5% of all activity is value-adding. So, what about the other 95%? Waste. Most of the activity that occurs in a business only costs the business resources and does not increase the value provided to customers. Which 95% of your activity is wasteful? Let’s find out.
At a glance
Waste: The activities that are crippling your business
Value exchange: How your business turns inputs to product
This week’s podcast: What is the market asking from your business?
Let’s dive in.
What is value? Most people don’t know how they are impacting their company. This is a huge problem. The goal of an employee is to help the company deliver value to the end customer. Value has no clear definition but can be loosely defined as:
Value = benefits – costs
What the customers pay for
Benefits are subjective but costs are not As a business, understanding your end customer is essential in understanding the value that you are providing. However, this is easier said than done. Each product or service that your business provides comes with associated benefits and costs.
Benefits- vary from person to person based on relative circumstances, unique needs
Costs- objective measures that are tied to an inherent quantity
The subjectiveness of benefits and the objectiveness of costs results in perceived value varying per customer. But where do you fall into the value equation? If your activity only adds cost to your business, it is likely far from the value equation. Think about this when you are working on projects in your business. Why are you doing this? Who are you doing this for? Don’t work in isolation or for the approval of others Employees in a business often fall into the trap of working on a project in isolation. This can happen when an employee is very passionate about a project for their own personal reasons or in pursuit of pleasing an executive. This is incredibly dangerous. When the business’s customer no longer becomes the focus of business activity, value is certainly not being created.
Truvle Challenge Actionable ways for you to put Truvle concepts into practice. Ask yourself: Is this something that the customer would be willing to pay for? Does this activity affect the product your service that we provide to the customer? learn more about this on this week's Truvle Podcast
Think about the bigger picture... but mainly the customer At the end of the day, your company exists solely to serve your intended customers. When deciding what is value and what is waste, understanding how your company goes from a collection of inputs to the product or service that the customer pays for is key. This journey from inputs to product is the value chain. The value chain – the road to a happy customer The value chain is the series of changes that need to occur to turn an input (e.g. raw materials) into the product that the customer buys. In most cases, the customer is paying for the total value of the value-added along the value chain. Example: When buying a diamond ring, the customer is paying for the mining, cutting, and assembly of the ring. The customer could have paid for the raw materials and assembled the rings themselves. Instead, the business handles these processes for the customer. Everything is connected to value All activities in a business should serve to either 1) create value for the customer or 2) reduce costs for the business without reducing value for the customer. Reducing costs for the business can come in the form of making existing processes more efficient or creating processes that help the business avoid wasteful activities.
Truvle Challenge Actionable ways for you to put Truvle concepts into practice. Take time to take a step back and ask: how is the customer impacted by the work that I am doing? If they are not, there is a good chance that you are creating waste. learn more about this on this week's Truvle Podcast
THE EXIT TICKET the bottom line
Understanding the value of business’s products and services comes down to understanding the costs and benefits.
The customer must always be top of mind. How are your business activities impacting the value that the customer is receiving?
All activity boils down to either value creation or waste creation. What are you doing?
Episode 8 What Is The Market Asking From Your Business? What is ‘Business Value’? It's super critical that you understand how to discern it… If you can’t, there’s a good chance you’re just meandering with your activity… which puts you at risk. The most successful team members understand how they relate to this definition because they ask the right questions. In this episode, Jon and Sam define business value. And they reveal the questions you need to ask to determine if you are currently producing it. A fruitful listen only for those that care if they’re currently adding value to their company, project, or customer. Take us with you on your morning commute or stroll to your home office: