I received an email from Dr. Marcus Blakemore about a very fascinating website called Fiverr.com. At first, I was very skeptical because freelancers like technical writers and web designers were offering their services for $5. In fact, these services were listed well below market prices.
Yet, the site also offers bizarre services like someone writing something on his or her lips to a person dressed in a clown suit willing to send greetings to anyone. Loaded with my conventional wisdom of ‘you get what you pay for,’ I gave the website a chance. Through this effort, I found some vendors were outstanding while others were mediocre.
Amazingly, the owners of Fiverr.com had created a niche for themselves with freelance websites, such as Elance.com or Guru.com. However, a new value proposition was also developed.
For experienced sellers, Fiverr.com provides a promotional venue where they can sell more expensive services down the product line, newbie sellers can turn their hobbies into financial gains, and value-seeking buyers can secure some quality services well below market value.
With the pressures of globalization all around, organizations are finding that creating value becomes a necessity. This article examines the concepts of value creation in today’s competitive environment.
Twenty-first-century organizations can no longer implement value creation in a vacuum. Ken Favaro, author of Put Value Creation First, further suggests that placing a priority on value creation gives businesses two advantages over their competition: The first is capital and the second is talent. Favaro argues that successful value creators never suffer from capital shortage.
Value focuses on the relationship between the customer’s expectations of a product or service and the amount paid for it. C.K. Prahalad and Vemkatram Ramaswamy, authors of The Future of Competition, further reasoned that twenty-first-century corporations must adapt their value creation system to fit the global scale.
They noted the new system is an individual-centered, co-creation of worth between consumers and organizations. Few executives take the time to explain their values, but this will be increasingly important if companies hope to expand success in their global market.
For many people, the concept of value creation is vague. An exact definition of value depends on the individual, but it could be defined as the net bundle of benefits the customer derives from a product or service.
According to Businessdictionary.com, value creation denotes ‘the performance of actions that increase the worth of goods, service or even a business.’ Consequently, value creation for customers encompasses developing products and services that customers find consistently useful.
Mark Johnston and Greg Marshall, authors of Relationship Selling, argue that an individual must understand the customer to establish value. Furthermore, Paul Peter and James Donnelly, authors of Marketing Management, argue that the starting point in the buying process is the consumer’s recognition of an unsatisfied need. The customer must remain the focus for any sustainable business success.
Value creation must also be a strategic and deliberate concept for professionals. Mark Johnston and Greg Marshall maintain that perceived value is in the eyes of the customer. Therefore, perceived value will vary. A professional’s biggest challenge is in selling this value with consistency. Being strategic about these business relationships is not simple. Organizations must clearly understand the external motivation within their market in order to create lasting customer value. The external environment is considered anything outside of the organization’s control. External environment factors include economic stability, legal-political shifts, technological growth, social-cultural norms, and natural changes.
With businesses losing market sharing to companies abroad, organizations must establish clear value propositions to their customers. Paul O’ Malley, the principal of Paul O’Malley Associates (Newton, MA), argues the crucial need of value creation for companies: “The most successful organizations understand that the purpose of any business is to create value for customers, employees, and investors, and that the interests of these three groups are inextricably linked. Therefore, sustainable value cannot be created for one group unless it is created for all of them.”
Furthermore, today’s professionals always need to provide value for their employers and customers. In tough times, organizations want to keep their best people. In order to sustain lasting success, value creation must be an important ingredient of corporate business strategies during economic turbulence.
Describe an opportunity or problem in an industry where a new product or service would be benefical to customers because it would provide new value for them.
© 2013 by Daryl D. Green