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What is Value? Understanding and
Measuring the Value Chain of a
Process
Highlights and Q&A - NYBPP Meetup 5/16/18
HASSAN K...
Hassan Khan
Hassan is the co-founder and process scientist for Cavi Consulting, a process science
consultancy helping busi...
Agenda
● What is Value? Understanding and Measuring the Value Chain of a Process
■ What is Value - the Value Equation
■ Ex...
What is Value - The Value Equation
Benefits are subjective and can change given
individual circumstances, unique needs,
na...
Exchanging Value
Why are the subjective “benefits” included in the formula then, if the objective nature of cost is what d...
What is the Value Chain?
Often, the customer only pays for the total value of all the value-adding steps in a process; how...
Defining and Measuring the Value Chain
The goal of process analysis is to derive the value chain of the existing process a...
Summary
● Value is the difference between benefits and costs when remaining at the end of a process
● Value is created whe...
Q&A
Hassan Khan | CAVI CONSULTING
Answering questions from the meetup
Question 1:
What is a blue sky design?
A blue sky design is a theoretically ideal solution not
limited by any physical con...
Question 2:
How to explain value chain in one sentence?
How to truly extract value from value chain?
Whenever there is a p...
Question 3:
How does discovery phase fit into the value
chain?
How do procedures such as meetings and
reports affect value...
Question 4:
Should process transparency take place
externally or internally?
How does process transparency speak for
Everl...
Thanks for coming!
● NYBPP Meetup:
○ Please leave us a positive review!
● You can view all of our past slides over
on Slid...
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What is Value? Understanding and measuring the value chain of a process (NYBPP Meetup)

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In this meetup, we discussed the concept of "value". We introduced the "value equation" and explain universal methods for understanding and measuring value creation within business processes. We also applied these principles in order to discuss how to implement process data controls within the value chain to enable continuous process improvement.

Publié dans : Business
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What is Value? Understanding and measuring the value chain of a process (NYBPP Meetup)

  1. 1. What is Value? Understanding and Measuring the Value Chain of a Process Highlights and Q&A - NYBPP Meetup 5/16/18 HASSAN KHAN | CAVI CONSULTING
  2. 2. Hassan Khan Hassan is the co-founder and process scientist for Cavi Consulting, a process science consultancy helping businesses to remove obstacles to energy flow and more effectively automate, scale and grow. Experience Hassan has consulted for small-to-enterprise level companies across a wide range of sectors and verticals, including financial services, legal services, media and digital services Education and Certifications Hassan graduated from the University of Nebraska with B.S. in Neuroscience and Chemistry Hassan is certified in Change Management (PROSCI) and Software Product Management (SPM)
  3. 3. Agenda ● What is Value? Understanding and Measuring the Value Chain of a Process ■ What is Value - the Value Equation ■ Exchanging Value ■ What is the Value Chain? ■ Defining and Measuring the Value Chain ■ Summary ● Q&A ■ What is a blue sky design? ■ How to explain value chain in one sentence? How to truly extract value from value chain? ■ How does discovery phase fit into the value chain? How do procedures such as meetings and reports affect value? ■ Should process transparency take place externally or internally? How does process transparency speak for Everlane’s value?
  4. 4. What is Value - The Value Equation Benefits are subjective and can change given individual circumstances, unique needs, natural or learned abilities, etc. Cost is not subjective. Within the value formula, cost is an objective measure translated to currency. You might argue that a cost can’t be placed on certain human or intangible elements; this is not true. Value = Benefits – Cost
  5. 5. Exchanging Value Why are the subjective “benefits” included in the formula then, if the objective nature of cost is what defines the value? It is because there are always two parties in value creation (assume “company” and “customer”), each with subjective experiences of the benefit of a given process in comparison to their cost needed to receive that benefit. This difference between customer benefits (goods or services received) and company benefits (possible profit opportunities) creates a space that allows for value creation to exist.
  6. 6. What is the Value Chain? Often, the customer only pays for the total value of all the value-adding steps in a process; however, because there are multiple steps in the process which add incremental value, those steps are collectively referred to as the “value chain”. In other words, if there is a process, there is value being exchanged, and if that process has multiple steps, there is a value chain. Each step in the sequence can then be deconstructed for analysis.
  7. 7. Defining and Measuring the Value Chain The goal of process analysis is to derive the value chain of the existing process and then design a new version of the process which matches that value chain as close as possible (within given constraints). Although our end goal is to derive the value chain of the process, it is easier to start by identifying all the waste that exists around the value-adding elements. Once you can use your process “vision” to identify and label all the waste, the value chain is simply whatever remains. With the value chain derived from the process design, you can clearly see which steps add value and add intuitive measures to them.
  8. 8. Summary ● Value is the difference between benefits and costs when remaining at the end of a process ● Value is created when two entities with different benefits and cost structures exchange energy in their respective processes ● The value chain of a process identifies, filters, connects and describes only those activities which directly contribute to the creation of value ● Understanding the value chain allows us to see within a process design the value adding steps. From here, measuring and controlling value creation is as easy as putting appropriate measures on those few steps within the overall process
  9. 9. Q&A Hassan Khan | CAVI CONSULTING Answering questions from the meetup
  10. 10. Question 1: What is a blue sky design? A blue sky design is a theoretically ideal solution not limited by any physical constraints. It is a productive method to brainstorm creative ideas and urge the outside-of-the-box thinking regardless of its feasibility. However, such ideal design could hardly be enabled in reality’s workflow considering physical limitations. Hence, that’s why a salesperson is likely to sell customer a blue sky product without fully grasping the implementation capability from the customer’s end. The oversight on the implementation tells that the salesperson is losing perspective on how value is being exchanged between the service offering company and the customer. A product, regardless how great it is, remains a blue sky design if it fails to implement feasibly with customer’s needs.
  11. 11. Question 2: How to explain value chain in one sentence? How to truly extract value from value chain? Whenever there is a process, there’s a value being produced and if such process occurs in multiple steps then there’s a value chain. Extracting value essentially means to remove wasteful steps. Wasteful steps come in two forms, non-value adding steps(e.g. transportation of a good) and non-value adding but business required steps(e.g. auditing). When examining whether a value is being created in a work step, one may realize some steps within a process yield no value to the end result that customer is buying. Hence the goal to extract the total value is to eliminate non-value adding activities while minimize waste that serves as a required business function for regulatory or legal reason.
  12. 12. Question 3: How does discovery phase fit into the value chain? How do procedures such as meetings and reports affect value? Just because the discovery phase can’t produce an immediate process improvement deliverable implied by the analysis phase, doesn’t mean it creates no value. In fact, process capturing phase plays a critical role investigating the as-is current state, which makes possible to further derive the value chain. After all, how can you improve a process without knowing where you are? Only when the value creation core steps are accurately identified through discovery understanding can a deeper analysis phase be proceeded. On the other hand, one might argue meetings and reports are non-value adding activities since these steps don’t yield apparent validation on how the value is being translated or exchanged. However, as long as meetings or reportings meet the objective of understanding or changing a process, they essentially exemplify value adding characteristics and sum up to the overall value.
  13. 13. Question 4: Should process transparency take place externally or internally? How does process transparency speak for Everlane’s value? Although some companies may want to maintain a certain level of confidentiality in protecting their secret sauce, cultivating transparency both externally and internally has become a health indicator for an organization. Because establishing transparency within a process ultimately creates comprehensive visibility for the personnel involved. Consequently, energy can flow more cohesively through the process and boost productivity. Take Everlane’s success story as an example. The brand exercises radical transparency philosophy by revealing to its customers how and where the clothing was made, what it really cost and how much of a markup Everlane is charging that makes their ethos truly promising compared to the aggressive markup that is evident in traditional designer brand. In addition, Everlane’s waitlist approach that aims to create a more transparent communication with its customers concurrently works to the brand’s favor as it enables the pull strategy that allows an item-driven business to form and drive its demand. As a result, their radical transparency strategy upholds Everlane’s value as a sustainable and ethical retail business and enables it to thrive.
  14. 14. Thanks for coming! ● NYBPP Meetup: ○ Please leave us a positive review! ● You can view all of our past slides over on Slideshare.net: ○ Slide Decks from Past Meetups ● Also, join our Facebook Group! ○ https://NYBPP Meetup Facebook Group ● Finally, check out more process insights at: ○ www.caviconsulting.com

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