The Value of Value
“We deliver value”. Widely stated and probably just as widely accepted as a valid reason for contracting a service provider. It slips off the tongue easily and doesn’t require much explanation. From the service provider’s perspective this is a valid, albeit clichéd statement designed to enhance the pitch and engender confidence. Is this how it is perceived by the client though? Like most cliché statements it is probably accepted with scepticism – a generalist statement with no clear deliverable, no checking or verification process and no, or at best minimal, accountability. While a client may prefer to hear more specific deliverables along the lines of “we will increase your annual profit by 25%”, this would be far too specific for any professional to enter into, particularly at the early stages of an engagement, so “we deliver value” is rolled out instead.
Scepticism aside, value is obviously being delivered, otherwise why are so many businesses paying for it? But what is it? How is it measured? Or, more importantly, how do you know it has been delivered?
What is Value and how does it equate to the service industry?
The definition of value, as a noun, according to Google, is “the regard that something is held to deserve; the importance, worth, or usefulness of something”. A broad enough statement so that evidence of its delivery will inevitably be subjected to interpretation; an opportunistic scenario from a service provider’s perspective, and often a confusing scenario for a client to come to terms with.
So how does one prove the value of a service offered, or a job performed, or an assessment completed? Unlike a residential property purchased at auction, where value is clearly evidenced in the price, what is being purchased from a service provider may not be seen, or touched, or heard, or even witnessed. Some service providers, such as lawyers, can provide a very specific service that is clear in its deliverable and relatively easy to compare, others however, such as business advisors may be asked to provide a service which has no direct comparison, or possibly never been delivered before due to its uniqueness. Often the purchaser of such a service will be doing so in the knowledge that they have a need that must be filled and will therefore be assessing value based on an expectation of value, formed in part or in whole, by the experience, expertise, qualifications, industry knowledge and, hopefully, reference sources of the advisor.
The determination of Value?
According to management consulting guru and author of the “Oxford Handbook of Management Consulting”, Matthias Kipping, the product of consulting is hard to evaluate in advance, because it is both intangible and also consumed at the same time it is produced. In the end, impressions can be all that matter.
So, does the perception of value equate to the reality of value? Quite possibly, although that is not to say that there shouldn’t be some good evidence of its existence.
What can an advisor do to evidence value delivery at the commencement of an engagement, where the scope may be broad and the outcomes general and largely unspecific? Good advisors may take a negative approach to the matter. While some value delivering specifics may be provided at the time, they may also detail the process should the delivery of value not be possible such as “we are unsure what the eventuality of this will become and we will work with you extensively to ensure that value is created, however should we reach a stage where it looks like this is not possible, then we cease work, re-assess and if necessary walk away from the engagement in order to retain credibility.” A “value-insurance” model
What does all this mean to a Client?
Inevitably, the decision to engage with a business advisory firm is not made lightly. Unless a specific task is being sought, such as a project feasibility study for example, which will have clear outcomes and a pricing model, the engagement of a service provider should be primarily about value. While specific value drivers such as profitability, efficiency, prosperousness, growth and strategy are all important; they all ultimately head towards one specific business aim - increasing the value of the business. The lifecycle of a business is relatively short. The average life expectancy of a Fortune 500 company is 40-50 years and only 33% of SMB’s in Australia last longer than 10 years and while many cease to exist due to business failure or retirement of principals, many are on-sold, merged and/or listed. Therefore, the primary intent of the business owner should be to maximise the value of the business.
Guidance in this process is difficult to obtain. Despite its enticing title; “Extract Value from Consultants”, authors Gordon Perchthold and Jenny Sutton adopted the client’s view of the advisor engagement, with a natural bent to managing advisors, under the guise of “getting the best out of consultants” as opposed to real value extraction. Value in this context was a “value-for-money” discussion, not a value accretion discussion.
What is does discuss however, is the importance of employing the best advisor, ensuring clear objectives/scope, focus on outcomes, not completion and ensuring appointed advisors are accountable for outcomes, something any quality advisor would readily accept.
How nem adds Value
Value is at the core of all nem partner engagements. The IP of nem is value driven; in fact one specific tool is titled the VALUE Encounter, a counter-intuitive approach to business development that avoids selling. Often nem engagements are commenced without any agreement on scope of works, fee structure or even commercial engagement. As obtuse as this sounds, it is a natural outcome of a VALUE Encounter based client meeting which explores the client’s concerns and creates a mutual desire between nem and the client to move ahead to the next stage, with the client clear in the knowledge that should the expected value not become evident then work will cease and commercial engagement suspended. It is inherent in the delivery of value that failure to deliver value also comes at a cost. In nem’s case that is the cost of maintaining its own core values.
Whether value is delivered by way of increased value in the business, or by some other means such as improved operating procedures or reduced risk, it is value nevertheless.
If a client either believes the business isn’t getting increased value or doesn’t clearly understand the expectation of increased value in regard to a service provider appointment, they are entitled to ask why. The appointment of a service provider should always be about provision of value and increasing value of the business.
But, lets be clear! Value is intangible and real, all at the same time. While it can be monetary, it often isn’t and can often be identified by its absence rather than its existence but – when it is delivered, perception equals reality for the client – and that is valuable.
Author: Gary Ayre, Partner of nem Australasia.
This article is based on research and opinion available in the public domain.
 Oxford University Press, USA, 29/3/2012
 Mark Goodburn – Jan 15, 2015 “What is the life expectancy of your company” - WeForumhttps://agenda.weforum.org/2015/01/what-is-the-life-expectancy-of-your-company/
 Australian Bureau of Statistics – Characteristics of Small Business Australia 2003 - http://www.abs.gov.au/ausstats/abs@.nsf/ProductsbyReleaseDate/E470ABFF948DE84CCA256FF00078EAB7?OpenDocument
 “Extract Value from Consultants”, Gordoin Perchthold & Jenny Sutton, Greenleaf Book Group Press, 2010