Monday, June 4, 2012

VAMA - The Case for Value Add


VAMA

The concept of “value add” is misunderstood and often misused in business. Its proliferation in daily business language has become so ubiquitous and it is so frustratingly overused that some of my colleagues started to refer to it as VAMA (Value Add, My Ass).

Value Add Everywhere

Clients are frequently targeted with manipulative “added value” offerings by vendors attempting to differentiate themselves. 
For example: A vendor may claim to be offering “added value” by doing something additional to that which is typically expected from their service or product. They offer a sizzle with the steak by including a free coffee, a free towel, hockey tickets, or smile with their service.

Some vendors or organizations claim “value add” simply because they believe they are better at it than their competition. If you deal with Vendor A, you are getting added value. Vendor A knows what they are doing, and B doesn't. Thus, your vendor A adds value.
Others attempt to package added value as a service or offering in its own right, by adding the term value to what they are offering. For example adding “Value Management” to Project Management to differentiate from competition. 

Value Delivery and Added Chains

Programs and Projects are tasked with implementing a business’ strategy, and in the process is responsible for delivering “value” to our business endeavours or improvements. Our Projects are driving for Earned Value as the holy grail of sophistication. Showing more “value” than the the cost of the work performed is the goal. Apparently, the ability to calculate added value distinguishes good Project Managers from others.
We also use “value” in the definition of a chain of events or interactions that is said to improve the product or service. 
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, “Competitive Advantage: Creating and Sustaining Superior Performance”. 
In Porter’s definition: “The value chain is a chain of activities for a firm operating in a specific industry. The chain of activities gives the products (or service) more added value than the sum of added values of all activities.” Two plus two becomes more than four if value is added in the process.

Value Confused

What then is this value then that we are so easily interjecting into our daily business language, and why should it matter? Is there substance, or is it merely VAMA?

Finding Value

To get a better understanding of value, we need to turn ourselves to the experts:
The origin of the term is Old French: The feminine past participle of valoir ‘be worth’, from the Latin: Valere. 
We find the following explanation in the dictionary for the word “value” as a noun: “The regard that something is held to deserve; the importance or preciousness of something.” It is an amount, colour property, duration, ideal, numerical quantity, or worth. As a verb, it is about appreciation, assess (estimate), judge ,respect, importance and benefit. 
It is used in written language 1 in 5,300 times and spoken 1 in 14,000 times. (www.wolframalpha.com)
Once we depart from the basic definitions of amount and quantity, it becomes clear that “value” as a term cannot stand by itself. It is rather used in conjunction with other concepts to improve clarity or define a characteristic. For example: Value Marketing, value investing, intrinsic value, store of value or value add (our favourite).
In economics, the difference between the sale price of a product and the cost of materials to produce it, is the value (added).
Simon Sinek summed it up well: “In reality, value is a feeling.  And that feeling is created when someone perceives (not calculates) that what they are getting, vastly outweighs what they are paying. If it were a calculation of getting more than you pay, we wouldn't call it value, we'd call it a bargain. And because value is a feeling, it takes more than stuff to have someone feel they are getting more.” http://sinekpartners.typepad.com/refocus/2010/05/value-formula.html 

Value Significance

Now that we have some “perspective” on the meaning of “value”, how is it significant to what we are doing as Managers in I.T.? 
A simple approach is to understand at the outset how much a desired object, service or condition is worth to our client. If we know this, we can drive for a condition or outcome that is relatively better. We can add value.
Without a perspective of the worth, no amount of additional effort, lower cost, or more delivery, will satisfy a need. As we've seen above, worth is not just a quantity in monetary value or time. It is also a feeling of trust, appreciation, or recognition. 
The best way to truly understand worth is to define it in terms of “lack off”. If your Mr. Client, did not have “a” or “b”, what will that mean to them? How will it make them feel? 
If we can somehow quantify the purpose or desired state and the worth of it, then we can demonstrate improvement or value. For example: If we have a base expectation that a product or service will be delivered on a certain date, and it is important to be on that date (for a birthday), and it arrived a day or two earlier, then we have created value. However, if the delivery date was not of importance (it was not worth anything to the client if it was a day early or late), then no amount of early delivery will make any difference. No value will be added and perceived by the customer.
The old simple truth for value creation therefore rings true: Find out what your client expects, and exceed that expectation. Then you add value. 
If you assume or are misaligned with your client's expectations, then the only value that is added is the likely cost of you giving your client something that they don't care about or appreciate. 
Value is only added when the expectation is exceeded. Providing something additional that is not related to the expectation is a waste of money and effort. The coffee mug, towel or hockey tickets are nice, but not valuable. It is likely not going to be perceived as value. A promotional gift is not value added. A quality report on a project's performance is not value add, especially when it is expected. 
An easy test to determine if something is of value is to determine if the client will be willing to pay for it if he/she can get it. If the answer is no, don't bother. You are wasting your and your client's time. Stick to delivering the core expectation. 

Stick to the Core

Fifteen years ago I was fortunate to do a dissertation on consumer behaviour. Without going into the details of the dissertation, I made a discovery that is quite appropriate to this conversation. I discovered that no amount of “value add” will ever make up for a core failure to meet an expectation. 
For example: If a client has an expectation to withdraw cash from an automated bank teller machine, and the machine fails to provide the desired cash, then no feature of the experience or technology, no matter how sophisticated, can make up for the failure of the core expectation. The client’s core need was not met. No value is possible.
As I.T. Managers (Portfolio, Program, Project and Service Managers) we sometimes get so distracted from the core expectation of our clients, by our supposed value adding features, that we fail the expectations of our clients. 
Frankly, clients do not care if we are using tool “a” or tool “b”, if we use framework “d” or “e”. What they ultimately want is a kept promise, and an expected outcome to materialize with agreed attributes. 
For example: It mostly doesn't matter if the email was sent via Google or Microsoft. What does matter is that it is easy to do, and that the message got through, securely. The value thereafter may be getting the message through faster, and more securely with an easier interface. It probably doesn't matter if it is an Oracle or MySQL database that stores the data. What matters is that the data is accessible, fast and stored economically. Thereafter, the value can be added by making it even more accessible, faster and more economical. 
The roses or coffee mug with the the sale of a new database is not value. The training or extra support is not either. It is a distraction. It confuses clients and is most likely going to work against your offering in the long run. 
Keeping a promise or meeting an expectation is not value. It is the prerequisite for value. If we can do better than our promise, then, and only then do we add value. 

Conclusion

What we know now is that there is no standard definition for the word value. It has to have context, and it has to be distinguished alongside a client's core expectation. 
Only use the word “value” when you are clearly prepared to explain what you mean. Value in the context of our management duties can only be claimed if you exceed expectation. When you do better than what was promised. 
If you don’t, people will soon learn not to value what you say. If you do not understand how to add value, you merely distract and confuse, and waste your and your clients valuable time and resources.
Let us provide value excessively, now that we know what we are talking about. Believe me when I say, you will be distinguished from your competition.
Your comments and views are always welcome.
Hendrik van Wyk

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