There are three main kinds of value: economic value, conceptual value, and experienced value
Economic value means money, which comes in the form of revenue and profit for a business, and in the shape of donations for a charity. But we need to be aware of this:
Prosperity in human societies can’t be properly understood by looking just at monetary measures, such as income or wealth. Prosperity in a society is the accumulation of solutions to human problems. These solutions run from the prosaic (crunchier potato chips) to the profound (cures for deadly diseases).
Source: Redefining capitalism, by Eric Beinhocker and Nick Hanauer, in McKinsey Quarterly, September 2014.
Harvard Business School professor Michael Porter has revised his ideas about the nature of value:
No financial man will ever understand business because financial people think a company makes money. A company makes shoes, and no financial man understands that. They think money is real. Shoes are real. Money is an end result.
Source: Peter Drucker, quoted in Mission Statement Definition: Linking Customer Mission and Social Mission, by Gideon Rosenblatt, The Vital Edge.
Conceptual value is typically seen in value propositions and purpose statements, or scribbled on Post-it Notes during a workshop session. Examples include refreshment, comfort, safety, convenience, and ease of use. Linguists call this kind of a word a nominalisation: the verb ‘to feel comfortable’ has been converted into an abstract noun, ‘comfort’. Conceptual value is an abstraction — the menu, not the meal.
Companies must take the lead in bringing business and society back together. The recognition is there among sophisticated business and thought leaders, and promising elements of a new model are emerging. Yet we still lack an overall framework for guiding these efforts, and most companies remain stuck in a ‘social responsibility’ mind-set in which societal issues are at the periphery, not the core.
The solution lies in the principle of shared value, which involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.
Source: Creating Shared Value, by Michael E. Porter and Mark R. Kramer, in Harvard Business Review, January-February 2011.
Experienced value is not something you can handle, like a dollar bill, nor is it a vague concept such as refreshment. Imagine this: It’s a hot day. You are thirsty. You buy a can of beer. You remove the ring-pull and take a swig. Whatever happens next in your sensory system (if it’s a positive experience, otherwise you’re experiencing anti-value) is what I’m calling experienced value. It’s utterly subjective, and cannot be expressed in words.
Rich Co-creation is mostly concerned with maximising the generation of experienced value.
How value is generated
Value is co-created through the interaction between the value beneficiary (e.g. consumer) and the value generator—something tangible or intangible that produces experienced value when the user interacts with it.
The main types of value generator are:
A meta generator 1 is a producer of value generators. Example: an enterprise.
A meta generator 2 is a producer of meta generators. Example: the founders of an enterprise.
If you would like to know more about value co-creation, I recommend Evolving to a New Dominant Logic for Marketing (pdf), a groundbreaking paper written by Stephen Vargo and Robert Lusch, and published in Journal of Marketing, Vol. 68 (January 2004).
The converse of value is anti-value.
Visualize this scenario:
It’s a hot day. You are thirsty. You buy a can of beer. You remove the ring-pull and take a swig. It tastes vile. You are now experiencing what I call ‘anti-value’.
Anti-value is more than dissatisfaction. It manifests as an experience of physical pain or emotional upset arising from a poorly designed or malfunctioning value generator (the can of beer, in our example), or from the denial of previously received and possibly taken-for-granted value.
Anti-value often spawns further anti-value. For example, a woman cuts herself when opening a packaged product. She feels physical pain, irritation and regret, and the emotions escalate into anger.
The inadequate packaging has now generated considerable anti-value and evoked a negative brand experience.
Fast forward to the next purchase occasion. The woman chooses a different brand, not because it promises greater value, but because she wants to avoid the anti-value she received from the first brand.
Increasingly, collective anti-value is being returned to the perpetrator in the form of badwill.