7 Keys to Understanding Value

As you may have noticed, I’m on a quest to help any individual or organization, public or private, big or small understand how to “see,” and therefore measure and manage the value that they create. To do so, I’ve assembled a team of researchers here in Kyoto to help me dig into this, and the good news is that based on the huge range of resources available to us over the past 6 months, we’ve been able to look at everything from ESGs to the SDGs, we’ve looked at GRI and FTSE4Good, and we’ve gone very, very deeply into how marketing, finance, accounting, human resources and management researchers think about and try to measure value.

The bad news is that we’ve still got a long way to go in creating our overall model for measuring and managing value. But the good news is that we’ve made enough forward progress that I’d like share some of our basic findings with you. These are in no particular order, but hopefully will be food for thought for your leadership efforts:

Finding #1: There are SEVEN key stakeholders to think about when it comes to value
What we’ve found is that value can be experienced by six value actors in relationship to any product or service…
1) The Firm (or Maker): basically this is whoever makes a product or service and it’s leadership team
2) The Shareholder/Owner: , The person or people who hold an ownership right in that maker.
3) The customer: The one who uses the product/service made by the Maker/Owner
4) Employees (Internal Partners): Those people (or now it could even be robots or AI engines) that the Maker/Owner compensates for helping to make the product or service.
5) (External) Partners: Those people or organizations that make up the supply chain or distribution channel for the product/service
6) Society: the community within which the Owner/Maker, its employees, partners and customers are embedded
7) The Planet: the natural environment within which everything is embedded

..and that very few measurement models focus on all seven. We’re still working on coming up with a really cool table to show this, but take any value measurement model, and match it up against these seven, and you’ll be surprised to find that at least one or many of these value actors is missing, but then appears in a completely different measurement model as if it is common sense.

Finding #2: Value can be positive or negative
Value is experienced by each of these seven stakeholders in either a positive or negative way. While all the fame and attention goes to positive value, important research is also showing that negative value is also important to pay attention to as well. Here Ple and Caceres point out the importance of understanding how much value we’re destroying by the actions we take. While we’re working on a universal model for quantifying and qualifying value creation and destruction for all value actors that any individual or organization can use, until we get there, it is definitely possible to create a personalized measurement model for your own company or organization today.

Finding #3: Value emerges from relationships
Recent research (see this article by Corsaro et al. for example) is showing that our old neoclassical views of the world don’t really capture value in the right way. In order to think about value correctly today, we need to think about it (1) in terms of relationships between actors, (2) within a larger system, and (3) that we need to track these relationships over time. An effective measurement model for value needs to be able to see value across these three dimensions (actors in relationship, within a system, over time).

Finding #4: Perspective is critical
I was born with a weak eye, that turned out to be shaped like a football. It’s obviously weaker than the other, so when I was a still a toddler, my brain decided that the perspective from that eye didn’t count, and made my strong eye completely dominant. It took me a very long time, and a lot of eye patches to get my weak eye at least to be considered a “partner” to my stronger eye so that I can still see out of it today. When we have been reviewing the literature on value, this struggle with my weak eye keeps coming to mind, as we’ve found that executives and governments have been trained to only look at value from the perspective of the strongest actor, the maker and its shareholders. And because of this, we’ve found it difficult to see the value impacts that the maker’s actions have on these other weaker actors, sometimes even when they are in plain sight. But relationships are two-way at least, and we need to also understand and account for the value that is created or destroyed from the perspective of those in relationship with the maker as well as from the maker’s perspective.

Finding #5: There’s no simple way to measure value (yet)…
The reality is that although there is A TON of research on value out there (One of our team’s researchers, Maha just found this great PhD dissertation on Value, by Joona Keranen that focuses on value creation/destruction for customers, and studied approximately 400 academic papers to reach its conclusions), everything that we’ve found so far is inconsistent, incomplete, or impossible to actually apply to an actual business decision or challenge today.

Maybe if you’re a big multinational you have the budget to bring in a team of consultants to help you try to map out the value that you and your organization create. But if you’re a small startup, or even SME, even though you’re interested in measuring and managing the value that you create (or destroy), there are currently no tools out there that can truly help you to do this. And the reality is that even if you are a big multinational company with the budget to hire an army of consultants, whatever measurement model your army builds will be different than the one that another army builds for a different multinational. Our new research initiative at Osaka University is working to address this issue, but if you think we’re missing something, or that this type of model already exists, I’d love to hear from you on this!

We’ll keep digging into this over the coming weeks and months, and update you on our progress. We definitely are on a long-term quest to create a simple, easy-to-apply, but still powerful way to measure and manage value. This blog will serve as the hub for all of our findings, for insights from innovators in the area of value creation and measurement, and hopefully a platform for discussion around these topics from a growing global community. I’m excited about all of the feedback, advice and ideas that have been shared with us until now, and I look forward to the discussions that I’m hoping our work will spark.

About The Author

Philip Sugai

Dr. Sugai joined Doshisha Graduate School of Business in 2013 where he teaches Marketing, eMarketing, Marketing Research, and Sustainable and Responsible Marketing to Global MBA program students. Prior to joining the Doshisha University faculty, Dr. Sugai taught at the International University of Japan in Niigata since 2002, where he taught similar courses and served both as Dean and Associate Dean for more than 6 years. He received his Doctoral degree from Waseda University’s Graduate School of Global Information and Telecommunications Studies and his M.B.A. in Marketing and Operations Management from New York University’s Stern School of Business. He has worked as a marketing executive at American Express, Muze, Inc., and Lightningcast, Inc., and as a marketing consultant for Advantage Marketing Information.

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