What is Value?

Understanding Value

We talk a lot about value in the Agile world, but value is hard to define, and a lot of the time I feel organisations misunderstand the value they deliver.

Take one minute and try to answer this question. Write down your answer.
”What is the value your organisation delivers?”

Now, Take one minute and try to answer this question. Write down your answer.
”What is the value your Toyota delivers?”

Did you answer something like a car or other vehicle? If so, consider this, if tomorrow Toyota invented a personal transport system that could safely, cheaply and instantly transport you anywhere, would they lose all of their customers?

Of course not, because that’s a great product, but the main reason they would keep all their customers is because they would still be delivering the same value. The value that Toyota provides is not cars, it is transportation.

If they invented a transporter that could transport groups of 5 or less people and 1 cubic meter of luggage, a distance of 900 km, at a speed of 200 km/h before needing to be refuelled, with an entrainment system,  would they loose all their customers? Again, the answer is no, because they don’t just provide the value of transportation, they provide that value under certain constraints. They don’t cross oceans, they don’t transport huge amounts of cargo. They transport a certain thing, at a certain speed, at a certain cost, in a certain situation.

The car is not the value they provide, it is the mechanism by which they provide it.

But why does any of this matter?

Because getting too locked into the mechanism leaves you vulnerable to disruptive innovation, while at the same time stifling your own innovation. All a competitor needs to do if offer the same value with better constraints to hurt you.

Blockbuster declared bankruptcy in 2010 due to being unable to compete with companies like Netflix and Redbox.

But Blockbuster had every advantage in this fight. They already had access and agreements with the content distributors, they already had a huge and loyal customer base. If they had adapted quickly when they saw this change in the market they likely would have blown theses companies away.

Blockbuster didn’t provide the value of renting movies.

Many people don’t know that Netflix has been around since 1997, they provided DVD and Blu-Ray rentals via traditional post for a very long time. Netflix realised that the value they provided was not that of renting movies. They provided the value of entertainment, and by changing the mechanism and constraints by which that value was delivered they were able to take the world by storm.

Do you think it matters now?

Agile is about being able to adapt, not about being able to deliver features faster. Agile organisations need to focus on the value they deliver, not the mechanism by which they deliver it.