Wayne’s Rule of Business:
Never make investment decisions on behalf of your customers; you will always be wrong.
Value is in the eye of the customer. It is what is important to them. You may think that the services that you offer are valuable for one reason, but it may be a completely different reason than the one that your customer is expecting.
When we were renovating our house, we asked our contractor to supply and install new windows in the front bedrooms. We had already had him do significant work around the place, so we trusted his opinion and the quality of his work. He brought brochures, and we discussed LOW-E, HIGH-U, PVC versus wood; all the important stuff, including size and price. As an added value, he proposed that since our sills were rotten and the rot extended into the walls around the windows, why not just remove that part of the wall and enlarge the window opening? We agreed, and off he went.
He returned a few days later with very large, custom-made windows with excellent numbers for solar heat, gain coefficient, etcetera. There was only one problem; while the price was very reasonable, the windows were ugly! They had sliding screens on the outside like you would find on a bathroom window on the back of a house. Our windows faced the street, and were a significant factor in the look of our home. Further, we had purchased this place as an investment property, and one day expected to sell it for substantially more. That alone was one of the main reasons that we were investing in the renovation work, and we were looking to maximize our return on the investment. Energy savings was part of it, but curb appeal was a more significant factor for us. The contractor had guessed that saving money was what we valued more.
Instead, we invested an extra thousand dollars per window and had him install large bay windows in those rooms. This significantly improved the look of the house from the street, as well as making the rooms feel larger. Spending more money bought us the results that we valued most. Money was an object for us, but we were focused on the sale price of our home (ROI), not solely on the cost of materials (price). For renovation work in other parts of the home, we valued lowest price, and yet in other areas we valued speed to completion.
Don’t guess about value, you will likely be wrong.
So how does this example apply to you if you manage a team of people or are an employee of a large organization?
You and your team are doing work. That work results in some sort of value to the end customer, even if that customer is many levels away from you. For instance, if your immediate customer for your output is an internal business unit of your organization, they have to use what you produce so that they themselves can provide value to their customers. If your company sells products, your immediate customer might be the V.P. of sales, whose customers are the people who purchase the products. Perhaps you are one step further removed, and your customer is the Finance department, and their customer is the V.P. of sales, relying on the finance department to help with pricing and tracking of income from sales.
It isn’t always easy to determine your value, and you certainly can’t do that without finding out how that value is used.
Does this apply to every type of organization?
Yes! In my consulting work, some of my clients are government departments. I often help them improve efficiency, reduce costs, or increase quality of the internal and external services that they deliver. Since they don’t typically have to sell anything, they often have difficulty understanding who their customers are, particularly if they are in some corporate services division that supports the department instead of dealing with the public. Even in these organizations, the same applies.
In order to determine your value, you have to know who consumes your services and why your service is valuable to them. Just like my window guy, you can’t guess.
