Defining "value" is a headache that impacts organisations across the UK.
When you consider the pure financials of a decision - whether that’s a buying decision at tender stage, a site decision if planning a new project, or an organisational decision which may impact structure, jobs and well-being - making the money stack up is relatively easy.
The bits you can't easily measure seem to play second fiddle, and often are the factors which are cause us the biggest headache when we try and quantify a decision.
The model in the link below, featured in the Harvard Business Review, identifies 30 elements which could constitute value, and sets a hierarchy of importance - creating the Value Pyramid.
What is interesting is that in their research, they confirm the theory that the ranking of value differs from sector to sector, and therefore a solution that is value for money for one organisation would not score as highly for another.
How this applies to procurement is really interesting. Buying organisations can use research like this to create more of a differential on quality, not price, enabling them to encourage innovation and new ideas from the supply chain.
Having led bids where every offer had to be given a financial value to count as a value offer, I hope studies like this will make those organisations re-think their approach.
When customers evaluate a product or service, they weigh its perceived value against the asking price. Marketers have generally focused much of their time and energy on managing the price side of that equation, since raising prices can immediately boost profits. But that’s the easy part: Pricing usually consists of managing a relatively small set of numbers, and pricing analytics and tactics are highly evolved.