Value Management – A Tower of Babel

Tower of Babel as Metaphor for Business Value

Jewish scriptures describe the construction of the Tower of Babel. For those not acquainted with the account, I’ll summarize it briefly (apologies to any biblical scholars reading this). A long time ago, man decided to build a large tower.  His plans grew so that he aimed to build the tallest structure on earth -- an early-day skyscraper touching the sky. In his arrogance, man soon began to consider himself god-like. As the tower approached the heavens, he became overly confident in his abilities and knowledge (believing he had actually usurped God). But God introduced languages. The tower’s construction workers subsequently could not understand each other and were confused. Chaos ensued halting construction. The tower fell into ruins.

What is the “moral” of the story? Many religious readers interpret this biblical passage as a warning not to place oneself on the same level as the Almighty. Other readers view it as a mytho-poetic explanation for the origin of multiple languages. I think it’s a useful metaphor for the current state of managing value in business. 

The Tower of Babel narrative contains two main ideas that emanate from the overarching theme of man’s hubris: the presumption that others understand us whenever we speak and the folly we display believing we have all the answers / knowledge / abilities to accomplish whatever we intend. In previous posts (link1 and link2), I noted that value is a language. There are multiple definitions of value developed by academic disciplines and used by their corresponding business functions. These definitions correspond to value used as a verb, noun and adjective. When one adopts a single definition of value, it is as if one were speaking using a single part of speech (much like a toddler). Even when speaking with like-minded colleagues (e.g. financial/accounting professionals), professionals often use different value definitions. Complications ensue. 

The language of value

Thinking about language is useful. Words and expressions (for various concepts) sometimes exist in one language but not in another. Often there is a contextual reason – languages spoken in Polar Regions will understandably have more words and expressions for snow, frost, ice and wintry conditions than languages spoken in the desert. In “The Magic of ‘Untranslatable’ Words” (Scientific American 12 July 2016), Tim Lomas describes how words existing in languages other than English can expand the emotional and cognitive horizons of English speakers. By becoming aware of these words and learning their respective meanings, English speakers can increase their intelligence and “emotional granularity.” Our knowledge grows and becomes more nuanced using concepts expressed in other languages. We can incorporate ideas we may seldom, if ever, consider.

As mentioned above, academic disciplines / corporate functions describe value differently. Marketing seeks to explain customer value. Finance investigates shareholder value. Accounting describes monetary value. Manufacturing / operations address production value.  Learning and employee training concern themselves with cognitive value. Information technology, artificial intelligence and knowledge management focus on information value. They are all business value!

In an earlier article, I stated that value is the energy of the business cosmos. Just as energy appears in various wavelengths (radio waves, light, etc.) in the universe, so value appears in different guises (customer preference, utility, cost, market price, etc.) in companies. Value is either matter (a company’s assets) or energy (a company’s activities). Einstein stated that matter is convertible into energy. I state that assets and activities are similarly convertible – they are different but complementary categories of value, i.e. different forms of business energy. Thoroughly understanding value is critical if one hopes to optimize overall business value.

Value mistranslation / value misalignment create value gaps

All business professionals need to understand value. Value is key to strategy. Value is the foundation of the value chain, i.e. the interconnected value activities within the firm. Value activities are the physically and technologically distinct activities the firm performs. They are the building blocks by which the firm creates a product / service valuable to its buyers, i.e. the firm’s value proposition. Unfortunately there isn’t a ‘universal’ definition of value in academe / the business world. The many alternative definitions lead to value mistranslation / misinterpretation / misalignment for companies. A universal Esperanto is needed to speak the language of value!

In An Empirical Framework for Evaluating, Implementing and Managing a Value-based Supply Chain Strategy (PhD thesis accepted by the University of Bath School of Management —ProQuest publication number 3121355), I published the Integrated Value Process (IVP) framework. IVP consists of (1) a ‘meta’ definition of value, (2) a conceptual framework illustrating the value management process based on that ‘meta’ definition, (3) five value gaps (mapping to the framework), and (4) a set of ‘first principles’ driving effective value management.

In a previous article, I introduced the “value gap.” Whenever value is misinterpreted / mistranslated between stakeholders and wherever stakeholders’ activities are misaligned across the value chain, value is wasted. Lean thinking posits seven types of waste – wasted assets (inventory, over-production, defects) and wasted activities (transportation, motion, waiting, over-processing).  The seven types of waste do not provide any value for the ultimate customer. Since they do not provide customer value, he or she would not willingly pay for them. In other words, customer value is being destroyed even if a company believes its assets / activities to be value-adding.

Integrated Value Management

An integrative, holistic approach to value is clearly needed. When conducting my PhD research into US and UK value chains, chief executives described their departments “talking past each other.” One CEO said it seemed as if his leadership team “was speaking different languages” [exact words]. In the value chains I studied, supply chain professionals struggled to manage global value chains where suppliers were in fact speaking multiple languages. Manufacturing / operations departments frequently struggled to interpret / translate corporate mandates to “maximize shareholder value.” Marketing departments sometimes struggled to communicate unclear value strategies pursued by their leadership. Customers often were disappointed by “wasted value” in the product and service offerings they received. Value gaps resulted – value sinkholes filled with uncompetitive offerings, ineffective activities and misallocated resources. Value was destroyed. See previous article.

A new “way of thinking” is required: Integrated Value Management. Optimizing value management for your company requires mastery of four key areas: (a) learning to speak the language of value, (b) using a system-wide value process, (c) observing the “first principles” of value, and (d) detecting / eliminating / preventing value gaps. Company executives will solve the value puzzle only when they adopt a holistic value philosophy that is conceptually sound and empirically tested. A systems-wide solution is needed for a complex problem.

The language we use shapes how we think and colors what we “see”.  Using a partial definition of value -- a single value theory used by only one of the many management disciplines -- restricts one’s ability to “see” value in its multiplicity. It also inhibits one’s efforts to communicate value with others. The resulting misunderstanding and mistranslation lead to the misalignment of efforts and activities across the company.  Misalignment is then compounded across the company’s value chain. Value gaps result.  Use the Integrated Value Process (IVP) framework to optimize value flows across your enterprise and your value chain.

Please see my additional posts on value at www.andrewjswan.com. Kindly email me at andrew.swan@columbia.edu if you’d like to discuss value, value chains, value streams / flows, Integrative Value Management, and / or mobilizing collective intelligence. I’m passionate about these topics.