Principles of Value Creation

Value is subjective. Working with different practitioners in the value creation space revealed that each person has a concept of value creation that is completely different from the other. How then can one create a principle that unifies value creation in different sectors?

Value can be created through sales, product design, marketing, operations, human resources, culture, experience, services, profit, productivity, performance and so on.

It is more like the proverbial story of the Blind men who had to touch and identify different parts of an elephant. They all describe the elephant based on the part they came in contact with. Each one of them may have been right, but then they needed the big picture to understand that it was an elephant.

Most practitioners in the value creation space focus on creating value for the customer in a particular industry. Creating value for the customer is just one small bit of the value-creation process. All other bits must be in place to produce value for the organization.

Value creation is a system with each part functioning in synergy with other parts to create the right outcome: which is satisfaction and happiness for everyone in the organization. If we focus on one part of the system, the other part may not work as expected which will negatively impact the system.

Value creation happens when we move resources, people, and organizations from a lower level of productivity and usefulness to a higher level of productivity and usefulness.

What is Value Creation? It is a different thing to different people. But can we have a general definition of value creation? Yes, we can categorize value creation. This makes it easy to measure. Here are the categories:

1. Value is capability: When people can do more than they have been doing, you have created value as capability. You enhance their performance and productivity.

2. Value is lifestyle: When we enhance the lives of people and help them live better and more fulfilled and satisfied lives, then value is said to have been created for them.

3. Value is feeling: When people have positive feelings about themselves, what they buy, and where they work, value is said to have been created. Value can be measured in terms of joy and happiness.

4. Value Is Opportunity: When people and organizations can see and capture opportunities that make their future bigger and better, then value is created

5. Value is Confidence: When people and organizations experience increased confidence because they can deliver value and capture opportunities, value is said to be created.

The Principles or Tenets of Value Creation

Is there a methodology we can follow to consistently create value? Yes, there is. We may not agree on what they are but I believe they can certainly bring the results and outcome an organization expects.

It is understood that value should be created for humans. This means all value-creation processes should focus on making life better for people and building a better world. To achieve this, then it’s important organizations abide by the tenets of value creation.

1. Exceptional Why

The why of an organization drives the value creation process. When you define your why, and the purpose organization exists, it will drive all the value-creation activities you engage in. Apple’s why is to enrich lives as such it designs and develops products that enrich lives.

2. Audacious Vision

When you create a compelling vision, you challenge yourself to create value that will help you achieve that vision. A vision defines the kind of future an organization wants to create. Creating value ensures that an organization's future continues to get bigger and better.

3. Empathetic Leadership

An organization that creates value must understand that they are creating value for humans (people) and have to walk a mile in people's shoes to understand what value means to them. People are humans, not resources and the goal of leaders is to create value for all the humans that their organization deals with.

4. Stakeholder Focused

Each stakeholder has a different definition of value. To make sure they are happy, creating value organizations must make sure they create value for those stakeholders. An organization must understand what value means to its stakeholders and endeavor to allocate resources and people to continually create value for them. Stakeholders of an organization include the community, suppliers, customers, employees, and investors and each needs value to be created for them.

5. Transformational Relationship

Value creation is the result of relationships. Organizations and individuals who want to create value will have to first connect, and build rapport and relationships with the people they want to satisfy. Everyone is in a relationship for what it will give them as such it’s better to build a transformational rather than transactional relationship.

6. Entrepreneurial Stewardship

Individuals and organizations are stewards of the environment. If we destroy the environment, we destroy human lives. Organizations that create value must see themselves as stewards of the earth and need to ensure that the value they create doesn't harm the earth. When creating value, organizations must ensure the wastes are biodegradable, introducing the circular economy and making environmental sustainability a policy.. They also use renewable energy to reduce carbon footprint. Entrepreneurial stewards innovate and create value that benefits the environment and humans.

?Get these tenets right in your organization and you will have a system that continually create value and make life better for everyone on earth.

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