used to a single Value-creating stream, or a major Value-creating system. When the Value-creating stream starts to dry up or the system no longer creates as much Value as it did before, it is natural to be depressed or saddened. However, this is also a chance to reinvent yourself and re-build yourself to gain new or increased Value.

This is an interesting topic because, just like Value waiting to happen, we sometimes can discard Value because of our perception or our inability to see the Value. As an example, creativity’s Value is based on what people perceive as new. If you do not see the newness, you may have no Value for the creativity. A very simple example is that you as an agent are given a brilliant book in an alien language, and you may discard the book and the Value it has or the author has, just because you cannot read that language, instead of sending it on to someone who can.

Value Reemerging

VI is all about Value creation and its destruction and sometimes about resurgence or reemergence of Value. There are so many examples of companies rebuilding themselves and reemerging. There are people who do this.¹¹ Examples will be given later in this chapter.

Often we see that Value dies or reduces by a fair amount. James Michener left $20 million for the Michener Center at the University of Texas, but few of the fellows have read his books and been thrilled by Poland, awed by Hawaii, or shared his joy at finishing his novel in The Novel.

His Value has diminished except to the fellows at the Michener Center who are paid by and enjoy his endowment.

Sometimes Value fades but reemerges just as Winston Churchill did or Indira Gandhi did. The lesson to be learnt is not to give up hope and strive to create Value in the hope of coming back or re-succeeding.

You can see how Value is created or destroyed. Executives have to learn to use this and create Value:

Value Reemerging and VI

The first principle of VI suggests Value creation is necessary for sustained human flourishing. It also states that it goes beyond the classic business/social ecosystem. It can be latent Value or Value waiting to happen, which when perceived could provide the basis for greater Value. The fifth principle suggests that you should leverage your potential, learning, and creativity. The seventh principle suggests that you must ensure your Value creation is greater than the destructive forces.

Measurement of Value

We have learnt that Value is not absolute. It is a relative measure, and so the best measurement of Value is versus alternatives to the beneficiary. While Value is doing good and improving well-being, it is also whether something is worthwhile.

We have been measuring the worth or Value of a product or service using the measure Customer Value Added. Here we measure the market perceptions of Value we add, and the market perceptions of Value added by competitors. We then define a relationship between the two called Customer Value Added.

Customer Value Added

Similarly we can measure the Value added by a company to its employees as perceived by its employees. This is called Employee Value Added.

Employee Value Added

This is a measurement done by a company to elicit the perception of Value added to its employees versus the Value competitors add.

However, if you are an employee looking to change a job, you want to figure out whether the new offer is better or not than your current job:

So if the answer is 1 there is no apparent difference between the present and the new job. If the answer is higher than 1, the proposed job offers more Value to you (Figure 2.3).

The percentages in the figure and numbers are mine, and you should use your own percentages and put your own numbers in the chart.

Figure 2.3 Attribute tree for Value to an employee in a job

You notice from the results we can also get the relative importance (In percentage) of each of the attributes in the attribute tree.

You could make a similar attribute tree for your business. You can get details from my book.¹²

Measuring something for doing good can be done in a similar fashion. India introduced a new GST (Goods and Services Tax). Is it good or not good? Every individual will have a different perception. If we measure a statistically significant number of respondents, we will get a general idea of the good or bad it did (Value created or destroyed). We could also do this for other social causes. We could do this for ourselves, for example when considering entering a college for engineering or for anthropology. Which could be potentially more valuable? (Figure 2.4)

Figure 2.4 Attribute tree for Value created by the goods and services tax in India

We have shown similar types of attribute trees for disruptive occurrences such as driverless car, Value destruction for professional drivers, repair services, insurance, and Value improvement for drivers and for society. Value will change over time and in various countries.

Customer Value

Customer Value Creation

This section will help you to use Customer Value Creation effectively and effortlessly, and to gain professionally and personally by applying the principles of Customer Value Creation. You and your company will achieve long-term success through the enablement and delivery of Customer Value.

The first step in your mastering Customer Value Creation is to understand what Customer means, how Value and Creation are used in the context of Customer Value Creation. All of us should use this common terminology.

Once we all agree and understand the definitions, we can move to the next step. Customer Value is a compound word meaning something that is worth to a Customer. Customer Value is created when benefits improve over costs, and destroyed when costs increase beyond benefits.

Second and very important, the Customer has a choice of the product or service he should buy or use, and therefore Customer Value that one organization creates is compared or relative to the Value the competing organization creates.

Customers tend to buy or use those products that they perceive creates greater Value for them.

Remember, the end result of Customer Value Creation is an improvement in business performance such as loyalty, market share, efficiency, team work, and profits, and executives gain professionally.

Customer Value Creation is fundamental to a business. Once you understand this, you will find yourself ahead of other executives. You will hear them talk about Loyalty, Customer Experience, Customer Response, Customer Journey, Customer Effort, Customer Satisfaction, Customer Success, and so on. Each one of these is a component of Customer Value. Thus a poor Customer Journey can increase the cost (greater effort, energy or time) to a Customer. Or a poor Customer response (ignoring the Customer, not answering on time, not answering at all) can decrease the benefits and Customer Value.

You will notice that Customer Value encompasses all of the types of Customer programs being used today. They are all essential components of Customer Value and impact Customer Value Creation (or destruction).

The role of an executive is to create Value, and not just be a good administrator or efficiency expert. The executive has to go beyond being a functional manager to being a Value Creator, and avoid destroying Value.

Principles of Customer Value Creation

To appreciate Customer Value Creation, you must understand the principles of Customer Value Creation. The principles of Customer Value Creation enunciated by Gautam Mahajan¹³ are as follows:

These principles form the foundation of the Customer Value Creation strategy and implementation, resulting in great Value for you and your company.

Why Is Customer Value Creation Important Now?

Customer Value Creation has always been important. It becomes more important today because of the following reasons:

When a company is in a dilemma on choosing a new product to launch, or which channels of distribution to use, whether digital or physical presence is important, or a business decision, they can solve these by looking at the Customer Value each of the options creates or can create in the future, and select the best one(s). Customer Value makes disruption work.

Can you be a Customer Value Creator today and create Value for yourself?

Philip Kotler echoes the importance of Customer Value in his book on Principles of Marketing (see Figure 4.1). Marketing to him means creating Customer Value.

Integrated Value Reporting

Integrated Value is becoming more important as businesses are now starting to develop a wider role in society for businesses.

This goes beyond philanthropy and corporate social responsibility (CSR) and also takes into account incorporating Values, environment, conscious capitalism, happiness, sustainable business, and the wider concept of shared Value.

We need to report customer scores along with financial scores to our stakeholders and our Boards. Internally we might wish to report employee scores, scores given to us from our suppliers and partners, and sustainability scores. All these add up to integrated reporting of Value.

On balance sheets, put items of importance to shareholders and your Customer Value Added score. Is it going up or down? How many customers do you have? What is your spend per customer and so forth?

Following is a list that you can research or do:

VI and This Chapter

All eight principles apply and should be used. We talk about you and VI, and the nuances of Value and its impact on happiness, Value waiting to happen, disruption, and integrated Value. You can use this understanding of Value to your success.

¹ Olaf Schilgen in a research Gate blog on “Value—Is It Relative or Absolute?” https://www.researchgate.net/post/Value-is_it_relative_or_absolute

² http://bain.com/publications/articles/elements-of-Value-interactive.aspx

³ https://theguardian.com/science/2016/oct/25/bioinspiration-thrilling-newscience-could-transform-medicine

⁴ http://fiercegentleman.com/necessity-impossible/

⁵ https://centerforparentingeducation.org/library-of-articles/indulgence-Values/Values-matter-using-your-Values-to-raise-caring-responsible-resilient-childrenwhat-are-Values/

⁶ http://advancedlifeskills.com/blog/create-success-by-creating-Value/

⁷ Jonathan Wells, 7 Simple Steps. Life, Values, Success, Goals, ebook.

⁸ Walker, H., and I. Kavedžija. 2015. “Values of Happiness.” Journal of Ethnographic Theory 5, no. 3, pp. 1–23.

⁹ https://forbes.com/sites/work-in-progress/2011/05/01/happiness-or-Value/#23550b35237e

¹⁰ Each sphere has an orbit of influence and could intersect with, react with or destroy Value in some other sphere. They can be rationalized also where Value evaporates and remains; it could be the conflicting possibilities in religion and business.

¹¹ https://cnbc.com/2015/12/22/four-iconic-brands-that-reinvented-themselves.html

¹² Mahajan, G. 2018. Creating Customer Value Makes You a Great Executive. Business Expert Press.

¹³ Mahajan, G. 2016. Value Creation. Sage.