Value

I’ve been working with a client over the past couple of weeks helping them to develop and present a business case for an online application. During this time, I’ve had cause to think about exactly what “value” means.

According to Wikipedia, the meaning of value is:

1. often expressed as the equation: Value = Benefits/Price

2. Describe how much value a person places on various ideas, objects, or beliefs.

These values can be grouped into four categories:

* Ethics (good, bad, moral, right, wrong)
* Aesthetics (beautiful, ugly, unbalanced, pleasing)
* Doctrine (political, ideological, religious or social beliefs)
* Inborn (inborn values such as reproduction and survival)

I’ve worked in a number of roles during my career, and they all seem to have a common thread — identifying value (or proving it). In Business Development and consulting you are developing value propositions, as a Product Manager you’re developing business cases for new product functionality and proving the value of your product to the market. As a strategist you are looking at how a company delivers value — to its shareholders and to customers. So are the tools we use to do this the correct ones?

Conventional wisdom is that Business Cases are crucial to organisations to predict the results of business decisions. This is because a Business Case helps to predict the likely financial results and other business consequences of an action. A good business case uses evidence and reasoning to reach a conclusion and involves financial techniques that are well know and long establised - NPV, IRR etc.

However, all is not as simple as it sounds. Cost-Benefit Analysis itself is not easy. Classifying what costs to include and where the benefit figures come from in the first place are difficult enough to resolve alone. And how do you account for the business impacts that cannot be weighed in monetary terms? Things such as the customer relationship, customer service, brand value and market perception? These issues are beyond the scope of traditional financial practice.

For some time, I have thought that was needed is an approach that works with the whole picture — seeing value not only as profits and capital as the measures of success. Then recently I came across the concept of Value Network Analysis. Whilst I’m nowhere near an authority on the subject, it appears to resolve my particular dilemma in an eloquent way. The methodology’s handling of the intangible benefits is an extremely perceptive take on what adds value to a company. The Author has written a paper here explaining it much better than I can hope to!

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