Every day in business and organisations, there is exchange of value. Traditionally this is thought of as the exchange of PRODUCT & SERVICES for MONEY. That’s one way to understand value.
The owner(s) of an organisation, will have created the organisation to create value, for self and for others. A challenge: Perspectives on what is valuable, isn’t the same for everyone. This difference in perspective can create tensions (positive and negative) for the working relationships between organisational owner(s), shareholders, staff, suppliers and customers. Understanding different elements of value and how they shape your organisational decisions, opens the way for powerful conversations and more meaningful expressions of enterprise activity.
Don’t be seduced into thinking that that which does not make a profit is without value.
~ Arthur Miller
An Exchange of Value between Owner and Enterprise
Organisations and enterprises exist to create or generate value. There is value for the Customer (or Client or Member), and separately value for the Owner(s). If not recognised and differentiated, talking about value in a organisational context gets muddled. While what is valuable isn’t the same thing for these two groups – it can be related.
In a business context, it’s easy to think of PROFIT as the dominant value that you get from your enterprise. That as the Business Owner you invest TIME, FINANCIAL CAPITAL, EFFORT, EXPERTISE and in exchange you get PROFIT. However, there are other things that are also valuable.
Value is in the eye of the beholder, and can also differ between each of the Owners of a single enterprise. There is a range of things that represent value, and these can change over time for the same person. The value exchange concept provides a powerful language for talking about different kinds of value; and exploring what is valuable in any particular context – because value is dynamic and shifts quickly under different circumstances.
Without being able to talk fluently in terms of value, expectations about what is valuable can be hidden and difficult to expose for a meaningful negotiation between multiple parties. When expectations are hidden, they can generate emotional noise that interferes with objective consideration of what each seeks and gets. Often times these emotions arise from breaches of social contract – you feel betrayed because you didn’t get X, when you expected X in return for Y. However – did the other party know that you were expecting X in return for Y? If not, then how have they betrayed you? Or have you misplaced your faith/expectancy?
The particular value exchange I’m talking about here is between Owner and the Organisation/Enterprise. (There are other values exchanges like between a Organisation and a Customer and between an Employee and Employer but they are the subject of other articles.)
Balancing a Value Exchange Ledger
The Value Exchange Ledger Activity is an accounting of what value goes IN and comes OUT regarding your enterprise. It involves a ledger, hence the accounting analogy. One side of the ledger is IN and the other side of the ledger is OUT. Any decisions about what is a ‘balanced’ ledger between IN and OUT for your enterprise is a judgement entirely in the control of the owner(s) of the ledger.
There is a small risk in using a financial analogy – you might be tempted to think of value exchange as only transactional, when it is more than this. The analogy is simply a pragmatic concrete way to explore something that is conceptual and sometimes highly emotional.
Who has a Ledger
As an Owner, you have a ledger for yourself. It’s a great start to simply know what you are putting IN, and what you are expecting OUT. With this knowledge you can consider the gap between the value you desire to put IN and get OUT compared to what is actually happening.
As an Owner, you can have a ledger for the organisation/enterprise. This can be a great resource, for staff and management to consult when making plans for the organisation – also for personal reflection on how the value they desire (as Employees) compares with the organisation. It also helps with a broader literacy to participate meaningfully in conversations about value.
These two Ledgers are not expected to be the same. Some alignment between the two, definitely makes for harmonious business activity. However, You and the Enterprise are separate entities with separate (and overlapping) interests to serve.
What goes in the Ledger
Value elements.
We’ve made life simple for you, by creating a deck of cards with a collection of value elements. These don’t cover everything that is possible value – but they’re a good start. We’ve come up with a list of value elements from the observations and experiences of ourselves and others. There’s blank cards in the set, for you to add your own value elements, in your own words.
There is a rich vocabulary to choose from, and first time users can be tempted to want everything. It is wise to set a time constraint (e.g. next 3 months) and context constraint (e.g. strategic planning as a team, see others below) to choose the most relevant, and thus useful, set of value elements.
Doing the Value Exchange Ledger Activity
The card set comes with a basic instruction booklet to do the Value Exchange Ledger Activity by yourself, or talk to us about a Thinking Partner session. If there is more than one Owner, or you want to include your Board or Management Team – consider a Value in Business Workshop.
What to do with the ledger
The ledger is a tool to organise your thoughts about value. It initially reveals things which may be unseen or unspoken. It also becomes a guiding tool for things that you want to make happen.
There are many instances in business where an Owner might do the value exchange activity. Here’s a couple:
- When reflecting on the past and taking stock of the present
- When thinking strategically about organisational plans for the coming year
- When contemplating a new direction for yourself and/or the enterprise
- When feeling dissatisfied with the status quo
- When considering what value you seek from a potential venture or partnership
It’s good to know which items of value can be addressed by whom: the enterprise, your partners, and yourself. There’s often a mix of the personal and organisational in the Owner perspective.
Taking the next step to value creation
Naming what is valuable to you and your enterprise is the first step to value creation.
As part of your Business Architecture (a way of visualising representing the key aspects of your organisation), it’s helpful to create a Enterprise Value Map. This artefact names the value elements (with a description that is meaningful to your organisational context) and shows the flow of relationships between the different value elements. (Talk to us about making your Enterprise Value Map.)
The next step is making plans to create or generate that value. Some of these plans may only involve you; the majority will likely involve any business or venture partners, management and key stakeholder in your organisational eco-system. These plans are limited only by your imagination and resources. You’ll want those plans to also include some measures to quantify ‘how much’ of each value element is desirable, so you know what you are aiming for.
The team at Quello can be your Thinking Partner or facilitate a Workshop to come up with and refine product ideas for enterprise value creation. Talk to us about these options.
Futures of enterprises and business
Success in organisations and business depends on meeting others ‘needs’ – the needs of your staff, your shareholders, your family, your customers, etc. Needs can be synonymous for value. It’s a worthy skill for 21st century enterprises to become highly literate in recognising and speaking about value from multiple perspectives.
It’s time to move away from thinking of your enterprise as creating predominantly financial value for you as the Owner. Business enterprises, in particular, can be an agent for societal change. They are part of an economic architecture and business eco-system that is being disrupted and requires new thinking and directions. The value you already have could be utilised to generate value that results in better futures for our society, our planet and future generations.
Get ready today, to take part in new conversations about value creation.
Author
Helen Palmer, Founder and Director of Quello and other businesses, has applied this thinking about value in directing her businesses. She’s helped others clear thinking obstacles, by using the Value Exchange Ledger Activity to be more playful and less constrained in how they perceive their current and future product range.
Attribution
Except where otherwise noted, this content is released under a Creative Commons BY-NC-ND 4.0 International licence so it can be freely shared with attribution to the creator (Quello); it cannot be used for commercial purposes; and it cannot be modified.