The right way to think about value!

The right way to think about value!
Photo by Amr Taha™ / Unsplash

Early in my career, during an audit by a potential customer (a global MNC out of Sweden), I was asked a question that surprised me. “We have understood your organisation’s mission and vision, but we also want to understand its senior leadership. So, what is your mission?”

No customer had asked me this question before (in fact no one had asked me this question before, including me), but being a thinking-on-your-feet kind of a sales guy that I was, my immediate response was that “my mission is to add value to whoever comes in contact with me” (wow! I was impressed by my reaction under pressure 😅 ). When the customer asked me to explain, what I meant by this, I was at a loss as I was unable to articulate what the word “value” meant.

Since then and after many years of pondering and having interacted with various colleagues, customers, vendors etc, I have come to realise that the most simple definition of value is to create a transaction where someone’s willingness to pay (WTP)> the cost of the product/service/transaction and value can simply be calculated by subtracting the cost from the WTP.

For example, if I am selling a watch worth Rs 5,000 and the buyer, after using it for a couple of weeks realises that it’s worth Rs 7,000 to her, then I have created a value of Rs 2,000 (7,000 - 5,000). On the other hand, if she realises that it’s worth only 4,000 to her, then I have created a product that is eroding the value at -1,000 (4,000 - 5,0000) per watch (it will not be long before I’ll have to shut down the business).

Applying the same logic to a workplace, the learning is that we must strive to deliver positive value to the organisation that we work for.

For example, if an organisation is paying you a salary of Rs 75,000/month, you must always strive to give back to your organisation (via your time, effort, ideas etc) something worth Rs 100,000/month, which is a positive value of Rs 25,000/month.

As long as you are continually upgrading your skills, learning new techniques, and improving the productivity of processes, of yourself and your colleagues ( more on this in subsequent newsletters), you will continue to deliver positive value and thus in return be valued by your organisation and get tangible benefits like increments, promotions and continuous opportunities to grow. It also increases your cost of replacement and makes any organisation think long and hard before they try to replace you or lay you off during a recession or a downturn in the specific industry that you are working in.

I hope this simple way of looking at and delivering value help’s you Shoot to the top!