I’ve been following a number of online discussions and posts on this topic. There are many opinions about value and (strangely) I think most of them are right, but perhaps not always for the right reasons. Value is a perceptual measure and is complex since there are temporal aspects and a multitude of functional, emotional, and (sometimes) spiritual elements which come into play for a given scenario (for each individual). The problem organizations have with measuring value is that IT IS HARD ! So, they tend to look for “trends” or common patterns amongst sets of demographics (the bigger the demographic slice, the better) since they are looking to scale their value creation & value delivery capabilities. The problem we’re seeing with shorter cycle times and increasingly diffuse value perceptions is that the industrial model (used to scale value creation & delivery) is becoming increasingly irrelevant. Hence the increase in marketing spend and “innovation” to find the next “big thing”.
So, this sets up an interesting challenge for organizations who are pursuing inorganic growth (via M&A). How do they leverage their investments in infrastructure and operations to scale their existing capabilities (for value creation & delivery) along with those of their acquisitions / mergers ? The approach of homogeneity (so popular in the last 20 – 30 years) is no longer sustainable and often leads to discontinuity in the market for customers of the original companies (now owned by the parent). The promise of “better” or “cheaper” is no longer a useful justification since customers are focusing on their individual perspectives of value when making choices. IF the parent company is not able to accurately measure the value points for the customer BEFORE purchasing another company, then they will have a difficult time assessing the opportunities to scale their new investment while preserving the value points which earned customer loyalty for the purchased company. This is the game changer for any M&A investments going forward.
So, it begs the question: How do we measure value so we can preserve it and ensure we optimize the capabilities in the organization to delivery it to the right person at the right time in the right amount for the right price ? Let’s go back to the earlier part of this post where I mentioned the dimensional elements of value (time, functional, emotional, and spiritual). These form a reference model for measuring value for any market (regardless of size) and for any scenario (when a service or product needs to be consumed). The consumption of value is typically at the time a given job is being performed. If you reference the work from Clayton Christensen (Harvard Prof.) on the Job to Get Done, then you be able to build a consistent model for measuring value within the current domains for your organization (based on the organization’s current business model). This is the genesis for building or optimizing the organization’s abilities for measuring value from an experiential perspective to guide value creation and value delivery. The capability mapping exercises them come into play once we can measure value from the customer’s perspective (experience in terms of desired outcomes applied to a given job the customer is trying to get done). From there on out, we can apply the traditional Requirements Engineering (yes, that is intentional since requirements can be captured, warehoused, analyzed, and reused), Design & Build, Test and Deliver per conventional best practices for PLM and SCM using approved standards & methods for lifecycle delivery.
Once the product or service is delivered, then the cycle for measurement of value begins again (not using conventional surveys, but) using a “jobs-driven” paradigm for measuring value gaps with the products and/or services delivered to the customers. The whole process of measuring value needs to be extended across the value chains (which includes one or more supply chains) within a given domain AND needs to be internalized within the organization to ensure the internal services (provided by functional areas in the organization) are also aligned on value. This is how organizations will differentiate themselves in the future since the ability to duplicate products & services is available to any competitive force in the market. The IP associated with a given product is becoming increasingly difficult to defend since variations on ideas are easily adopted w/o violating patents. In addition, many companies focused on protecting the IP in their products instead of the IP around measuring, warehousing, and mining for value, which is the real engine used to power innovation.