Value

Description

1. The problematic nature of defining 'value', by George Mobus:

"The word 'value' is a bit problematic in itself. Value is a human subjective attribution that might be informed by some objective basis, such as the amount of skilled labor required, but nevertheless is conceived by what someone thinks is worthwhile. A worker might think more value should be placed on his or her efforts; they are being paid less than they are worth. A producer/owner/seller might see a product or service as being more valued because of its unique features or esthetics. A buyer, on the other hand places value on a product or service with a whole variety of psychological factors playing into the mix. One of the reasons that markets and money exchanges work as well as they do is that they provide a process whereby buyers and sellers can establish an average value via the price and supply/demand mechanisms. If a buyer thinks the seller is charging too much he or she can simply refuse to buy, or better yet, look for a competitor that is selling for less. That mechanism worked really well in days when relative values were transparent (one farmer had a good idea how much effort another farmer put into raising corn vs. his own effort in raising wheat and the quality of each product could be ascertained by looking in the bushel basket). But these days, there is much less transparency in products and services. We say that not all parties have complete information and therefore the markets are less efficient in terms of distributing real intrinsic values across varieties. Two computers could look exactly alike and yet carry different prices. How is the average buyer going to know that the difference is in the care of manufacture, or the quality of parts, etc? They might suspect it; one reason brand names can charge higher prices is that brand recognition carries some implication of higher quality, but that need not be the case." (http://questioneverything.typepad.com/question_everything/2009/10/what-is-value-.html)

2. John Bellamy Foster on 'wealth vs value':

"On the labor theory of value, some commentators fail to comprehend Marx’s crucial distinctions between wealth and value, and between use value and exchange value. Wealth, for Marx, derived from both nature and labor, and was associated with the production of natural-material use values. In contrast, value, or exchange value, under capitalist commodity production—as expressed by the labor theory of value of classical political economy—excludes nature, which is treated as “a free gift…to capital.” Hence, nature (real wealth), as Marx emphasized, was systematically robbed. Here it is important to remember that Marx was a critic of capitalism. The labor theory of value was the key to explaining capitalism’s laws of motion, but the real object was not to understand capitalism but to transcend it—including the commodity-value relations on which it was based." (Great Transition Network mailing list, October 2015)

Typology

By Chris Lawer:

"Firm-Centric Perspectives

Much of the knowledge on customer value is from the firm’s perspective in that it emphasises one of three varieties of firm-created or -derived value:

1. Value-Added This perspective suggests that value is embedded in the firm’s products and services and is independent of the customers’ perceptions of value. As such, value is something that is owned, created and exchanged by the firm and the emphasis is on designing offers that target customers will purchase.

2. Economic Worth of a Customer Here, the firm’s concern is to extract value from (particularly existing) customers and to segment them according to their value potential. Much of popular CRM and customer loyalty thinking focuses on this variety of value

3. Economic Worth of a Seller’s Product / Service Offering to a Customer This view defines a customer’s view of value in primarily monetary terms – where value is equated to price – and that customer’s measure the value attained in terms of their ability to derive a preferable deal from sellers.

Customer-Centric Perspectives

We then have an important customer-centric perspective on value-definition.

1. Value-in-Use, is a concept which defines value as something that is perceived by a customer when interacting with products and services in use situations. Rather than the value being contained in the product, here value refers to a customer’s meaning that is attached to product and service bundles relative to a use context. In other words, a customer’s valuation of a product or service depends on their experience with its use in situations that are important to them. Another way of putting this - value-in-use can be expressed as the job that customers are trying to get done. They "hire" a product or service which they believe will help them get these jobs done most effectively and efficiently." (http://chrislawer.blogs.com/chris_lawer/2007/05/value_value_val.html)

Theories of Value

See the summary by George Mobus at http://questioneverything.typepad.com/question_everything/2009/10/what-is-value-.html

Discussion

Value and Co-Creation strategies

Chris Lawer:

"Now, using these definitions of value, I argue it is possible to identify two broad categories or styles of co-creation, 1) Value-Added within a Firm-Centric perspective and 2) a Customer-Centric Value-In-Use perspective

1) Value-Added Co-Creation within a Firm-Centric Perspective

1. Product “Finishing”, The customer completes the product or service and is the final co-creator of value or actor in the business system or value chain, e.g. IKEA

2. New Product Design and Development (Lead User),

Here a limited number of expert customers are invited “into the firm” to share their knowledge and contribute to the development of new products and services. There is a good description of the Lego Mindstorms lead user project in February 2006’s Wired magazine. Other examples include Harley Davidson HOG events, Saturn Cars, Proctor and Gamble’s Connect & Develop programme and Silicon Graphics.

3. Existing Product Adaptation (Customer Feedback),

Here the company actively solicits expressed customer needs or feedback to improve its products, e.g. Cisco and Microsoft Knowledgebase

4. Mass Customisation,

This is the provision to the customer of a limited set of company-determined choices or options with which the customer can personalise a standard product or service template. Examples include Adidas custom shoes, Dell PC’s and BMW cars (plus most other manufacturers)

5. Open Community Ideation and Product Design and Development.

I differentiate the open-source movement because a) it is more distributed and b) firms cede more control to the community of users and creators. Also, open source tends to bias in digital environments, creating mods to games software for example as well as the well-known examples of Linux, Firefox and Sugar CRM. I also include Innocentive here because of its community basis for creating solutions to R&D problems.

6.

New Service Design, I distinguish new service design from new product design and development (Lead User) (2 above) because service tends to involve more consumers in the innovation process and are also easier to test in markets than products through experimentation, probe and learn approaches. Also, of course, service value is inherently more adaptable than tangible product value, involving more knowledge-rich interaction. Examples include Teliasonera’s testing and piloting of new mobile phone services and Alaris Medical Systems constant dialogue with customers to improve its advocacy offering.

2) Customer-Centric Value-In-Use Co-Creation

7. Real-Time Marketing & Service Adaptation,

Moving more to within markets and value-in-use with higher adaptability, this style of co-creation is characterised by high levels of customer dialogue and interaction, enabled by digital technology. This allows individual customers to change the value presented by the firm in real-time, so for example, Cemex allows its customers to modify the delivery time and quantity of cement to fit with their changing operational requirements, Fedex allows large corporate customers to change package transit times and destinations in real-time. These are enabled via an intelligent knowledge interface between the firm and the individual customer.

8. Personalised Experience Value and Knowledge Co-Creation.

Finally, this is where the firm and the customer interact within an experience environment to realise unique co-created value. The unit of value is not the product or the service but the individual experience and its interaction with a host or experience network partners. Examples here include those such as iPod / iTunes (facilitates a personalised music experience, it is less about the white box and more about the experience gateway it provides), Medtronics pacemakers (less about the pacemaker technology, more about the intelligent care network ), John Deere (less about the heavy agricultural machinery, more about the remote sensing capability and adapt-to-farm conditions value) and Amazon (especially in the US which is experimenting with all kinds of personalised interfaces and content).

Capabilities for 7 and 8 Value-in-Use Co-Creation

Traditional Voice of the Customer approaches to customer needs identification tend to emphasise the value-added concept at the expense of value-in-use in their assumptions about customer needs and value. For example, the House of Quality first defined a set of capabilities and a process for collecting customer needs. Since then, many methods have been developed for translating VoC data into inputs into the value-creation process. In each instance, the firm tries to identify known or latent needs/wants of customers through a variety of mechanisms such as interviews, surveys, observational techniques, and so on. In these approaches, the firm’s capabilities are designed to help it learn about customer needs that exist in the market, beyond the boundaries of the firm. The company does the asking, the listening, the observing, experimenting and learning; customer needs/wants are the object of the study. After the firm learns about customer needs and wants, it then develops and delivers the goods and services that it feels will provide value to customers.

Now however, co-creation demands an alternative process for “co-creating the voice of the customer”, one where the customer and the firm are engaged together in the asking, listening, observing and experimenting – that is, both are engaged in learning. Importantly, the subject of the value-creation process is both the firm’s needs and wants and the customers’ needs and wants. This will be the subject of some later posts." (http://chrislawer.blogs.com/chris_lawer/2007/05/value_value_val.html)

Value in User Owned Theory

The concept of Value is too often equated with or limited to Profit, yet production has many different results including:

• Object or Product or Output occurs by mixing Sources with Labor. For instance, apples are the result of mixing land, SUN, water, apple tree, tools and some work. Software is the result of mixing work - probably through a keyboard onto a computer that requires land and electricity.

• • In some cases the Objects of production are automatically owned by the owner of the Physical Sources of that production - such as in the apples or software discussed above. This is the primary Value that a developer of Free Software receives since he probably did that work to achieve his own Objectives.

• • In other cases the Object may be owned by a worker who rented some of the durable Sources (such as an oven and the kitchen it sits in), while purchasing (owning) only the consumable inputs such as the apples, flour, butter and energy (gas or electricity) to make an apple pie.

• Wages may be paid by the owners of Physical Sources or consumers who hire workers to transform some inputs into outputs as defined by those owners. This is another way a Free Software developer could earn value, but the agreement to pay must be made before the work is completed (or at least before the Object code is delivered), else the Consumer has no incentive to pay.

• Profit is a Value paid by a consumer when he pays a price above the real costs of production, including externalities. Wages are one of those costs. Profit is not needed by society, it is an inverse measure of consumer development - and can be balanced (to solidify an economy) by treating it as an investment for that same consumer into Physical Sources needed for future production as outlined in the GNU General Public Law.

---