How to determine the added value?

We seek to bring value to everything we do: there is nothing worse than wasting time. But how to define the value? What is value added? I propose to think on the different types of value that a project, an action or an activity can have. This value is not always monetary, as you will see in the next lines.

Value can be viewed and measured in different ways. There is of course the simplest that is the physical product or the service rendered, but rather look at the value of any side or feature of the product or service. I based myself on a framework of reference of the Treasury Board of Quebec, (available on their site) to propose you some thoughts in what constitutes the added value of a product or a service, beyond the product or the service itself.

In the rest of the text, I will use the term solution to lighten the reading, but by solution I mean any action, activity, operation, project or program that an organization realizes to meet the needs of a client.

Solution quality

It’s obvious, but always good to remember, quality is often intrinsic value. Here are some examples of indicators reflecting the quality of the solution:

  • Average time before the microwave needs to be replaced or repaired,
  • Waiting time before getting a passport,
  • 3G network coverage
  • Number of complaints generated
  • Level of satisfaction of customers.

Revenue increase (or costs reduction)

This value is also obvious. If the solution can produce more revenue: either by being more sold, or having a lower cost, its value is only greater for the organization. This is often the only value evaluated for a solution because it is the easiest to measure. It is directly in $ or easy to convert. We improve the processing time and convert the gain of FTE (Full Time Equivalent) in $.

Processes efficiency

Efficiency should not be confused with lower spending. When I talk about process efficiency, I’m talking mainly about improving the service offered. The solution reduces exceptions, more customers can access the system or access at the same time (load), in short, we do better with same resources.

Availability and accessibility of management information

Who can manage his organization without data? This value looks at the solution’s contribution to the availability, accuracy and distribution of reports, as well as the flexibility of use. A solution must be sure to provide the data to manage it. Otherwise, how to be sure that it delivers the expected results? Solutions that require the manipulation of many files for performance may be of less value to some organizations. If you need to contact the vendor and wait two weeks for each change to the report, is it value-added for you? It is often the operational teams who give the most importance to this value.

Legal or normative compliance

Depending on your activity’s sector, this value is more or less important. It can be measured in different ways. In particular with the number of nonconformities present in the organization or the proportion of a law or standard covered by the solution. It is very complex to turn this value into $. If the cost of the fine for non-compliance is known, the costs associated with not operating for several weeks is very difficult to define.

Security and business continuity

This value is rising sharply, especially on the aspect of security. The almost daily piracy of systems and the theft of data, in direct connection with the public image, make it the new essential. Does the solution protect data security, how does the solution behave in the event of a major failure? Do we have fast food or respite systems to keep running? If you ask yourself these questions it is because this value is important for your organization. The indicators are the level of risk, the recovery time, the number and the severity of the incidents, …

Contribution to public image

This value can be measured by means of specific surveys on awareness or by associating the organization with a keyword (innovation, sustainable development, trust, etc.). It is long to build and can deteriorate quickly. It is more important for organizations that serve their products directly to the customer. If its measurement is expensive, it is quite easy for a project team to estimate if the impact of the solution is positive or negative on this image.

Effect on human resources and engagement.

When the teams are disengaged, the productivity falls. In the end, it is the entire performance of the organization that suffers. What value do you provide to your human resources? The measure can be done by the absenteeism or retention rate, the ease of attraction, the satisfaction of the employees, … How does the solution impact those who generate value in the organization? Although a priori the benefits are intangible, they can have unsuspected impacts.

Flexibility and ability to evolve

Agile … a buzzword, but is it a key value for your organization? Do you need to be faster, flexible, evolve? Will the solution impact the ability to implement other solutions in a short time? On the contrary, are you creating a “monster” that will slow you down? Whether it’s an approval process, prioritizing, processing requests received, a decision support tool, a collaborative ideation platform, make sure you consider this value if it’s important to your organization.

Value for customers and partners

This value applies especially in the public service, the government sector or the multinationals. It consists of the benefits provided to other entities of the organization. From a purely accounting point of view, the solution brings nothing to the business unit that sets it up. However it helps other sectors to deliver more value. For example, it involves sharing a system or resources with other entities, without charging them the cost, economies of scale obtained by negotiating a larger contract, etc.

a-retenir

Each one defines the value according to his point of view, it is what makes the diversity of the products and services offered. So there is no single answer about what constitutes value, but a fit between the value that your organization wants to deliver to its customers and the value it delivers.

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