The DNA of Value Creation – Why is it Crucial for Business Success?

Value Creation

Every Successful Business on this planet has created value for its customers and shareholders. Be it in any industry, geography, or market; Companies cannot survive if they lack the value creation quotient.

But what is Value? And why is it so important for businesses to survive and thrive in the market? Let us understand.

What is Value?

If you perceive to get more than what you pay for, you as a customer get “value”. Similarly, if shareholders invest an amount X in a company and get X + Y then Y is value for them.

As you would have understood already, companies need customers and stakeholders to grow in the market. Top executives and entrepreneurs understand that continuous value creation is imperative to become a success of the imperatives ways to do business.

Value could be anything and in any form. For Example, Amazon won hearts by creating a lot of value for everyone associated with its ecosystem. Here is how Amazon Prime is a win-win for everyone

For Customers

1 and 2-day deliveries, Content on Prime Video, Amazon Music, Exclusive Prime Member Deals, Early Access to Daily Offers

For Sellers

More Reach and Revenue, Distribution support, Ads and Promotional support, etc.

For Amazon

Greater Business, Branding, Cross-Industry presence, Value creation for its stakeholders, etc.

Now, when you think about this company from anyone’s perspective, you’d understand what value really is.

Obviously, it is not possible for every other company to create such value. Probably that is why Amazon is one of the best companies ever built.

But can other companies simply ignore the step of value creation? Can they afford to completely give up this game and compete on something else?

The answer is “No”. Here is why:

Why is Value Creation Important?

When you go to the market, you’d notice a plethora of options of almost everything.

But what must interest you is what goes on in the mind of your customers that make them lay their hands on Product A and not Product B?

It is the “Value” that they “Feel” they “Get” while choosing your product that makes them happy and willing for your product over the other.

If a company does not create value, there is literally no meaning for its existence.

This is why whenever you read the Vision and Mission statements of any company, you’d immediately realize what the company wants to achieve and how it wants to create value.

Without the eye to create value, founders of companies are directionless; not knowing what their firm is about. But I am sure, none of us want to be in that category of founders / CEOs.

Such haywire management often leads to the failure of a business.

So, obviously, the next question that has relevance here is:

How to Create Value?

Since value creation is imperative to success, we must learn how to be of more value to our customers.

Although there is no alternative to this, the process is easier said than done. Let us discuss a simple process using which we can create Value:

Let every task you do be divided into 3 components: Input -> Process -> Output

The Input is what your customers would be giving to you for a particular product or service. The Process is what you do within your company, people, factories to generate value for them. And Output is what your customer would get back in return for his/her Input.

You have to make sure that the Process that you do, ensures Output > Input.

Sounds Simple? Let us take a practical example:

Value Creation Example

Suppose you and I are business partners and we make cookies. Delicious chocolate chip cookies! 🙂

The market is highly competitive but we still have a desire to create more value for our buyers than our competitors. How do we do it?

We can start by doing the following:

1. Analyze the market of the product

2. Study the product of our competitors. This could be in terms of product specifications or features, places where it is sold, packaging, taste, availability, promotional offers (if any) etc.

3. Understand the Consumer Mindset – You’d be amazed at how insightful this could be

Thereafter, based on the findings we can do the above check to ensure that the Output we provide to our customer is at par or more than what our competitors are providing.

Believe me, customers would instantly understand the product offering more value and it won’t be too long before we witness a rise in our sales figures.

Value Creation is Industry Dependent

The process of value Creation varies according to what industry your business is operating in. We took the example of cookies, but similarly every product and industry can create some value or the other for the customer.

Every industry is different in terms of its value chain, products or services, customers, and the value they are looking for and so there is never a fixed set of guidelines that we can use to create value. 

It is the mindset of the Strategist that helps him create more valuable for his customers.

Closing Thoughts

Therefore, Value Creation is not an option. It is a necessity for a business to run, grow and achieve continuously.

Before offering any product or service to our customers, we have to take a moment, switch into their shoes and think.

We would get a plenty of answers on how to add more value to that product or service such that the customer goes “WOW”.

Do you think Business can survive selfishly without thinking about value creation? Is there any other alternative to creating value? Please share with me in the comments. 🙂

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