Fundamentals of Value

Here are seven fundamental lessons about IT value that Mohanbir Sawhney has learned in a decade-long career as an academic researcher, consultant and teacher:
1. Value is customer-defined… To understand the true nature of value, you need to get inside the minds and hearts of your customers, whether they’re internal or external…
2. Value is opaque…Understand all factors that customers take into consideration in assessing value, and you have to understand the relative importance that customers place on each factor…Once you understand the factors that specific customers consider when making decisions, and how they make trade-offs, you can develop a better understanding of the value propositions that might appeal to each one…
3. Value is multidimensional. A common myth in business is that IT investment decisions are made solely on functional value-a product’s features and functionality. Value has two other dimensions as well: economic value-what these features and functions are worth to customers in terms of time and money; and psychological value-the emotional benefits that customers get from your products or your company…
4. Value is a trade-off. Value is the perceived worth of something in relation to the total cost that customers pay for it. This definition underscores the fact that value is a trade-off between costs and benefits…
5. Value is contextual. You cannot divorce the value of an IT system from the context in which it will be used…
6. Value is relative. Customers never assess value of an offering in isolation. They always consider value relative to alternatives. These alternatives may not be other products or systems, but other ways of accomplishing the same goals or doing nothing at all…
7. Value is a mind-set. Value-based management is more than models or processes. The value mind-set is grounded in the belief that the sole purpose of a company is to create value for its customers and to be compensated equitably for its efforts.”