Value of Value Conversation

Why do we need to have a value conversation? Is it not enough to produce great deliverables and services and let the receiver decide on how useful they are to him/her? Unfortunately, it is not. Often times, customers are convinced of the usefulness of a service they have received but are not able to fully articulate its value to others. For example, consider the case of a CIO of an insurance company who knew that she needed to do something about Big Data given the numerous requests from her business units. She was pretty aware of the high level capabilities of her IT department but unaware of how her data and information was setup for Big Data. So she brings in an outside consultant who not only provides an assessment of her current capabilities but provides a roadmap for a recommended target state for the insurance company. After the engagement, how does the CIO articulate the value of this assessment and the roadmap to the business? What was the consultant able to do that her own staff were not able to do so? From the consultant’s perspective, she would like to stay engaged at the insurance company for obvious reasons. So she needs to show to the business, through the CIO, the good work that she was able to produce for her. How does she begin to demonstrate the value of her work? These are precisely some of the reasons for the need for a structured value conversation.

You don't get paid for the hour. You get paid for the value you bring to the hour. – Jim Rohn

Consultants and Advice Givers Perspective

Management consultants and enterprise architects have concrete deliverables just like their technical consultants (developers, project managers, etc.) However, while a technical deliverable such as the implementation of a new feature or completion of a development milestone can be easily measured for its value to the business, strategic deliverables cannot be directly measured. When a management consultant provides advice to customers in terms of roadmaps and assessments it cannot be easily converted to quantified value by the customer. A value measurement framework that quantifies improvement in productivity, decrease in risk, etc. would be a useful tool in evaluating the deliverables from a strategic engagement.

The value of an idea lies in the using of it. – Thomas Edison

Executives and Advice Receivers Perspective

Executives struggle with value all the time. This is because of the nature of the ambiguous decisions that they have to make. As their decisions are usually at a strategic level, one normally does not see the result immediately. Often, these decisions manifest into success or failure after months and sometimes years of implementation. Therefore, any tool that can measure potential value, i.e., value of potential choices of action, would be a welcome supplement to their decision making process. Measurement of realized value, i.e., when a decision has been implemented, is also useful in vindicating their stance.

Introduction to Valufication

Introduction

Before we begin to discuss this subject, it is important to agree on a working definition of value. Obviously, various definitions of value exist. In fact, value is such a subjective aspect that more often than not, it is in the eye of the beholder. So what then, is the definition of value?

Merriam-Webster dictionary (Definition of Value, 2014) gives the following definition of value.

¹val·ue

noun \ˈval-(ˌ)yü\

: the amount of money that something is worth : the price or cost of something

: something that can be bought for a low or fair price

: usefulness or importance

For the purposes of our discussion, let us agree that value is the worth of “something”. When quantified, it can be measured in dollars. When it is not able to be quantified, value can be measured in terms of the goodwill it generates. Obviously, we cannot measure goodwill in absolute terms. But we can certainly measure it in relative terms based on a benchmark of sorts. The concept of a goodwill index is being developed in this blog. Analogous to the Dow Jones Index, the goodwill index is a relative measure of goodwill that fluctuates up and down over time. By itself, it has no meaning but when you compare two different activities relative to each other, the goodwill index of one over another helps to compare their values.

Then the next ambiguity that we need to resolve is the “something.” In the context of this discussion, it is an activity or service that is provided to the receiver.

Price is what you pay, value is what you get – Warren Buffet

Accordingly, for this discussion, we will define value as:

Quantifiable: The amount of dollars that can be exchanged in return for an activity or service.
Intangible: The amount of goodwill that is generated as a result of an activity. From a consumerization perspective, it is expected that all goodwill will result in something tangible for the value creator. For instance, better customer relationship will result in increased business in the future.

Implicit in the above definition is the fact that both quantifiable and intangible values needs to be both observable.

So then, let us begin the definition of “Valufication”. I define Valufication simply as follows:


“The act or process of measuring value of a good or service”

• What is a cynic? A man who knows the price of everything and the value of nothing. – Oscar Wilde

Welcome to Valufication of Things

This is a site for a healthy discussion of value measurement for consultants and advice givers in any area. As consultants and advice givers, we often dole out valuable strategic information, roadmaps, guidance and briefings. How do we then measure the value of such advice? Many times, strategy is not tangible but nevertheless valuable. This blog is devoted to valuating those things that are hard to quantify. Oh, by the way, all posts and content on this site/blog is subject to copyright protection and cannot be reproduced without my explicit written permission.