I’ll try to explain value provided a bit. I think it’s a useful concept to share.
A company or organization, generally speaking, has a purpose. It either produces something for or provides a service to end customers which they perceive as valuable. Over time, a company figures out what that purpose is and what it is not. If you are trying to manage a company and you are fixated on dollars, you’re usually not adding anything useful. You’ll likely make decisions completely misaligned with the purpose of the company. If you run a business by jumping from department to department trying to figure out how to maximize profit, you’re just an administrator looking to squeeze efficiency out of existing processes. You want some employees who do this, but it’s certainly not going to keep your company alive and relevant for the long term in an evolving market.
Instead, you want to be jumping between departments trying to figure out if the core value proposition of the company is being realized. Are you maximizing value provided to your customers? Is your value proposition still relevant?
Chasing value is targeted and intelligent. You’re correct that it’s much harder to create metrics for this, but the metrics you find are substantially more useful than profit margins. These metrics tell you if you’re succeeding.
If you’re providing value and profit is an issue, then you either charge more or you never had a viable business model in the first place.
Early stage companies chase cashflow by necessity. But once you’re no longer early stage and you have a margin of safety and some success, you can start to think differently. Chasing dollars at this point might put you out of business. Chasing value provided to your end customers leads to substantially more opportunities for continued success.
A company or organization, generally speaking, has a purpose. It either produces something for or provides a service to end customers which they perceive as valuable. Over time, a company figures out what that purpose is and what it is not. If you are trying to manage a company and you are fixated on dollars, you’re usually not adding anything useful. You’ll likely make decisions completely misaligned with the purpose of the company. If you run a business by jumping from department to department trying to figure out how to maximize profit, you’re just an administrator looking to squeeze efficiency out of existing processes. You want some employees who do this, but it’s certainly not going to keep your company alive and relevant for the long term in an evolving market.
Instead, you want to be jumping between departments trying to figure out if the core value proposition of the company is being realized. Are you maximizing value provided to your customers? Is your value proposition still relevant?
Chasing value is targeted and intelligent. You’re correct that it’s much harder to create metrics for this, but the metrics you find are substantially more useful than profit margins. These metrics tell you if you’re succeeding.
If you’re providing value and profit is an issue, then you either charge more or you never had a viable business model in the first place.
Early stage companies chase cashflow by necessity. But once you’re no longer early stage and you have a margin of safety and some success, you can start to think differently. Chasing dollars at this point might put you out of business. Chasing value provided to your end customers leads to substantially more opportunities for continued success.