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Wednesday, April 15, 2009

How do we Add Value

A critical challenge for all businesses, but particularly professional service businesses is adding value. We constantly hear that we have to "add value" - it is the rallying cry of consultants, management and leadership. ADD VALUE! Of course, the problem with this mantra is that we don't necessarily know what "added value" means. never mind how we add value. Over at the American Express Open Forum, there is a great post entitled "Are you a 100% sure you are adding value people will pay for?" that focuses on the definition of added value.

The original definition of added value was: “The contribution of the factors of production, i.e., land, labor and capital goods, to raising the value of a product out of commodity status”. The article suggests a new definition: “Added Value is total value MINUS the value without us. What you get is what you bring to others".

I like the definition, and think it can be used as a rather provocative question during a strategic planning session. More importantly, we should also be asking the inverse and identifying what the customer considers "added value". Alternatively, and likely the subject of another post is to ask ourselves the question of whether or not we should even be attempting to provide added value? What do you think?

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