In the World of IT, Value Creation is a Perception and not a Calculation
Value creation is the primary aim of any business entity. Creating value for customers helps sell products and services and once a tipping point is reached, one could command its own price. Think about Louis Vuitton, Chanel, or Hermes to name a few.
Value creation is a perception and not a calculation — but “Price” is. When you set a price on something, its calculation is wholly based on its perceived value. Why is a díamond so expensive? What is a diamond’s real value, aside from getting a “Yes!” after proposing a marriage to the woman of your dreams? Our notion and perspective of things accounts for the total value we assign to it. A thing is perceived to be valuable when it’s rare, or old, or new, or important or perceived to be important. These assumptions make a rock like the diamond valuable. By creating value, you command and set the price.
A diamond is forever, but so are other rocks.
But, in order to create value, you need to improve the perception of your product first. Then, one needs to measure what is perceived to be important by the clients and stakeholders, then identify what has the highest value and priorities according to those who are interested in them.
5 Steps to IT Value Creation
1. First, you need to understand that the world of IT is no different. One needs to set value creation by understanding the needs and interests of your business partners and how it connects to the value chain of the company. Once a common agenda and priorities between the business and IT is set, say business continuity has a higher priority than digitalization efforts or vice versa, then setting common goals will be easier and clearer.
2. Second, set SLA’s (Service Level Agreements) and manage expectations. This is important to all parties so there are no confusions on priorities and service accomplishment expectations. After all, SLA‘s must be set according to: what is the level of service that all parties have agreed upon.
3. Strive for the PRICE:
Reliable IT services
4. A common metric must be established between IT and the business. Going back to the notion that, if you really want to improve, you need to measure the things that matter most. Having shared business-IT agenda will serve as a compass so that all team efforts are rowing towards the same strategic direction.
Most successful companies like Google and Intel use OKR’s (Objectives - Key Results) method to establish alignment.
O: Productivity / KR: Man-hours saved
O: Reliable IT services / KR: Reliable Business
O: Innovation / KR: Level of digitalization
O: Cost reduction / KR: Higher EBITDA
O: Efficiency / KR: Level of automation
5. Lastly, in order to create value, IT needs to effectively communicate its accomplishments, with the hope to be perceived as the trusted ally of the business that brings productivity, reliable IT service, drive innovations, cost reduction, and delivers efficiencies through process improvements and automation. This is the price for the unwavering, unfaltering, and diligently striving for excellent IT service. No more, no less.
In a world of IT where not everything that can be counted counts, and not everything that counts can be counted, at least we need to win the trust and confidence of our business partners and customers.
“Value creation” is nothing but improving perception in order to be TRUSTED. The sad news is, if you break it once — you’ll be back to square one.