Tuesday, February 07, 2006

Toward a working definition of "value"

When student assistant Linh passed by my class last week, I asked her how she would define "value." I admit now that I asked the question in a vague way, because she asked me in turn if I was talking about ethics. When I told her no, then she asked if I was talking about quality. So even I was confused by this point. What the heck WAS I talking about? And I know that many people much more experienced in business than I am are hesitant to throw out a definition of the term "value" and expect others to use it.

Still, I need a working definition for my own students to use. Entrepreneur magazine has an article by Barry Farber with a nice simple definition:
the power of a [product] or [service] to command other goods or things in exchange [...and...] the present worth of future rights to income.
How about this?

And going a step further: I found another article online, by Mohanbir Sawnhey of Northwestern, that gives seven characteristics of value, which I have totally paraphrased here:
  • Customers define it.
  • They will not always be able to. We may have to help them to describe what it is they like, without actually telling them they like it.
  • It's multidimensional. Here are just a few things my students just yesterday said might contribute to value:
  • It's a trade-off. Sometimes we may have to sacrifice a little of one area -- even one of our favorites -- to give the customers more of several others.
  • It's contextual. What they like may depend in part on who they are and what they're doing with our products and services.
  • It's relative. What they like may depend in part on what our competitors -- known and unknown -- are doing.
  • It's a mind-set. If we don't think "value" in everything we do, we are not very likely to deliver value in anything.

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posted by Ron @ 9:02 PM

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