Value has a lot in common with the weather. Everybody talks about it, but nobody does anything about it. Or so it seems.
Ideally, service managers should be the exception, since the very first of the Seven ITIL 4 Guiding principles is “Focus on Value”, and for good reason. It all comes down to value. Primarily value to the customer, but also value to employees and to the business itself and, ultimately, each and every stakeholder.
When stopping to consider the other 6 ITIL 4 guiding principles…
- Start where you are
- Progress iteratively with feedback
- Collaborate and promote visibility
- Think and work holistically
- Keep it simple and practical
- Optimize and automate
… it might be argued that they support the first one: Focus on Value.
- So, let’s focus on value. But what is “value”?
The word “value” has many definitions.
A dictionary definition is “the regard that something is held to deserve; the importance, worth, or usefulness of something”.
ITIL 4 defines value as “the perceived benefits, usefulness and importance of something”.
While both good definitions, it’s important to recognize that value is more than perception. To you and me, value is both tangible and intangible. Whatever the product or service might be, it musty do something for us. It has to be worth it.
And the first lesson to understanding that is to recognize that value is not “you” focused.
Value is “other” focused.
These “others” are the recipients of what your produce, your “output”. Your customers, your coworkers and your employees and, on the personal side, your family, your friends, your spouse or partner.
You’re likely familiar with term “WIIFM”, i.e., “What’s In It For Me”.
But VALUE is about “WIIFO”, i.e., “What’s In It For OTHERS?” Value begins when we start thinking in terms of “WIIFO”.
When we provide a product or service to someone else, they are the ones to determine if it has value to them or not. When we receive a product or service from someone else, we are the one who determines its value.
Getting down to a most basic understanding of value, it is ultimately about something being “worth it”.
Is the product or service worth the money? Is a new software worth what it cost as well as the time and effort it takes to install, learn and then manage and maintain it? Is using that online service worth the effort? Or is dealing with a particular person or company worth the “hassle” required?
Value requires that we believe “it’s worth it to me”.
If you’ve ever returned a product that even though it was reasonably priced reasonably, took such an inordinate amount of time and effort or “hassle” just to get it to work properly where you got to the point that you threw up your hands and said, “That’s it! I GIVE UP!”?
It no longer provided the “VALUE” you expected. It just was no longer “worth it”.
On the other hand, have you ever bought something – say, for example, an Amazon Prime Day Deal – that you really didn’t need, but you just couldn’t pass it up because “it was such a GREAT DEAL!”? It was worth it because, well you can always keep it to give as a gift. To someone. Someday. Maybe.
It is your customer – again, any recipient of what you provide – who decides exactly what is valuable. They are the final judge of whether it is “worth it” to them… or not.
In his book, “Originals”, Adam Grant, tells the story of the “Segway”. Many well-known business geniuses were convinced that the Segway was a revolution in transportation. “The biggest breakthrough since the invention of the wheel!” But it turned out to be quite a disappointment. To the vast majority, the response was a shrug of the shoulders. “So, what?”
Grant states emphatically that “Products don’t define value. Customers do.”
Value, therefore, is a two-way street: someone provides value and someone receives value and gives something of value in return. WIIFO comes first. WIIFO follows. ITIL refers this as “Value Co-creation”.
If there isn’t a mutual exchange of value, it’s servitude, not service.
Value is in the eye of the beholder
So, an important thing to realize about value is that value, like beauty, “is in the eye of the beholder”.
From the customer perspective, there are three elements to understand.
- The PURPOSE the customer has in mind, something they want to do or accomplish or an outcome they want.
- The PREFERENCE the customer has how they want it done.
- Lastly, the PERCEPTION the customer has of the quality and how well their purpose is likely achieved by a specific product or service.
What do we want? Value! When do we want it? Now!
Value is Indeed “in the eye of the beholder”, so it makes sense that we need to have a good understanding of what is of VALUE to our customers.
Once we truly understand that concept, it prompts us to rethink, modify or adjust our product or service. It also helps us better articulate the value of our output in how it meets the wants or needs of our customers.
The products or services we deliver can be quantified and be broken down into three constituent parts:
- What does it DO? That is, the product or service features and functionality?
– For example, there are several GPS apps available for your mobile phone. The Waze GPS app is an example. It helps us get where we want to go by the fastest or shortest path by showing a map, showing where we are on the map and, if desired, verbally providing step by step directions to get us where we want to go.
- HOW WELL does it do it? Is it there when I need it? Does it perform the way I want it to? Are there any privacy or security considerations to meet?
– Again, using the Waze app as an example, does it work when needed (and not “Searching for satellite”)? How quickly does it do it? (Have you ever had a GPS app say, for example, “Turn Left” AFTER you’ve already passed your intersection?). Is it possible for someone hack into my GPS to learn everywhere I’ve been?
- How much does the product or service COST? How much money and/or time and/or effort (“hassle”) do I need to outlay to obtain the features, functionality, performance, etc.?
– There is no cost to easily download the Waze app to a smart phone but maybe the app receives and delivers real-time road information related to a given route so it might cost you in terms of data. The free Waze app pops advertisements up. Are you willing to put up with that?
Keeping these three points in mind, if a product or service 1) does what someone wants it to do AND 2) does it in the way he or she wants it done, AND 3) is at a price the customer is willing to pay, it has value to that person.
The Waze GPS app has value to us when it 1) does what I want it to do, i.e., provide reliable directions, 2) in the way I expect it to (is there when I need it, performs quickly and well, and addresses any security and recoverability concerns) and 3) other than the information my usage provides to Waze and possible data usage, the price is right!
So, when I use the Waze GPS app, it accomplishes my PURPOSE. i.e., gives me reliable directions AND meets my PREFERENCES in how it’s done, i.e., it’s responsive, reliable, portable, secure AND is reasonably priced. My PERCEPTION is that it is one of GPS apps available.
What the customer wants to do is THEIR purpose.
How they want it to be done how they personally prefer it.
But the PERCEPTION can be influenced because VALUE can be both tangible and intangible, largely based on customer perception. As Tom Peters has said in his books, “Perception is reality”.
Perception is the only one of the three pieces which over which we can exert a good degree of influence.
How is value created?
When we go to buy a product or service, we may not consciously think about what we want it to do and how we want it to do it, but these are important. According to businessdictionary.com, what a product or service does and how well it does that are known as “Utility” and “Warranty”, that is: Utility: The features and functionality and fitness for the intended purpose.
Warranty: How the product or service performs, it being fit for intended use.
The value to the customer is represented by Utility plus Warranty, then largely influenced by the cost money and time – and hassle – it takes to acquire and use).
Products and services don’t appear out of nowhere and from nothing. It takes certain assets to produce them, and there are two categories of these assets:
- Resources: What do you have? Resources include things like, well, money (some type of funding). Also included are raw materials, software, hardware, cars, trucks, infrastructure, buildings, assembly lines, computers, data, information, components, pieces and parts… in short: stuff. You need stuff to do things to and with.
- Capability: What can you do? The level of competency you and the people who work with and for you actually HAVE. Specialized skills, like the ability to manage, lead, program, communicate, manage projects, build things, sell things, and have an effective organization structure. And, “know how”, i.e., have knowledge. You want the ability to consistently and effectively execute certain processes. In short, you must be able to do things.
So, your value isn’t determined by what you have. And your value isn’t determined by what you do. Your value is determined by what you DO with what you HAVE.
Simply speaking, you use your “know how” to convert “stuff” that you have into products and/or services that your customers can use and gain value from.
Customers ALSO have resources and capabilities which they, in turn, use to produce services and/or products. And, just like you, they want to be able to do things with their “stuff” too so they can, in turn, provide value to THEIR customers.
Your “end product” quite often becomes their “raw material”.
Further, the products or services you deliver which do certain things (utility) in a certain way (warranty) to make positive impact on your customers’ resources or capabilities (or both).
Your product or service may help your customers do things they could never do before – or perhaps allow them to do something they might have been able to do before but now they can do it better or faster, resulting in a positive impact on your customers’ capabilities.
Helping them do something they could do before but at a lower cost has a positive impact on your customers’ resources.
Because value is in the form of products and/or services which come from come from available resources and capabilities, an important part of creating – and ultimately maximizing – your value is clearly understanding exactly what your capabilities are, and what the resources you have available to you.
Capabilities “orchestrate” available resources to deliver a product or service with defined levels of utility and warranty. It fulfills a want or need of a customer – and is “worth it” – it has value, enough to be paid for.
Understanding what your customers are looking for in terms of outcomes is central to maximizing your value. Do we have the resources and capabilities to deliver it? More importantly, how do we obtain the necessary resources and capabilities?
In answering those questions, it’s important to look beyond the obvious. Often tremendous value can be discovered in the simplest things.
Like a bread wrapper.
Roger Wittenberg spent a good portion of his career taking cast-offs and turning them into something of value. As a young man, he had a part-time job delivering fresh bread to grocery stores. As he was rolling fresh bread in, he often noticed someone else rolling stale bread out. He learned that the stores he delivered to were paying others to haul away the stale bread which simply ended up in a landfill.
So, Roger offered to haul away the stale bread for less than the stores were currently paying, using the reasoning that he would already there delivering the fresh bread.
He learned he could sell the stale bread to companies which made poultry feed and companies which made bread-crumbs and croutons.
Now, however, he was faced with a new question: “What to do with all those plastic bread wrappers”?
Having a background in organic chemistry, Wittenberg began experimenting, combining the bags with other materials. He developed a way to combine shredded plastic bags and sawdust to create something he called Rivenite, which had the appearance of wood, but had much longer durability.
He used his Rivenite to make benches and other furniture and it wasn’t long before it found its way onto decks and walkways.
Today TREX, the company Roger Wittenberg founded, turns well over a billion plastic bags and plastic wrap and sawdust made from over 200 million pounds of wood scraps procured from furniture manufacturers into their signature product. The Winchester, Virginia-based company now does over $160 million in annual sales.
When you recycle those plastic bags you get from your grocery store into curbside bin, chances are they they’ll find their way to TREX and end up as part of someone’s deck!
There are countless examples where individuals and organizations saw potential value in something which others overlooked.
When you focus on value, you’ll start seeing it in places you may never have expected!
