Value Creation, the Modern Businesses Need

Value creation

Creating value in business can significantly benefit the customers along with making a financial profit for business owners. Value creation depends on many factors, each of which creates specific aspects of interest for the general and specific.

This article discusses the concept, importance, and other aspects of value creation in the organization. So join us to learn more.

What is Value Creation?

Value creation means creating credibility, honor, and competence in a particular matter. Based on this, we can say that value creation in businesses is about producing and presenting products and services. Of course, every product that is produced creates a specific value that makes that product sell. In other words, something that does not create value will not be sold. However, due to the competitive market and high diversity of products in the present era, only products and services creating more value are considered. (Like making  more comfortable, stylish, or of better quality shoes)

Consider two smartphone manufacturers—both companies’ phones include basic mobile phone facilities. However, one of them provides additional add-ons to its product and launches it at a higher price.

If the second company’s features create more value, it will be much more welcomed by customers. This higher value may be solving a problem, being more user-friendly, beautiful, and so on.

“Anything that makes people feel better about themselves and the world around them is a value!” This definition helps entrepreneurs create value. Value creation is actually a win-win transaction started by the entrepreneur and welcomed by the customer. Customers simply pay more for products that produce more value.

Why Is Value Creation Important?

Human beings are the only intelligent being on the planet that needs value. All jobs are created to meet human needs, but there are always jobs that suppress others. These jobs usually create more value in addition to meeting customers’ needs,. The reason why some brands are popular among people is that they make more value. By prioritizing value creation in an organization, founders pave the way to gain more success in future. However, unfortunately, most people’s priority in business is to achieve financial goals quickly.

In the past, due to a lack of public awareness and poor technology, entrepreneurs paid little attention to value creation. However, with the expansion of communication facilities, social networks, online stores, and public awareness, value creation has found a special place in businesses.

Nowadays, to start a business, the founders need to consider value creation as a base to achieve financial profits.

Does Value Creation Make More Profit?

If you follow the right value creation process, it will definitely bring a good profit to your business.  In today’s competitive market, any company that generates more value attracts more customers. More customers mean more sales and, therefore, higher profits.

Value creation can also be defined as finding new ways to serve the customers. By generating more value, you are actually providing more service, which your customers will appreciate by buying more and being loyal to your company. For example, by producing a comfortable shoe, you are actually serving your customers with a comfortable walk.

Competitive advantage

Value Creation Vs. Competitive Advantage

Usually, some managerial terms are closely related. For example, “value creation” is very similar to “competitive advantage.”

Competitive advantage is how you differentiate your products and services from your competitors.  Competitive advantage can be considered a kind of value creation. However, there are minor differences between these two conceptions. For example, competitive advantage focuses on performing better than competitors, but value creation seeks to create more value for customers, even if it is not to compete with opponents! However, if business owners build their competitive advantage in line with their created value, they will get far better results.

How to Create Value

The value creation process is different for various businesses. This is why you cannot apply one pattern or formula to all organizations, companies, institutions, and other businesses. 

In general, people may create value in the following ways:

Value Creation at individual level

Individuals can create value for themselves and others by producing useful products or providing needed services. When someone changes a common product to become more modern, light, or durable, he/she, in fact, has created value. So people in the community can benefit from each other’s services and products in a win-win transaction.

Value Creation in Organizational Level

Sometimes organizations and companies have captured a good share of the target market and do not need to find new markets or more customers. These companies can create new values within the organization by doing things such as:

  • Procuring raw materials from a closer distance
  • Procuring raw materials at a lower price and the same quality
  • Hiring more efficient employees
  • Applying a better management method

 Therefore, in addition to the individual level, you can create value at the organizational level for people within the company.

Value Creation at the Community Level

In addition to the above, value creation can take place at the community level. For example, governments can encourage people to start businesses and fund more start-ups by creating the necessary facilities, training, and other methods.

As different markets are interconnected, people can create a general trend of value making by linking their business to other markets. For example, a faucet company can work with businesses related to pipes, sinks, etc., to create an interconnected level of value creation in society.

Based on the above, value creation at the individual level is the most accessible form for the general public. 

So any job you have, create new values to offer others and, in return, enjoy its spiritual and material gain. Making a profit through value creation seems to be one of the most logical, humane, and effective methods.

Value Creation Through Value Chain

If you need to create new value in your organization, you should first know more about the value chain:

The value chain is a set of activities in an organization to create a new value. It helps organizations create value from the input stage (raw materials) and manage it until the product reaches the customer. This chain consists of three steps:

Step 1: Activities Review and Analysis 

In the first stage of the value chain, you should review all the activities that take place in the company. These activities can vary depending on the company nature. But in general, service, production, stages of marketing, accounting, ordering, support, repairs, follow-up, testing, and the like can be part of activities in an organization.

Depending on the organization’s size, factors such as hiring capable people, motivating employees, using the latest methods, recognizing and getting feedback from customers, creating and managing online platforms, etc., can also be among the first concerns of the value chain.

Step2: Analysis and Review of Values

In the second stage of the value chain, you need to write down the value you can create during each activity. For example, what is valuable to you and your customers during the support or ordering phase.

Usually, factors such as timely delivery and proper execution of orders are valued in the ordering stage. On the other hand, factors such as telephone answering, online answering, face-to-face follow-up, review, and problem-solving are considered valuable in the support stage.

The task of managers in the second stage is to examine all possible values ​​for each activity and put them in a flowchart to have a more understandable visual effect.

Step 3: Final Evaluation and Planning

If you have completed the second step, you are ready to run. By implementing all or some of the ideas you have written down, you can create value and experience tremendous progress in your work.

Remember that your business development and value creation can happen even with a simple idea. So in the first place, do not take risks and start implementing the simplest ideas on your list.

You will soon understand, you can count on individual and team ideas and creativity to make great values. The human mind is the origin of all the changes on this planet. So we suggest you perform the above three steps and plan for value creation.

Value chain

Value Creation in a Team Vs. Individually

As a company, the discussion about value chain steps is usually performed in a team. However, as we said, individuals in small businesses can also create value that leads to significant results.

However, brainstorming with a team brings more practical and significant results than having it just with yourself.  So, if you have employees who can help you implement  your value chain, don’t hesitate to share the issue with them.

Customers’ Position in Value Creation ‌

In new value creation methods, the customer is always a priority. The development of your business greatly depends on your customers’ satisfaction. Therefore, paying attention to their needs is essential in the value chain analysis of any organization, company, or business.

Engaging with your customers, getting to know them, and getting feedback from them will guide you better than anything else in creating new values in your organization. 

Learn more: Lean Resources, Business Models, Customer Truth

You can use the following ways to interact with the customers:

  • Create a customer club and collect their contact information (to send offers to their email)
  • Sending SMS to customers (occasional SMS, thank you for buying massages, invitation to buy, introduction of new products)
  • Holding competitions and lotteries
  • Contact customers directly and ask for their opinion about your products and services.
  • Sending survey forms

How to Create Value for Your Business 

Below we list some of the things you can do to create value for your business:

Find a Need to Create a new value

As human beings have countless material and spiritual needs, there are always more hidden needs to seek for and address. By finding people’s unmet needs and providing solutions to meet them, you can create a new value with no history in any other business.

For example, the “Event Planner” job has little history. No one in the past thought of meeting such a need, but today it has become a business. Undoubtedly, in the not-so-distant past, someone has found this need for the first time, planned to meet it, and started a new business.  In fact, meeting such a need is itself a unique value that can help you satisfy customers.

Performance Improvements

If business owners offer easier ways to get jobs done, they have created a significant value for their potential customers. For example, applications have made it easy for us to register on various websites, transfer money, order food, etc.

Lower Price

The lower price of a product compared to similar products of the same quality is one of the most common examples of value creation in business. The low price is a high-value lever that attracts most people in the community. Seasonal and special discounts and special sales are examples of lower prices.

Reduce Purchasing Risk

Everyone is inherently afraid of making a mistake when shopping. Therefore, reducing the purchase risk for customers can make a high value for them. Reducing the risk of buying can be done through “Returning the goods in case of dissatisfaction,” “providing training on the correct use of the product,” “answering all questions about the product or service,” etc.

There are many valuation items, the most common of which are the ones we provided here. You can also look at the businesses around you and learn from their values ​​to create your own value for your business.

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