Value and Value Creation

In ethics ‘value’ denotes the degree of importance of some thing or action, with the aim of determining what actions are best to do or what way is best to live (normative ethics), or to describe the significance of different actions. It may be described as treating actions themselves as abstract objects, putting value to them. It deals with right conduct and living a good life, in the sense that a highly, or at least relatively highly, valuable action may be regarded as ethically “good” (adjective sense), and an action of low in value, or somewhat relatively low in value, may be regarded as “bad”.

In neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to supply in a perfectly competitive market.

Similarly in classical economics, the value of an object or condition is the amount of discomfort/labor saved through the consumption or use of an object or condition (Labor Theory of Value). Though exchange value is recognized, economic value is not, in theory, dependent on the existence of a market and price and value are not seen as equal. This is complicated, however, by the efforts of classical economists to connect price and labor value. Karl Marx, for one, saw exchange value as the “form of appearance” erscheinungsform of value, which implies that, although value is separate from exchange value, it is meaningless without the act of exchange.

In marketing however, value also known as customer-perceived value, is the difference between a prospective customer’s evaluation of the benefits and costs of one product when compared with others. Value may also be expressed as a straightforward relationship between perceived benefits and perceived costs: Value = Benefits / Cost.

Regardless value creation is an individual’s or an organization’s raison d’être, the ultimate measure by which it is judged.

Every successful entity creates something of value. The world is full of opportunities to make people’s lives better in some way, and our job is to identify things that people don’t have and find a way to provide it. The value one creates​ can take on one of several different forms, but the purpose is always the same: to make someone’s life a little bit better.

The fundamental types of value are:

  • Functional Value: This type of value is what an offer does, it’s the solution an offer provides to the customer.
  • Monetary Value: This is where the function of the price paid is relative to an offerings perceived worth. This value invites a trade-off between other values and monetary costs.
  • Social Value: The extent to which owning a product or engaging in a service allows the consumer to connect with others.
  • Psychological Value: The extent to which a product allows consumers to express themselves or feel better.

Throughout human history value has been created in a variety of ways:

  • The Bandit Age: After hunter-gatherers became growers and herders, some people realized that it is faster and easier to go take other people’s crops and cattle than grow your own. War was a popular commodity and wealth got a bad reputation.
  • The Warrior Age: Going to war for glory was the way of creating value for the reigning chieftain. Those who returned alive from the battlefield were rewarded with land and slaves.
  • The Craftsmen Age: In the 9th century, some people too smart to be peasants but not aggressive enough to be vassals realized that they could avoid being plundered by tyrants if they organized themselves into bigger groups; that is how cities and guilds were born. This was the time people first got the incentive to work smarter. These people, called craftsmen or artisans, created value by making useful and decorative artifacts.
  • The Explorer Age: Cities changed everything. Ideas spread and the courageous ventured on the high seas to discover far off lands.
  • The Merchant Age: Once the far away lands were discovered, people who didn’t mind the risk of sailing really far to bring back exotic goods became merchants.
  • The Mechanization Age: As craftsmen kept perfecting their skill, they came up with machinery such as Johannes Gensfleisch zur Laden zum Gutenberg’s printing press. With machines they could mass produce things, thus creating value a lot faster.
  • The Industrialization Age: As electricity became popular and machines became electric-powered,  production became even faster.
  • The Oil Age: Around this time, cheap cars and trucks came around. With the demand for fuel growing, people realized they could drill for oil. The Rockfellers and the Gettys, became wealthy by discovering oil (or by purchase oil futures, or oil companies).
  • The Corporate Age: To reach a greater number of consumers, traditional factories organized themselves into vast organizations with a variety of departments; that is corporations.
  • The Financial Age: As corporations started profiting, creating monetary value in the order of billions, people realized that they could buy stocks and shares of corporations and resell them for more. 
  • The Information Age: When each corporation started employing millions of people, vast amounts of data needed to be managed. Thus a new age of technology began.
  • The Self Positioning Age: Workers started realizing that in order for their work to gain visibility, they would have to engage in self-commodification.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s