Looking at Value

Let’s start by exploring the concept of value. It is a fundamental driver shaping how we perceive, and act, in our world. Our beliefs about who creates value, how, and when, have far-reaching implications for our approaches to sales, innovation, and therefore growth.

Merriam-Webster defines value as both a noun and a verb:

• noun:
  • the monetary worth of something
  • a fair return or equivalent in goods, services, or money for something exchanged
  • relative worth, utility, or importance
  • something intrinsically valuable or desirable

• verb:
  • to consider or rate highly
  • to estimate or assign the monetary worth of
  • to rate or scale in usefulness, importance, or general worth

https://www.merriam-webster.com/dictionary/value

If I asked you “What is value?”, what springs to mind?

You might, like me, first think of various physical or digital objects in your everyday life. For instance, my car has value, whereas a bus or taxi doesn’t. Even if both can take you to the same place. This is a generalisation of course. If the bus is your only form of transport, you attach some (more?) value to it.

Why is the car valuable and the bus not? It’s because of the way we’re taught to see the world. Either formally through education or by observation. Things we purchase, like the car, are typically seen as valuable as you’ve exchanged a lot of money for it. Busses, on the other hand, are not something you typically purchase. Instead, you buy a comparatively much cheaper ticket to use for a short period of time.

Adam Smith addresses this in his Wealth of Nations work, which any economists or business students reading will be well aware of.

The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use’ the other, ‘value in exchange’. The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful that water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a great quantity of other goods may frequently be had in exchange for it.

Adam Smith (1776) “Wealth of Nations”

Then we can look to Karl Marx who differentiates those two views of value into worth and value:

in English writers of the 17th century we frequently find worth in the sense of value in use, and value in the sense of exchange-value.

K Marx (1886) “Capital: Vol 1“

Value became, and still is, linked to an exchange of something else of value; often cash. Something McKinsey articulate succinctly as:

A product’s value to customers is, simply, the greatest amount of money they would pay for it.

Golub, H., and Henry, J. (1981) “Market strategy and the price-value model” via “Delivering value to customers”, McKinsey (2000)

And this is reflected in the dictionary definition above: value is “the monetary worth of something”.

However, it turns out that defining value is a little more difficult than just that.

Value is difficult to define

Stepping away from the dictionary definition, we find many scholars telling us that it is hard to define value. Grönroos informs us that:

value is a “concept that is difficult to define”

Grönroos (2008) ”Service logic revisited: who creates value? And who co-creates?”

we’ll come back to this paper shortly as it gives us the foundational difference between the first two views of value we consider.

Anderson and Narus echo the same sentiment, pointing out that:

“remarkably few suppliers in business markets are able to answer…” questions like “…How do you define value? Can you measure it?”

Anderson and Narus (1998) ”Business Marketing: Understand what customers value”

That’s quite worrying to me since we’re all trying to maximise value.

One of the reasons there is this challenge is because there are many views/names of what value might be. We can turn to Karababa and Kjeldgaard (2013) who highlight the existence of multiple value concepts, each “lacking a definitive basis”. They note there is:

…use value, exchange value, aesthetic value, identity value, instrumental value, economic value, social values, shareholder value, symbolic value, functional value, utilitarian value, hedonic value, perceived value, community values, emotional value, expected value, and brand value are examples of different notions of value, which are frequently used without having an explicit conceptual understanding in marketing and consumer research.

Karababe, E. and Kjeldgaard, D. (2013) “Value in Marketing: Toward Sociocultural Perspectives”

This challenge to define “value” is a problem.

Why this is a problem

Our belief of what value is, how, and when it is created/used, drives our approach to life.

For manufacturers and producers, that means how we sell and innovate. If we believe we should seek a maximum exchange we will focus on achieving that. Whilst that has been wildly successful in the past, global GDP growth has been shrinking over the years.

When there is a mismatch in understanding value between manufacturers and customers the sales and innovation processes are set up to eventually fail.

The IMF is concerned with this being a decade of disappointing and sluggish growth. In late 2024 their chief said that we are heading for the “tepid 20’s” unless we can make a course correction.

How can we sell our offerings to customers if we can’t readily identify the value we are offering?

Or how will customers choose to buy from us if they can’t identify with the value we are offering?

When it comes to innovation, how many of us have innovation programs that generate numerous ideas but fail to move the needle on growth? We risk performing what has been called innovation theater.

According to McKinsey, only 6% of executives are happy with their innovation initiatives. Think on that: 94% are unhappy! (see the innovation problem). And that “very few [executives] know what the problem is, or how to fix it”.

It’s also well documented that a leading cause of start-up failure is lack of market fit. There’s just not enough customers seeing the same value that the start-up sees.

You get the picture on why a poor definition of value is a problem!

What’s the answer?

On the surface, the answer is to identify a definition of value we can all agree on. Simple, right?

Well, re-read the section above about value being difficult to define!

There is a different way. I propose we should see value as a secondary focus. That might sound crazy; but it only is if our frame of reference is our traditional view of value equating to price. Instead, we should focus on making progress – which could be seen as an expansion of job-to-be-done theory (Christensen’s and Ulwick’s).

Everything anyone wants to do involves moving from the state they are in now to a more preferable state – they want to make progress. And if they arrive at their more preferable state, then maximum value has emerged. Therefore, we need to look at the world from a progress-first perspective. Value then becomes a measure of progress – progress potential, progress reached etc.

Offerings are judged by users (we’ll call them progress seekers) against how much progress they feel they can make using an offering. Progress helpers (those who create offerings) should build offerings based on their understanding of progress seekers are trying to make and reducing the hurdles to making progress. Finally, it’s important to understand a progress state consists of functional, non-functional and contextual elements.

Our sales focus should be on understanding a seeker’s progress sought and configuring an offering to maximise progress towards that. Innovation should develop and execute offerings that help make progress better, make better progress, and reduce hurdles to progress.

How do we get to that story? We need to deeper understand the two views of value Adam Smith identified. Doing so in today’s context, examining their successes and challenges:

• value-in-exchange – our traditional view rooted in observing manufacturing (goods-dominant logic)
• value-in-use – an alternative view based on usage (service-dominant logic)

Once we fully understand those, we’ll find a focus on value is still challenging. Instead, we should focus on what people are trying to achieve (which we call progress). We’ll observe that value emerges from making progress. Therefore, our primary focus should be on enabling better progress. Now I introduce the progress economy’s view of value:

• value-through-progress – the progress economy approach, building on top of value-in-use

Join me as we lightly explore these views on value models in this page whilst linking to separate deeper pages on each view. At the end of this page, we’ll compare and contrast each view in a table highlighting key attributes.

From our traditional view: value-in-exchange

As we’ve discussed, our default view on value equates value with the maximum amount of cash one is willing to pay for a goods or services. We often refer to this as value-in-exchange, since we are are exchanging items of value.

value-in-exchange – our traditional, manufacturing (goods-dominant), view. Where value is incrementally added through supply chain and we boil ir down to being the simple idea of how much someone is willing to pay

It is the view of value that we learn in economics and business classes around the world. It is also the view we tend to observe it in action in our daily lives; paying cash for goods and services. We can trace its formal documentation back to Adam Smith documented it back in 1776 in his famous The Wealth of Nations, although the concept predates this work. What we can say is that as a view of value, it has proven to be wildly successful in the past. We only need look at GDP growth of various countries over the centuries.

What it means

This view of value strongly reflects the manufacturing world, it is a goods-dominant logic:

value-in-exchange

Our traditional model which has historically been wildly successful.

• Value-in-exchange revolves around:
  • manufacturers in the supply chain successively embedding value into products
  • manufacturers exchanging embedded value for other valuable items, typically cash.
  • the end customer using up, or destroying, the embedded value they now own.
• It has close parallels with the linear economy – take, make, waste – the antithesis of the circular economy
• We attempt to see services in the same view.
  • that leads to a goods vs services debate where goods are seen as preferable and services are poor relatives.
  • Services are: intangible, inconsistent, require involvement, we can’t create inventories and production/consumption are inseparable.

We typically measure value in this view as the price. And price is usually set by a manufacturer. Customers generally share this perception, although they also seek the best possible price. This dynamic is referred to as the hand of the market. It means that price is generally set through the balance of demand and supply.

A natural consequence of this balance is Porter’s generic strategies. To charge the highest price requires differentiation. An alternative strategy is cost leadership. In this approach, the goal is to offer lowest price. The aim for the manufacturer/provider is to have a higher volume of exchanges. It appeals to customers looking for “value”, ie. good enough products at low cost. Whilst challenging the concept here that higher value equals higher cost, it still reflects the link between price and value; and that value is difficult to define.

The challenges

The fundamental challenge with value-in-exchange is the manufacturers total focus on making an exchange. That drives a number of blind spots to further value creation, namely:

• consistency over customisation
• chase next exchange over understanding/helping after exchange
• more exchanges are better than circular economy thinking or longevity
• goods better than services
• marketing myopia
• simple exchange over business model innovation
• value is determined by provider

Paradoxically, these are the blind spots that have given value-in-exchange its power in the past and driven growth. Now they hamper further growth. They drive us into strange ideas, such as having to understand the “shift to service economy” where various factors challenge the “goods better than services” mentality so embedded in our thinking. Services are not valuable, as Adam Smith tells us; yet most major economies are now “service” economies. Or hamper our circular economy thinking – it is better to make more exchanges than build something that is simple to reuse, recycle, refurbish etc.

These same blind spots hamper our approaches to innovation. We’re too busy trying to embed more value in our products to truly understand customer or consumer view of value – we know best. Or we get caught in Levitt’s marketing myopia, unable to see beyond what we currently offer and trying to improve that (the “add yet another razor blade” phenomenon) Organisations are great efficiency engines: Incremental innovation is easier than radical which is easier than disruptive (in the Christensen sense).

Dive deeper

Can we address those blind spots? I believe we can, by evolving to a different view of value.

Evolving to value in use

Remember that Adam Smith identified two views of value: value-in-exhange and value-in-use. Back in 1776 he settled on value-in-exchange as the predominant model. That has a lot to do with context. In his time, manufacturing was driving wealth and so he naturally saw that as productive labour. On the other hand, services – such as maids, housekeepers, butlers etc – were then seen as unproductive labour (in terms of increasing the wealth of a nation).

The context in our 21st century is different. Here’s the components of GDP for UK in 2019:

You’ll see that services made up 79% of UK GDP. We argue that viewing growth through a value-in-exhange model that accounts for only 21% of an economy might not be the way forwards.

To strengthen that argument, we can observe, as Grönroos did that:

It is of course only logical to assume that the value really emerges for customers when goods and services do something for them. Before this happens, only potential value exists.

Grönroos (2004) “Adopting a service logic for marketing”

Therefore we arrive at a view where value is created during the use of propositions. Where those propositions could be goods or services, or combinations. This is what we call value-in-use.

value-in-use – an alternative view of value, which sees value as an increase in well-being, and propositions only creating value as they are used. It reflects a service-dominant world, where the role of goods is to transport (frozen) service to where, and when, needed.

What it means

Fundamentally, value is tied into using a product – with no distinction between goods and services – to achieve an increase in well-being. In summary:

value-in-use

Minimising the blind spots of value-in-exchange by removing the deep focus on a point of exchange.

• Value is:
  • created as wellbeing of the service system, which includes the beneficiary, is increased
  • co-created through use – resource integration
  • destroyed by one or more parties during use
• There is no longer a point of exchange
• Everything is a service (singular) – the application of skills and knowledge for the benefit of others, or oneself
• Goods freeze service, allowing it to be distributed in time and space.
  • the service is unfrozen in acts of future resource integration
  • in practice one service may be frozen in several goods
  • goods often place a higher knowledge/skills requirement on the user

This is the world of service-forward logics. Notably, Grönroos’s service logic and Vargo & Lush’s service-dominant logic.

The benefits

There are two high level benefits over value-in-exchange:

• we remove the point of exchange – offering the potential to address the value-in-exchange blind spots
• the resource integration perspective gives insights into user behaviour
• we remove goods vs service division

Removing the point of exchange allows us to see the time logic as continuous. We’re have the opportunity to be involved “before”, “during” and “after” (if those terms really mean anything now). That offers the opportunity to remove, or at least minimise, the blind spots of the previous model. Sales is part of the whole lifecycle, it should use conversations to:

• customise the offering before engaging – to find and help a better understanding of beneficiary’s well-being sought)
• alter the service during the engagement – to keep or increase, or even reflect evolving, well-being improvement
• review and improve offering after engagement – to offer a closer match in the next provision)

The next benefit comes from seeing value as being co-created through resource integration. We get to think about i) what resources are required to increase the well-being; ii) who provides/has those resources and iii) what gaps still exist. Resources carry competences and skills. Some are seen as operant – that acts on other resources – and others as operand – that need to operated upon (such as goods).

These two points combine together when we consider innovation. Innovation becomes the process of discovering and delivering new offerings that improve well-being better than currently can be done.

Technically this means new resources and/or new configurations of existing resources. This includes shifting skills and competence between operand and operant resources. It’s interesting to note that the un-extraordinary shift from operand to operant resources in an offering is the extraordinary “shift to service economy” in value-in-exchange thinking.

Further, by removing the goods vs service debate, those new resources, or combinations, can be viewed as a wider solution space. Levitt told us back in 1975 about marketing myopia (short sightedness):

“people don’t want to buy a 1/4 inch drill; they want a 1/4 inch hole”

Levitt (1975) “Marketing Myopia“

Yet, if you are in the business of selling a drill, your innovation is likely around improving the drill. We see that directly in the razor blade business, with innovation seemingly consisting of adding yet another razor blade to the razor head.

Levitt is telling us we should think wider. What other ways are there to achieve the well-being a beneficiary is looking to achieve? It could be through purchasing a drill, or hiring one, or engaging a handyman that provides such a service, or some combination. All are the same in the value-in-use view. In fact, we start to see a continuum of offerings between those that are pure goods based and those pure service based.

the challenges

Whilst the value-in-use view gives us the opportunity to solve value-in-exchange challenges, it brings some challenges itself:

• well-being, whilst better than value, is still hard to define/agree upon
• requires deeper understanding of what beneficiary is trying to achieve
• we lose the connection to price / signalling value
• is still not the full picture – we miss levers to make sales/innovation more systematic

It’s a powerful shift to start equating value with an increase in well-being. However, have we just shifted the problem to another phrase? Is well-being easy to define or agree upon? I believe it is a step in the right direction, but still misses the structure to help in a definitive way.

For example, you may already have drawn a parallel between well-being and Ulwick’s and/or Christensen’s Jobs-to-be-done theories. However, it’s non-obvious why a beneficiary chooses a particular offering on the continuum we briefly mentioned above. That is, when looking for a 1/4 inch hole, why would a beneficiary chose to do it themselves or to engage a handyman.

Next we have a benefit masquerading as a challenge. Both sales and innovation require a much better understanding and alignment with the increase in well-being a beneficiary, or group of, seeks. That makes things more complicated for providers. It’s simpler for “commodity” offerings, those that fulfil a simple increase in well-being. But beneficiaries are often looking for more complicated increases. Those require chaining together offerings – either by themselves or by another opportunistic provider.

We also find a challenge in how to signal value, sometimes losing control of the narrative. Gone is our link to price. Instead we need to explain how many more dishes our 500ml of washing up liquid cleans compared to competitors. Or how many experts recommend our product. Nowadays it doesn’t have to be experts, it is reviews by similar people to us (TrustPilot, reviews on Air BnB or Amazon etc).

One way we can gain some control is to introduce artificial comparative scales. Hotels and restaurants have long been assessed using a number of stars awarded. Proficiency in a language is often examined by some trusted body. The list goes on.

Perhaps the largest challenge for using the value-in-use view is the hold that value-in-exchange has on us. Had you previously heard of value-in-use or service forwards logics? It’s hard to let go of our previously wildly successful view. Even if that model has the blind spots discussed that are more apparant today.

Dive deeper

If value-in-use offers the chance to solve our value-in-exchange challenges, how do we solve the new challenges it introduces? We need one more evolution.

Observing Value emerges from making progress: Value-through-progress

How can we improve on the definition of well-being? In the progress economy we chose to do that by seeing it as a beneficial change in state that a progress seeker is looking to make. For example: moving from being unable to speak Mandarin Chinese to having a certain competence; from not being able to drive a car to being able to; of currently being located in Stockholm and wanting to be in Oslo; needing a picture hanging on a wall; and so on.

From this premise we can envisage a progress seeker is currently in a state we’ll call progress origin and they want to reach a state of progress sought. And we can further define that state as comprising of functional (such as those above) as well as non-functional (for example safely, quickly) and contextual (typically constraints) elements.

Our focus should be on understanding progress and what hinders progress being made. Value emerges as progress is made. It becomes a set of progress comparisons. This is value-through-progress.

• value-through-progress – value emerges as progress is made towards a more preferable state (progress sought); with maximum value emerging for a progress seeker reaching their progress sought.

What it means

We’ll build our new view of value on top of value-in-use, interpreting it as:

• by definition: no value has been created when the progress seeker is at their progress origin
• similarly: we can say that maximum value has been created, for the progress seeker, when they reach their progress sought
• it follows that: value is incrementally created (or emerges as we’ll say) as a seeker moves from their progress origin to their progress sought

In our progress-first world, progress is a verb, noun, state, and state transition.

value-through-progress

Defining value in an actionable way – or more correctly, realising value emerges from making progress.

• We build upon the value-in-use model, inheriting its advantages over value-in-exchange.
• Our focus shifts to understanding progress – moving to a more desirable state. What is that progress sought? Where are we starting from? Where are others offering to help us reach?
• From this we get to understand there are six hurdles to making progressing. The fundamental one being a lack of resource – and we find propositions arise offering to minimise that. How can we minimise these hurdles?
• “Value” naturally emerges as a trailing metric of progress reached (towards that more desired state). It is also a prediction of future progress (progress potential).
• It turns out that value is the result of a set of progress comparisons, for example: how far can I progress on my own? How far can a proposition get me? How far have I got?

Sales becomes a process of understanding a seeker’s origin and progress sought as well as their progress hurdles; then aligning an existing offering to that so the seeker’s progress comparison judgements (pre, during, and post) lead to maximum value.

Innovation becomes the actionable process of finding and executing new propositions through some combination of:

• making better functional and non-functional progress within a defined context towards an individual seeker’s progress sought from their progress origin
• reducing one or more of the six hurdles to progress
• accelerating how/when seekers recognise value (we’ll come to this shortly).

The line between sales and innovation blurs to a question of timing and how wide the effect is. That is, innovation may occur in the sales process and the sales process may result in innovation (an improved offering).

Value as progress judgements

In our value-through-progress view, value becomes a set of progress comparisons.

We can best visualise these various progress comparisons by grouping them into three stages:

• before
• during, and
• after a progress attempt.

As well as grouping those made when a seeker makes a solo progress attempt and those additional/updated comparisons when engaging a proposition.

The Benefits

Progress between two states is more understandable, and actionable, than a focus on value. It reveals a number of tools and levers we can use to improve sales and innovation success. These include understanding:

• progress sought from a functional, non-functional and contextual perspective
• where progress seeker will begin their journey in terms of functional, non-functional, and, contextual elements
• a seeker’s prominent progress hurdle: a lack of resource (time, skills, knowledge, tools, etc)
• what resources may help the seeker (which also includes the proposed progress-making activities)
• the five additional progress hurdles that come with a proposition to help make progress and which, and how ,to minimise them (adoptability, resistance, lack of confidence, mismatch on continuum, and equitable exchange).
• which progress judgements a seeker makes (and that leads to how to influence them)

Notice how we don’t use the word “value” above. This is what I mean about focussing on progress; value follows.

By building on top of the value-in-use view we inherit that view’s benefits in terms of offering the ability to remove the value-in-exchange blind-spots and unhelpful goods vs services division.

The challenges

Progress is relatively complex to understand compared to broad-brush view of value being the maximum someone is prepared to pay. It is this complexity that gives us the levers to be more successful in sales and innovation – and therefore growth.

Diving deeper

There is one more aspect of value in the progress economy to cover – value emergence vs value recognition.

Recognising value

An interesting question arises when we view value as emerging from progress: when is that value meaningful? Let’s take an example to explore what I mean.

Say we want to make the progress of moving 100km from where we are now; and we manage to make 80km in one day. We could simplistically argue that 80 units of value have emerged. But are those 80 units meaningful?

The answer is, It depends.

If I can continue the final 20km tomorrow then yes, I can recognise those 80 units as meaningful. However, if I can’t continue tomorrow – say I had to present something at the destination in the evening of day 1 – then those 80 units of emerged value mean nothing to me.

In the progress economy:

• Value emerges as progress is made
• But it needs to be recognised by a seeker for it to be meaningful to them
• Value recognition is a process akin to revenue recognition used in organisations
• Emergence and recognition do not have to happen on the same timeframes; they often do not

value recognition

Value needs recognising – akin to revenue recognition – for it to be meaningful

Another aspect of sales and innovation emerges from this thinking: helping speed up a seeker’s value recognition timeline.

Comparing the three Views

So how do these models compare? We can take various attributes, such as how value is defined, measured, created and destroyed, and which actor and resource focus, as well as how they impact innovation and the challenges the model had:

So, are you ready to explore the fascinating world of value and progress? I suggest starting with the traditional view – value-in-exchange – and see why it has been so successful but why it ultimately is now hindering innovation and growth.

Then move on to value-in-use to see how that addresses the value-in-exchange blind spots yet does not give us the necessary levers to drive innovation and growth. Before delving into our progress economy’s value-in-progress model to see how that unlocks growth and systematic innovation.