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