Value Creation

Value Creation

Value Creation Jonathan Poland

Value creation refers to the process of creating outputs that have a higher value than the inputs used to produce them. This is the foundation of efficiency and productivity, as it allows organizations to generate more value from their resources. The following are illustrative examples of value creation.

Commodities

A farmer uses land, equipment, water, labour, sunlight and seeds to grow onions. This process creates value from resources.

Products

A firm manufactures eye glass frames on a production line. The eye glass frames have greater value on the market than the cost of inputs such capital, labor, energy and materials.

Services

A bank uses technology, labour and capital to offer mortgages to customers. This has value to customers as it allows them to pay for a property as they use it.

Processes

A customer support process takes customer issues and inquiries and uses technology and labor to resolve the issue or answer the question. This has value to the customer, so much so that a customer may only purchase products and services that offer customer support.

Machines

A machine in a job shop drills holes in metal. This is part of a value creation process that creates parts for high speed trains from materials.

Information Technology

A software service takes inputs such as data and computing resources to generate monthly customer invoices. This has value to a firm as they need to send customer’s invoices in order to collect revenue.

Work

A craftsperson uses labor and tools to create a canoe from wood.

Knowledge Work

A designer uses software to create a design for a chair. The design may have value as chairs with a useful and attractive design may command high demand on the market. Generally speaking, design is a significant factor in the perceived value of goods and services.

User Intent Jonathan Poland

User Intent

User intent refers to the goal or objective that a person has in mind at a given moment. Modeling user…

Internet of Things Jonathan Poland

Internet of Things

The Internet of things describes physical objects with sensors, processing ability, software, and other technologies that connect and exchange data with other devices and systems over the Internet or communication networks.

Implementation Risk Jonathan Poland

Implementation Risk

Implementation risk refers to the potential negative consequences that a business may face as a result of difficulties or failures…

Dismissing Employees Jonathan Poland

Dismissing Employees

Letting go (aka firing) employees is a difficult and sensitive task, and it’s important to handle it with care and…

Brand Risk Jonathan Poland

Brand Risk

Brand risk refers to the potential for a brand to lose value or for a new brand to fail in…

Visual Branding Jonathan Poland

Visual Branding

Visual branding is the use of visual elements, such as color, typography, imagery, and design, to create a cohesive and…

Qualified Small Business Stock (QSBS) Jonathan Poland

Qualified Small Business Stock (QSBS)

Qualified Small Business Stock (QSBS) refers to a special classification of stock in the United States that offers significant tax…

Corporate Governance Jonathan Poland

Corporate Governance

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It…

Change Driver Jonathan Poland

Change Driver

A change driver is a force or factor that initiates or drives change within an organization. Change drivers can be…

Learn More

Key Employees Jonathan Poland

Key Employees

Key employees, or key personnel, are individuals who possess unique skills, knowledge, or connections that make their prolonged absence or…

Industrial Design Jonathan Poland

Industrial Design

Industrial design involves creating designs for mass-produced products. A common principle in industrial design is that the design should be…

Domain Knowledge Jonathan Poland

Domain Knowledge

Domain knowledge refers to a person’s understanding, ability, and information about a specific subject or area. It is often associated…

What is Fractional Reserve Banking? Jonathan Poland

What is Fractional Reserve Banking?

Fractional-reserve banking is a system in which banks are only required to hold a fraction of the deposits they receive…

Good Customer Service Jonathan Poland

Good Customer Service

Good customer service is a service experience that goes above and beyond to meet the needs and expectations of customers,…

The Power of Compound Interest Jonathan Poland

The Power of Compound Interest

Traditional finance will explain compound interest as the interest paid on a loan or deposit calculated based on both the…

Business Goals Jonathan Poland

Business Goals

Business goals are targets that an organization sets for itself in order to improve its overall strategy and performance. These…

Business Experience Jonathan Poland

Business Experience

Business experience refers to any work experience, including paid employment, freelance work, and contributions to family businesses or personal entrepreneurial…

Cash Flow Statement Jonathan Poland

Cash Flow Statement

The cash flow statement is a financial statement that shows the inflows and outflows of cash for a company over…