The art of creating value

What is value?

Value is perceived differently per company. Making more money, increasing NPS or increasing market share for example. For some these are values and for some these are means. Take Oxfam who aim to create a world free of poverty. Making money is a means, having fewer people in poverty is value. Also commercial companies can see money as means. Take SpaceX with their mission to make life multiplanetary or Tesla who want to accelerate the world’s transition to sustainable energy. Creating a spacesuit for Mars would be value to SpaceX, because it will bring them 1 step closer to their mission. Technically, if all of Tesla’s competitors would switch to solely building electric cars, it would be value to Tesla, because it would bring them closer towards their mission. 

So creating value is simple, right? For whatever is valuable to us, we create a key performance indicator (KPI). Any distractions are forbidden, we tell everybody to FOCUS on the KPI and if the trend is upwards we must be creating value. 

Who seeks value?

Not just companies seek value, employees do as well. We want to learn, to be challenged, work towards a goal we also believe in and be compensated for something valuable to us at the end of every month. Business partners and even governments seek value from your company. Your business can grow theirs and your business supplies jobs for people who can then fund the government through taxes. In fact, anyone economically involved in a company can bring and wants to retrieve value from a company.  

How do we truly create value?

So let’s say our company is aiming to make more money and decide to cut the salary of the employees and increase the rates for its business partners. Are we creating value? According to our KPI we are. However, it decreased what is valuable to other stakeholders, so I think we should call this ‘moving value’* instead. Now if we decide to put an application live before testing it, are we creating value? This could hurt quality or increase the work after going live. I think we should call this ‘stealing value from the future’*. 

So what is the art of creating value? Creating value is the art of increasing value while preserving what is already valuable to us and all of our employees and stakeholders. If you are a privately owned company with 1 employee selling folded airplanes, then by all means create KPIs for everything that is valuable. However, if your company is (much) more complex than that, be under no illusion that KPIs will give you insight in whether value is being created rather than being stolen or movedIn order to add value, you need to listen to all of your employees and stakeholders, carefullyThis is art. 

*: The terms ‘moving value’ and ‘stealing value from the future’ were mentioned by Jurgen Appelo in his book ‘Managing for happiness’This partially inspired me to write this article and I can definitely recommend his book! 

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