In a generative enterprise, value is the red thread that unites purpose, vision, strategy, mission, project work, capability expansion, and other business imperatives.
There are three main kinds of value: economic value, conceptual value, and experienced value.
Economic value means money, which comes in the form of revenue and profit for a business, and in the shape of donations for a charity. But we need to be aware of this:
Prosperity in human societies can’t be properly understood by looking just at monetary measures, such as income or wealth. Prosperity in a society is the accumulation of solutions to human problems. These solutions run from the prosaic (crunchier potato chips) to the profound (cures for deadly diseases).
Source: Redefining capitalism, by Eric Beinhocker and Nick Hanauer, in McKinsey Quarterly, September 2014.
Harvard Business School professor Michael Porter has revised his ideas about the nature of value:
No financial man will ever understand business because financial people think a company makes money. A company makes shoes, and no financial man understands that. They think money is real. Shoes are real. Money is an end result.
Source: Peter Drucker, quoted in Mission Statement Definition: Linking Customer Mission and Social Mission, by Gideon Rosenblatt, The Vital Edge.
Conceptual value is typically seen in value propositions and purpose statements, or scribbled on Post-it Notes during a workshop session. Examples include refreshment, comfort, safety, convenience, and ease of use. Linguists call this kind of a word a nominalisation: the verb ‘to feel comfortable’ has been converted into an abstract noun, ‘comfort’. Conceptual value is an abstraction — the menu, not the meal.
Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a ‘social responsibility’ mind-set in which societal issues are at the periphery, not the core.
The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.
Source: Creating Shared Value, by Michael E. Porter and Mark R. Kramer, in Harvard Business Review, January-February 2011.
Experienced value is not something you can handle, like a dollar bill, nor is it an abstract concept such as refreshment. Imagine this: It’s a hot day. You are thirsty. You buy a can of beer. You remove the ring-pull and take a swig. Whatever happens next in your sensory system is what I’m calling experienced value (if it’s a positive experience, otherwise you’re experiencing anti-value). It’s utterly subjective, and cannot be fully expressed through language.
How value is generated
Value is co-created through the interaction between the value beneficiary (e.g. consumer) and the value generator—something tangible or intangible that produces experienced value when the user interacts with it.
The main types of value generator are:
- Product (e.g. smartphone)
- Service (e.g. banking)
- Facility (e.g. cash dispenser)
- Establishment (e.g. concert hall)
- Event (e.g. concert)
These are not mutually exclusive.
A meta generator 1 is a producer of value generators (products, services etc.).
Example: an enterprise.
A meta generator 2 is a producer of meta generators.
Example: the founders of an enterprise.
If you would like to know more about value co-creation, I recommend Evolving to a New Dominant Logic for Marketing (pdf), a groundbreaking paper written by Stephen Vargo and Robert Lusch, and published in Journal of Marketing, Vol. 68 (January 2004). The Wikipedia entry for Service-dominant logic is also very informative, and includes this useful summary of axioms and foundational premises:
Operant resources refer to skills and knowledge. They are considered invisible and intangible resources that act upon operand resources. Following service-dominant logic, knowledge and specialized skills are the core of a firm’s competitive advantage. (Source: IGI Global.)
Operand resources are tangible assets that are factors of production, such as raw materials or machinery. In a goods-centered logic, the operand resources are considered the primary source of a firm’s competitive advantage. (Source: IGI Global.)
Actors are individual and organizational participants in the value co-creation process. For an academic exposition of actor theory, see The Actor: The Key Determinator in Service Ecosystems, by Bård Tronvoll (pdf; 14pp).
The converse of value is anti-value. Visualize this scenario:
It’s a hot day. You are thirsty. You buy a can of beer. You remove the ring-pull and take a swig. It tastes vile. You are now experiencing what I call anti-value.
Anti-value is more than dissatisfaction. It manifests as an experience of physical pain or emotional upset arising from a poorly designed or malfunctioning value generator (the can of beer, in our example), or from the denial of previously received and possibly taken-for-granted value.
Anti-value often spawns further anti-value. For example, a woman cuts herself when opening a packaged product. She feels physical pain, irritation and regret, and the emotions escalate into anger.
The inadequate packaging has now generated considerable anti-value and evoked a negative brand experience.
Fast forward to the next purchase occasion. The woman chooses a different brand, not because it promises greater value, but because she wants to avoid the anti-value she received from the first brand.
Increasingly, collective anti-value is being returned to the perpetrator in the form of badwill.
Net end-user value can be increased by halting the generation of anti-value.Enterprises wishing to maximise the generation of ecosystem value must seek out and eliminate any generators of significant anti-value such as the packaging described earlier.
In service businesses, anti-value is often generated by a badly designed or malfunctioning value creation system, although the source of the anti-value generation may be wrongly attributed to an individual or “the management”.
What is the relationship between these ideas and the Value Proposition Canvas?The Value Proposition Canvas is a tool created by Alex Osterwalder, the founder of Strategyzer. Here is an explanatory version:
- Gains represent the value the customer wishes to experience.
- Pains represent the anti-value the customer wishes to avoid.
You can download a large-format canvas in pdf form via the Strategyzer website (email provision required): https://strategyzer.com/canvas/value-proposition-canvas
Although I mostly talk about value and anti-value, there are times when I use the snappier gains and pains.
Customer jobs and Jobs-to-be-Done Theory
I prefer Alan Klement’s interpretation of Jobs to be Done to the one touted by Tony Ulwick as a core component of Strategyn’s proprietary Outcome Driven Innovation® offering. In my view, Alan Klement’s approach shows more humanity and gets closer to the truth about why people choose a particular product or service in preference to alternatives.
These are the six basic tenets of Jobs-to-be-Done Theory:
1. People buy products and services to get a ‘job’ done.
2. A job is stable over time, making it an attractive unit of analysis.
3. A job is always a process (to make progress).
4. A job offers a new avenue for understanding ‘needs’.
5. A functional job has other jobs associated with it.
6. Products that win get a job done better and/or more cheaply.
Given these tenets, Jobs-to-be-Done Theory can be explained as follows:
Situations arise in people’s lives where they turn to products and services to help them get a job done. By understanding in detail what that functional job is, and its associated emotional jobs, companies are better informed to create solutions that will help customers get the job done better and/or more cheaply.
Source: What Is Jobs-to-be-Done? by Tony Ulwick, founder of Strategyn.
If you are involved in an innovation, marketing or branding project and intend to identify the jobs to be done by your potential customers or users, I recommend Alan Klement’s excellent article, Know the Two — Very — Different Interpretations of Jobs to be Done. I also recommend his book, When Coffee and Kale Compete: Become great at making products people will buy.
I had known about Jobs to be Done (JTBD) for a few years but Christensen’s “Milkshake” case study never really resonated with me. Neither did Ulwick’s books about his laborious ODI method. When I stumbled across “When Coffee and Kale Compete” back in late 2016, things changed dramatically. The book was a real eye-opener. For the first time, I understood what Jobs theory was about—discovering what progress humans are looking to make in their lives and how they pull in solutions (products and services) to help them get to where they want to be. Alan’s clear and concise writing style makes this comprehensive book easily digestible. From the theory’s origins to the description of its principles, the case studies from the interviews with entrepreneurs and the practical tips to get started, this book will help you progress.
Rene Bastijans, a partner in Revealed.