Value creation means creating better value for business owners. Although value creation shares the same principles as productivity improvement, i.e. getting more output by using same or less resources, but it is encompasses more. The final measurement for value creation is how much more value has been created over business lifespan vs productivity measurements which are typically more short term in nature, e.g. value added per employee.
From the diagram above, we can see that based on financial principles, to increase value, one can do 3 things:
- Increase Revenue
- Reduce Costs
- Improve Capital Efficiency
The above is grounded by financial principles but we won’t go into it here at the moment. For those interested in finding out more, you can contact us.
How do we increase revenue, reduce costs or improve capital efficiency?
There are 4 areas that you can look into:
- Improving workforce morale, skills, management and creativity;
- Improve business model so that less resources need to be utilized and more customers could be served;
- Increase customer satisfaction and coverage in order for more customers to purchase more from your business; and
- Improve internal processes to improve delivery of your business offerings to your customers and stakeholders.
We have developed comprehensive value creation framework that can be applied to any business. For more information about our value creation framework, please contact us at firstname.lastname@example.org.