Seven Steps to Create Value

from Daniel Tigani

During 20 years of leading and training client focus groups in diverse fields and locations, I have observed that very few people understand clearly what it means to create value.

I. Value is:

The subjective meaning that things have to satisfy human needs or give satisfaction.
The quality something has which makes someone give something of equivalent value in order to possess it.
The quality some things have which makes them worthy of respect or admiration.
The significance or importance that something carries.
The efficiency or ability of something to produce results.
Any one of a variable number of possible decisions.
Size.

II. What does this mean?

That value is that which motivates any transaction.
The client always buys a package, made up of a mixture of tangible and intangible attributes that s/he values, and the business obtains money for its costs which generates benefits that it values.
This package, when examined, is called the Model of Value and it is formed at the same time that the business is designing, buying, manufacturing, inspecting, administrating, selling, etc. The different people involved are those that are going to add or detract value from the deliverable. This is what is known as the Chain or Value, or more in keeping with our times, in which the farming out of non-strategic activities to third parties is the tendency, the Net of Value or Constellation of Value.

III. How does this apply to my activities?

If Value is the perception that the client has of what s/he receives, of whether it will give or produce satisfaction, it is clear that not everything that adds cost adds value. As a result, no client will consciously accept paying for our inefficiency.

Detecting what it is that has value for the client becomes a search for competitive opportunities.

IV. Constructing a Model of Total Value:

A Model of Value is the combination of things and experiences that create in the client a perception of the total value received.

We cannot speak of quality without reference to a model of value, in which the product and its circumstances are virtually inseparable. The challenge is to overcome the gap which exists between what is valued by the business (its personnel, suppliers, vendors, etc.) and what which the client appreciates, adapting our concept of total value to the client's expectations.

It is arrogant to believe that we can exactly satisfy the client's wants without asking. Getting to know the client is the way in which to begin any process that has the goal of satisfying the client, because it is much quicker and cheaper to consult them than to experiment through trial and error.

Silence on the part of the client should not be taken as synonymous with satisfaction, since 96% of unsatisfied clients do not complain. They do, however, express their frustration to eleven people close to them. In contrast, satisfied clients will express their satisfaction to only three people close to them.

Although we ourselves may place value on what we deliver, the client is the one with the final vote and s/he votes with her money.

V. Scale of Value for the Client:

The effect the product creates in the client will be at one of 4 levels.

1. Basic: These are the minimum attributes, without which there is no sense in entering a product into competition. Nevertheless, there are businesses that exist at this level since they enjoy special privileges and have formed a monopoly or oligopoly.
2. Expected: These are the attributes which the client is sure of receiving.
3. Desired: These are the attributes which the client does not necessarily expect, but which are familiar and which he does appreciate.
4. Unexpected: These are the exceptional attributes that have surprise value for the client. Once the client experiences them, they become desired things. It is at this level where excellence begins.

VI. The Push to Create Value:

The expectations of the client evolve continually and oblige us to constantly raise the bar in order to continue surprising the client.

The drive to exceed the value expectations of the client is the motor of continuous improvement.

VII. Basic Action Plan for Creating Value:

Defining our model of value can quickly become a debate between platitudes and cosmic digressions. In order to avoid this pitfall, we can concentrate on 4 steps:

1. Investigate the attributes valued by the client.
2. Determine the individual weight the client gives to each attribute.
3. Compare our position with that of the competitors on each of these attributes.
4. Propose our own plan for exceeding the proposed value of the competition.

Work groups that meet to design models of value should ask themselves the following questions:

The client values which things that I do? (Add value)
Which things that the client does not value can I eliminate? (Lower costs)
What can we do to add value for the client by our activities? (Define objectives)
How are we going to measure the results? (Establish goals and parameters)
Where should we begin? (Prioritise tasks)

Delivering surprising value is the principle of excellence.

If you want further information, or to send comments, write to the author at: ntigani@maxima.com.ar

Translated from La Iniciativa de Comunicación - click here for the Spanish version.