All commerce is the exchange of value.

But what is value? Well, the dictionary definition includes both (i)noun and (ii)verb:

1. “value” as the innate quality of a thing; and
2. “[to] value” as the ability to recognise and prioritise those qualities compared to something else.

So, for a busienss to succeed it must do two things:

1. Provide value to a customer – Failure to do so would suggest the business is a scam
2. Convince the customer of the value – Not doing this would be a failure of marketing

Definitions of value found in BABOK and ITIL textbooks both use “usefulness” and “importance”, while also referencing value as being subjective.

As a Business Analyst, your job is to maximise value for the business in which you operate.

Assessing Value

There are two main qualities when considering value – the tangible, the intangible.

The Tangible

Tangible Value includes the explicitly measurable characteristics of something. The obvious answer here would be the monetary price of an object, but what defines price?

A business has a quantity of “Thing” to sell. The sale price will depend on several factors: 

• the weight or volume (as this may impact transportation, and so limit customers)
• the quality
• the effort of production
• the cost of production
• Profit margin

The Intangible

Intangible values are things that can’t be as easily measured. Continuing from the example above these could include:

• The urgency of sale
• Consideration – being paid might be more or less favourable compared to trade for another product or service
• Competition – what others are willing to trade for based on all of the above criteria

Intangible Values also includes how something makes us feel, which is a subjective assessment. Brand value is a clear example of this, for example, two cars of similar size, specification, and cost – one a BMW, one a Ford. You may have very strong feelings as to which you’d prefer due to what you perceive is the difference between the marques – or the stereotypes of their owners.

Maximising Value

So, we could say that Tangible Value is the base cost, while Intangible Value is a multiplier.

For this example, let’s consider the Mona Lisa:

• Tangible: it is old paint on an old canvas.
• Intangible: “the best known, the most visited, the most written about, the most sung about, the most parodied work of art in the world.”

Remember though, that Intangible Value is subjective. How valuable would you consider the Mona Lisa if you and it were trapped on an island?

Value Consensus can help, with the Mona Lisa holding the Guinness World Record for the highest known insurance valuation in history (US$100million in 1962). It can also hinder; consider Netflix VS Blockbuster, where customers valued subscriptions and no late fees over in-store selections and concessions.

Practical Value

Let’s face it, you didn’t come here for a dictionary definition of Value, nor an art-history lesson, to which I suggest this:

Value is what incites action.

James Copperwaite

The pursuit of value created your job, and that job is to maximise value for the business – you will need to identify:

• the processes involved in a successful transaction
• the parties involved in each process, and 
• what they value – tangible and intangible

Your business might: 

• directly or indirectly increase productivity (tangible)
• improve interdepartmental collaboration (intangible)
• improve the quality of the product (tangible)
• develop a strong user community (intangible).

A huge motivator for business action is Security. In many countries, if a company gets hacked it must be publicly reported. The business could be subject to pay fines and for updates to their security. Customers might lose faith in the organisation and choose to leave, or they may discourage their friends and colleagues from using the service – this is known as Brand Damage. Many organisations consider their Brand as their most valuable asset, and consider the risk of Brand Damage as more costly to the business than any fines/penalties and so will invest in extensive security measures for this reason.

So, what is the definition of “Value”? Value is what incites action.