E87: Deliver Value Part-1 – Definition of Value (Dov)
Hello and welcome to the KnolShare with Dr. Dave Podcast. I am Dr. Dave Cornelius your host. For those who have been listening and receiving value from the podcast, I thank you for the support. If you are new, welcome and I
The Deliver Value series is a set of topics that will be included in my upcoming book called Deliver Value: Happing contributing people, satisfied customers, and thriving business. As an author our creative juices are not as fluid, and we hit the proverbial writer’s wall. Since the COVID-19 pandemic, I have been struggling to finish this book, so I decided to use a lean-agile approach. Each month a topic from the book will be released as one of my podcast episodes to create the Deliver Value series.
Let's begin with the Definition of Value (DoV)
The Definition of Value (DoV)
If you ask several people what the definition of value is, you will likely receive varying responses. Let's begin with the dictionary and see what is written about the definition of value in the Merriam-Webster dictionary. This dictionary was established in 1828. Value is identified as a noun, verb, and adjective. The following are the three (3) definitions as a noun that I selected:
- The monetary worth of something, like market price
- A fair return or equivalent in goods, services, or money for something exchanged
- Relative worth, utility, or importance
I spoke to four people who may have an influential opinion in business and the agile community.
Marty Nelson, Alchemy Code Lab founder:
Value has a positive exchange, positive emotion, and experience. Value is generative - money, friends, and social connections, working ecosystems. Value is something that satisfies true wants.
Diana Larsen, author of Agile Retrospective and co-found of Agile Fluency Model:
I think there are different kinds of value. It's too bad we only have one word to talk about several definitions.
One context is value to the customer. Businesses are sensitive to their customers' needs. They want to give the customer what they want so that customers will pay for services and products. So, there's the value around the value stream going to the customer. Are we getting closer and closer as time goes by to build what the customer wants and will accept and pay for? Product management helps the organization focus on the items with the highest priority over others, which gives a sense of, "this is more valuable than that, at least at this moment in time."
To better understand priority, we can add methods like the cost of delay, and it begins to get us closer to understanding value as well.
Then there's also business value, which is the investments enabling the business to thrive, be resilient, and sustain over time. Value, I think in the business sense, is very much tied to strategic direction. Is this strategic position providing us value because it's moving us more toward our strategic goals, like targets in the Improvement Kata? Is this moving us in the direction that we need to go to give greater value to the business? In the Agile Fluency model community, we tend to talk about value as business benefits. The value is the benefits that the business wants to gain from supporting and investing in their teams to help achieve the maximum value from the products in the market.
Dave West, CEO, Scrum.org:
Value is a subjective measure. Therefore, it is not how I define it that matters, but ultimately the person and organization that I wish to bring value to that are relevant.
For example, it would be easy to describe the outcome of a sale (happy customer, rich seller, etc.), but ultimately you must ask why is the person buying that thing – what is the value they want to receive? Also, what value does the seller achieve – why are they selling this thing rather than doing something else? It is a complex question – so ultimately, I say the value is something defined by the individual that describes the outcome of the event.
Howard Sublett, CEO, Scrum Alliance:
In my mind, value is a relationship between the amount someone pays and what they perceive that they get in exchange or the amount of effort that's expended for the perceived return. It can also be the amount of joy you perceive in return.
For example, if I were to drive across the country to visit the Grand Canyon in Arizona from New York City — perhaps one of the things on some people's bucket lists. If I invest a lot of time, money, and effort to get there and when I arrive, the weather is foggy and rainy. I can't see the views or experience the canyon in the way I'd envisioned. Then I will perceive the experience as a low-value even though it's generally considered a high-value thing to do.
Alternatively, a low-effort, high-value experience for me is sitting on the back patio and having coffee with my bride. We don't get to do it often with me traveling so much lately, but when we do, it requires minimal effort and returns an incredible amount of value to me in my personal development. So, value is the relationship between what you invest or pay and the amount of joy you perceive that you received in return.
Definition of Value (DoV)
Value is the experience of receiving something useful that is beneficial to us. Value is also giving something of merit to others that is good or helpful. The recipients of value are customers, people at work, in our community, and family. We want to receive value when we engage in a transaction with a company or interact with people. Value has a different meaning to each person or group, or company. This is because we have different experiences and expectations based on background and culture. We all desire to receive value.
My definition of value is outcomes that are measurable, realizable, and shareable.
Outcome Values Are Measurable
Outcomes are the payoff or benefits received from a specific interaction or transaction. The measurable outcomes can be quantifiable or qualifiable, demonstrating that the benefits are validated learning and not a hypothesis. Objectives Key Results (OKR) is one method to measure the outcomes. Google, rock star Bono, and The Gates Foundation used the OKR method to identify what was the most important for the next three, six, or twelve months. The OKR structure is broken into two parts that include 1) an objective (why is this important) and 2) key results (benchmark and monitor how to get to the objectives). An OKR example follows:
Objective: COVID-19 infection reaches herd immunity level globally
Key Results 1: 85% of the world's population vaccinated by Q1 2022
Key Results 2: Misinformation reduced to affect only 1% of people in Facebook by Q1 2022
Key Results 3: 65% of the global population are ambassadors for healthy living by Q2 2022
Outcome Values Are Realizable
The second value attribute is realizable, which represents the actualization of a desired or even an unknown outcome. In 1943, Abraham Maslow created the paper "A Theory of Human Motivation." The paper described five levels of human needs.
If we think of five steps in a staircase:
- the first step is physiological (food, water, warmth, and rest)
- the second step is safety (security)
- the third step is belongingness and love (intimate relationships and friends)
- the fourth step is esteem (prestige and feelings of accomplishments
- the fifth step is self-actualization (achieving your full potential, including creativity)
The realization of the measurable outcome is the fifth step in the staircase of actualization. Not driven only by one's capability but fueled by collaboration with other people.
Outcome Values Are Sharable
People are seeking to obtain value in many areas of life. It is the reason that we spend a tremendous amount of time on social media sharing lived experiences or desires. We are often on a quest to find value through our experiences. The concept of value as an experience or outcome to be shared provides a way for others to validate the perception of value.
As a professional coach, I am an aspiring creator of value, and my mantra is "helping people achieve awesomeness." This is a tall order to achieve but a worthy journey in all aspects of life. Helping people achieve their level of awesomeness is a partnership that I engage in with people that I coach.
However, the ultimate ownership resides with the individual(s) working toward a meaning of awesomeness. When we say someone is awesome, we are describing the meaning of value at the highest level. The words that come to mind are awe-inspiring, magnificent, amazing, impressive, and wonderful. These words are synonyms for the word awesome. Please be aware that "awesomeness" is not a real word in the dictionary.
The "pursuit of happiness" was written in the 1776 United States Declaration of Independence. The "pursuit of happiness" is an American dream, but not exclusively. I want to assert that happiness is a state of satisfaction. When people achieve their level of awesomeness, it is one state of satisfaction. As we deliver value, the state of satisfaction is being given and received.
The next lens is the value from a business perspective. Members of most business organizations often pursue maximizing value through effectiveness and efficiencies. Optimizing flow is an ongoing effort and part of continual learning. We check to verify the satisfaction with an optimized flow state and decide to acknowledge that it is good enough or identify if more changes are needed.
Identifying the need for change is not enough because an associated action is required to ensure that we remain in an optimized flow state. Deming's (1950) continuous improvement model of 1) Plan 2) Do, 3) Check, and 4) Act or PDCA is an optimizing flow. The Check state in the PDCA model relied on measuring the results and sharing that information with the appropriate stakeholders. Stakeholders are people that may have an interest in a specific result. The Act in the PDCA is based on a decision to improve the current state or situation. To act or not to act depends on the results from the "Check" metrics.
We should not make changes unless that data informs us of the action to take. Otherwise, we are reacting to gut feelings. The world of agility adopted the PDCA model and described the behavior as 1) Plan, 2) Do, 3) Inspect, and 4) Adapt or PDIA. The core of lean thinking is optimizing flow to minimize waste to achieve the greatest value. I want to focus on flow to continually move value from one person or organization to another with limited friction. Some would like to think that interactions can be frictionless, but that is an ideal state of being. Friction exists in everything we do, but we can minimize the amount of friction to make it appear frictionless.
I invite you to pause for a moment during your next visit to a coffee shop and ask the question, what value is provided to the customers and employees?
The coffee shop provides a customer experience that makes people feel accepted during in-store or online buying experiences for a coffee drink and a light snack. The cozy community feel can help people connect and improve the exchange of value between barista and the person waiting for their drink to be on their way to work or school. The Internet cafe family-style and co-working collaboration desk configuration make it possible for students and business professionals to connect for a conversation or do homework.
The people working at the coffee shop tend to have a positive attitude toward customers, and people buy from people they trust. The coffee shop employee receives many benefits that help them finish college or establish an alternative career. The coffee shop also promotes social impact and change in communities to feed the homeless through unsold foods.
My Experience with Delivering Customer Value
One of my claims to fame is that I delivered over $1 billion in customer value over my career - through the software platform that I led in my role as a senior manager of product development.
The calculated value was based on the number of transactions and dollar value pushed through the software platform I was responsible for developing and managing. Around 2004, the financial markets were thriving, especially the housing industry. People and companies were making money hand over fists, and accelerated innovations were needed to enable faster transaction throughput. People do not scale. The only way to achieve sustainable faster throughput is by leveraging advanced technology platforms. Rarely do you get to grow the value of a technology platform in a company where the core business is not delivering technology as a value proposition.
I inherited a technology platform that did not scale and was brittle. The systems were responsible for collecting credit ratings, home appraisals, and title information for home buyers, brokers, and other financial organizations. It was estimated that $80 billion in transactions per month was being processed across the financial organization. The company revenue was four (4) basis points or 0.04% on the $80 billion total transactions. That is approximately $320 million per month in revenue opportunities. A delay in processing those transactions affected many people, including customers, salespeople waiting for commissions, and the organization's revenue. The delays created an immense number of tensions between the technology group and the business operations group.
At month-end closing, all hands were on deck to watch the system 24-hours for seven days. We did not get much sleep, and the wonderful Blackberry mobile device that we carried would sound off at 2:00 AM or all hours in the morning, alerting us that the system was broken. It was even worse during the peak hours of the day. I asked my boss one day how he was doing, and he said that he felt like he was being abused in jail.
That was a powerful statement, and I tried to empathize with my boss's experiences daily. The VP of operations would publicly berate my boss and make him feel inadequate and inept at best. One day I walked into the VP of operations office and asked what the opportunity cost to the organization when the system's performance was slow or unavailable. He looked at me with a surprised facial gesture. Still, I forged forward to let him know as a product manager. It is important to understand the value of my assigned products to internal and external customers. During peak week, he and I spent several days collecting information about transactions stuck in the pipeline to understand the ripple effect financially on internal and external stakeholders. It was important to know how much money was not being processed. Finance departments frequently leverage the "float" to make money for their companies.
For example, if a company could process $100 million and collect a day's worth of interest, that can be a significant annual revenue opportunity. This was a worthy story, and stakeholders would appreciate the value IT-enabled through the solution platform. The knowledge and understanding of the impact of poor-performing technology platforms also resonated with the software development teams, and they began to look for solutions that could help stabilize the brittle systems.
Our team collaborated to fix the performance issues and provided increments of value to the internal and external customers within three months. This was a great step toward reducing uncertainty and enabling the organization to realize value without delays. The cost of delay is an important concept for business and technology people to understand. Having the ability to realize the value and use it immediately was key. My boss and VP of operations began to work better because of the improved system stability. Value was realized in respect and collaboration between the two leaders. My boss did not have to be on the defensive, and VP of operations reduced his antagonistic behaviors about the system performance
In an article written in the Harvard Business Review (HBR) by Eric Almquist, John Senior, and Nicholas Bloch, the authors defined four value elements: functional, emotional, life-changing, and social impact.
Marty Nelson (positive emotion), Diana Larsen (investments enabling the business to thrive), Dave West (outcome of the event), and Howard Sublett (high-value experience -- coffee with my bride) described the four elements of value defined in the HBR article.