What is value?

What is value? Whose opinion of value is worth listening to?

These are very important questions because the perception and the view point of value will influence how an organisation measures itself and its success. Measures drive behaviour, so if you get the measures wrong, you drive behaviour in the wrong direction and ultimately deliver less or no value.

The only view point on value is that of the customer. The customer is the final user of the product or service. Don’t get confused and think that because the work you do goes to the accounts department next in the process that accounts is your customer! They are not. Only the final customer can define value.

How can you know how your customer defines value? Well, you can ask them. You could do a customer survey. But initially I would suggest a different tack. First I would listen to your demand talking to you. Look at all the requests for action or information from your customers. Categorise that demand into “failure demand” and “value demand”. (This is an idea I learned from the work of John Seddon of Vanguard Consulting). Failure demand is that which is caused by error or inaction on the part of the company. Value demand is a normal request for service from the company. For example, if you were a mobile phone company, “I ordered a phone, but it has not arrived.” would be failure demand, while “Can I upgrade to a new model?” would be value demand. So divide demand in to value and failure and look at the failure demand and you will have a pretty good idea of what customers value. Or at least what they are annoyed enough to contact you about at the moment.

The work now is to remove the failure demand. At this point, this will be the best single way of improving service and cutting cost. Once this is done, you can work on enhancing the creation of value in your processes and making value flow.

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