Understanding & Building Value

Introduction to Value Creation

In order to create value in an organisation, we need to understand what value is? How you improve it? and where can you create value? This short paper;

• Defines what value is?

• Outlines how value is created?

• Guides to where value can be created?

• Elaborates on the relationship between value improvement and;

  *  Capability Building
  
  *  Performance
  
  *  The Business Model
  

Ultimately an organisation is concerned with maximizing value for its key stakeholders (Owners, Customers, Employees, Citizens, Partners etc) in line with its ambitions, aims and objectives. Value creation happens at both a micro and a macro level and there are many techniques that are used to create value and eliminate waste (non-value add), Lean, Six-Sigma, TQM, SPC, JIT, Value Engineering etc. In this paper we concentrate on the key relationship between Value, The Business Model, and Capability Maturity Management.

Definition of Value

Value may be described as the, Worth, Usefulness and Importance of someone, some entity or something as perceived by a recipient, observer or stakeholder group.

Worth implies how well needs and desires are satisfied, both quantitatively and qualitatively. Financial, volume, speed are quantitative examples. Esteem, expectations, brand are qualitative examples.

Usefulness implies the functionality, convenience, practicality, effectiveness or efficacy perceived or experienced.

Importance implies the significance, consequence, relevance and relativity as to why it is meaningful.

Value Improvement in an Organisation

Is where one or more of the Worth, Usefulness and Importance of any person, group, product, material, method, or information is improved for any stakeholder in the organisation in line with its vision, strategy, values and aims.

Value and Capabilities

Capability can be defined as the ability to mobilise resources to achieve a specific outcome. Capability in an organisation means, what is required to enable or contribute to the creation of value, directly or indirectly, to meet the intent of the organization or value stakeholders who receive our goods and services experience.

The Organisation Capability Maturity (OrgCMF™) Reference Model

The Value Pyramid

The Value Pyramid points to the value arenas & value points in the value stream, where value and advantage can be created or improved.

The Business Model

Value Proposition: The promise and experience that compels the customer to buy or use “The Offering” from “The Organisation”

Value Network: The interconnected eco-system resources that create and/or add value to “The Offering” from “The Organisation”

Value Architecture: The organization and management of the internal and external eco-systems resources to create and/or add value to “The Offering” from “The Organisation”

Value Finance: The economic impact, measured in creating value (The cost benefit – net value)

Summary

Building Value can happen at any point in the Value Pyramid, they key to success is creating a culture where all stakeholders seek to identify and implement Value improvements, whether big or small.

Understanding and aligning the Organisations Strategy with its business model is a critical success factor. Building an organisation’s Capabilities and improving Capability Maturity Levels enables Value Creation.

A good place to start with is, completing a an OrgCMF™ 'Triage Assessment' to establish readiness to roll out a Value Improvement Program across the organisation and implementing maturity improvement guidance to move up through the maturity levels.