The Value Trap

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I often pose these questions to senior executives from software companies and their reaction is invariably quite amusing.

If they were to ship the identical software to three different customers, would the customers have achieved totally different value from the same software if we went back two years later?  If so, why is that, given that all three received   the same exact software?  And would any of them have achieved the intended value from the software?

Let me illustrate my point.  Let’s say the software is designed with 100 units of value.  Of the three customers, will any of them achieve the 100 units?  If not, why not?  The second question is why do all three achieve different units of value from the same exact designed value (100 units)?  Let’s assume that customer A achieved 80 units, customer B achieved 70 units and customer C achieved 60 units.

The value gap of 20, 30 and 40 units is caused by the Adoption and Implementation of the software and clearly not because of the software itself.  Yet, the gap is often blamed on the software itself because most organizations fail to grasp the importance of Adoption and Implementation.  Customer C could easily have made sure that they achieved more than the 60 units had they done at least as good a job as B or A.  And what’s even more interesting is that the software companies keep making enhancements to their product, thus increasing the designed value from 100 units to 110 to 120 and so on.  What they fail to realize is that by doing that, they are actually increasing the value gap unless they are also focused on helping their customers increase the achieved value, which has very little to do with the software.

Let me use another example.  How much of the designed value of a smart phone is actually achieved by the average user?  Would you be shocked if I told you it’s in the single digits?  And by the way, the phone companies keep adding to the designed value every six months and therefore keep increasing the value gap.  Steve Job’s genius was in focusing on how customers were actually going to use the product and get the most value out if it.  He clearly recognized the importance of the ”vowels” which actually help reduce the value gap and not the “consonants” which do nothing but increase the value gap.

 

This simple yet powerful concept needs to be recognized by the software companies so that they can focus on the achieved value and not the designed value.  If they do that, it will actually have a significant impact on how they enhance and design their products.  All future enhancements will be focused on reducing the value gap and increasing the achieved value.  Increasing the designed value and not doing anything about the Adoption and Implementation will only increase the value gap.

The same applies to any solution that you are working on.  Developing the best Supply Chain strategy or the best contract with a supplier is the designed value.  The achieved value has to do with Adoption and in reality a sub optimum contract may actually deliver more achieved value for the organization because it focus on the vowels thus reducing the value gap.

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Dalip Raheja
Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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