Why Is Value So Elusive?
How do we create value, hold it in our hands, and hand it to our customers? We can’t. Instead, our products and services act as conduits through which value is transferred. We design and provide these solutions, and when effective, our customers experience the expected and necessary value.
The challenge in delivering value lies in the gaps between what we create and what our customers receive, which are too frequently connected only by faith, hope, and trust. We present value in an abstract proposition rather than in a concrete equation. Traditionally, we’ve structured our delivery chains around the production and counting of parts and products, instead of focusing on the elusive concept of value.
Transforming Value Generation
To bridge the gaps between what we create and what our customers truly receive, we must evolve from merely stating a value proposition to firmly establishing a value equation. In this equation, we link the challenges faced by our customers with our products and services, returning a quantifiable benefit. 
This shift is crucial as it moves away from ambiguous value claims that often plague traditional business approaches. We force ourselves and our teams to move beyond superficial claims like “enhanced user experience” or “seamless supply chain.”
This methodological shift compels every stakeholder in the organization to think critically about the actual value being delivered. It demands a deeper understanding of customer challenges that is profound and nuanced. This understanding then informs the development process, ensuring that we design every feature of a product or service with a clear purpose—to mitigate these challenges.
Building the Value Equation
As described in our Building Metrics Program article, we start the development of metrics early in the business generation process. Standardized metrics create consistency and enable the quantifiable demonstration of value across our products, customers, and regions.
Aligning our development process with the value equation—customer challenges + our solutions = quantifiable benefits—yields several crucial outcomes:
- Customer-Centricity: Every activity starts and ends with the customer in focus, ensuring that all our efforts are aligned with their actual needs and challenges.
- Tangible Value Creation: This approach transforms the process of value generation from an abstract concept into a concrete assembly line of benefits.
- Data-Driven Validation: It generates hard data that demonstrates the return on investment for our customers on an ongoing basis to support existing and future negotiations and as proof for prospective customers.
Defining Benefits from Metrics
Once we have successfully built our metrics program and created our metrics accordingly, defining the benefit is straightforward. Essentially, the benefit is derived directly from the metrics by simply adding an indicator—either increased or decreased—to the metric name, depending on whether the value is enhanced by the metric going up or down.
The Methodology of Benefits
Similar to metrics, benefits, to be actionable and impactful, must be defined in a consistent way.
- Benefit Category: This classifies the benefit according to types such as time, cost, quality, or emissions.
- Benefit Indicator: Indicates the direction of change for the benefit, such as increased or decreased.
- Benefit Name: A name created by combining the benefit indicator with the metric name. For example, ‘Increased On-Time Development Precision’ or ‘Decreased Cost Per Unit Average’.
Practical Examples
Additional Tools for Realizing Value
To effectively implement a systematic approach to value realization, following are some additional tools we can use to identify customer needs and transform them into measurable benefits:
- Product or Service Canvas: This tool allows us to visually map out and align our offerings with specific customer needs. It is crucial for identifying gaps and opportunities in our value equations.
- Risk Assessment: Regular risk assessments help us predict and mitigate potential barriers to value delivery, ensuring that our solutions remain viable and effective under various scenarios.
- Value Audit with Customer: Conducting regular audits with customers allows for a feedback loop that continually refines our understanding of customer value perception and our delivery’s effectiveness.
Realizing Increased Value
For organizations looking to shift from theoretical value propositions to practical, measurable benefits, embracing a structured approach to value creation is essential. For those ready to turn ideas into results and truly align your product and service offerings with customer needs, we are here to help guide your approach and ensure that your value proposition becomes a value realization. Transforming value propositions into value equations is both strategic and tactical and a critical evolution in today’s competitive marketplace.
If you this content is useful, check out our articles from our Humdrum Scrum series Part 1, 2, and 3 or insights from our Product Manager vs. Product Owner article. Comment or message to keep the discussion going or contact us to engage one on one. Follow Doug on LinkedIn to connect and engage on business topics.