Value Creation: Is it vital for Business Success?

Make something people want… There’s nothing more valuable than an unmet need that is just becoming fixable. If you find something broken that you can fix for a lot of people, you’ve found a gold mine.” Paul Grahan

Every successful business creates something of value. The world is full of opportunities to make other people’s lives better in some way, and your job as a businessperson is to identify things that people don’t have enough of, then find a way to provide it.

What is ‘Value Creation’?

Let’s start with understanding the term. Value creation is a fundamental aim of any business entity. Sustainability of any business organisation depends largely upon continuous value creation for its customers, shareholders, and society in which the organisation operates.

  • Creating value for the customers helps sell products and services;
  • Creating value for shareholders ensures continuous wealth creation and profitability; 
  • Creating value for society by means of generating employment, assuring sustainable environment and conducting related CSR initiatives

How an organisation can create value?

The process begins with identifying the consumer need and bridging the gap through a solution to their problem. You need to look around yourself, identify the problem and provide a unique yet effective solution.

What is the dilemma with Value Creation?

Often people have mistaken between the term Value creation with wealth creation, so let’s try to differentiate both.

Wealth creation is an outcome of value creation. More than 50% of the start-ups fail because they shift their focus from value creation to wealth creation. People are unable to understand that earning money out of your business is an outcome of creating value for your consumer. The day you stop creating value for them they will stop using your product or services and may switch to some other source of higher value proposition.

The success of any business depends on the three matrices? 

  • How to create value?
  • How to capture it? 
  • How to sustain it?

Here are the 3 Golden logics of value creation through which you can solve the above problems:

1.     Value creation through Resources

You need to first identify the core resources of your organisation; it can be the top-rated client. Imagine how you choose software development or digital marketing company for your project?

One of the many factors for deciding the same is what all clients they have in their portfolio, you may get impressed by seeing the name of Hindustan Unilever, Kotak, Tata, etc. This kind of portfolio builds trust and attracts new customers.

It can be the best support service team, for example, many people prefer Maruti over any other Car brand. Well, Maruti is a pioneer in providing best customer service and support. No matter which corner of India you are in you will definitely find Maruti Service Centre. Another example of resources is your highly skilled employees or maybe a new technology.

Following characteristics conclude the core resources very well:

·       Rare, as they are not available to everyone

·       Valuable in their own way

·       Difficult to imitate, so competitors can’t quickly build a brand

Capturing Value through generating opportunity  

By generating opportunity, we mean:

  • Creating opportunity for organisation by continuously updating the current product and services so it will not become obsolete
  • Introducing the whole new range of products and services by keeping an eye on the gap in the market place
  • Identifying consumer’s need on regular basis and then organizing the resources you have to pursue this gap
  • Generating opportunities for the employees by training them with new skills and giving a chance to explore new things and to ensure their growth
  • Generating opportunity for society by contributing to social development activities
Sustain value through position

So, the idea here is to identify the right market, you stack out a position in the market and build high barriers to entry to keep your competitors out. The barriers to entry might be regulatory – like non-compete agreement or Patents.

The key idea of these ‘high barriers to entry’ is to keep your rivals out and allow you to create value on a continuous basis.

The strategy you make to create, capture and sustain value can take on one of several different forms, but the purpose is always the same: to serve organisation’s stakeholders in best possible way.

Without Value-Creation, a business can’t exist — you can’t transact with others unless you first have something to trade. The best businesses in the world are the ones that create the most value for other people.