>> Article Archives >> Management Insights >> The Value Principle: Part 1 - The Principle

Management Insights
The Value Principle: Part 1 - The Principle
By Jonathan Narducci, Narducci Enterprises

How do our company's benefits - product, services, brand identity, and operations - become valuable? It's not through marketing or sales. It's not through building products we think are the wave of the future. Our benefits - value - become valuable because our customers get the results they need by using them.

The Principle

How do our company's benefits - product, services, brand identity, and operations - become valuable? It's not through marketing or sales. It's not through building products we think are the wave of the future. Our benefits - value - become valuable because our customers get the results they need by using them.

The Value Principle is a rule that is grounded in the belief that customers do not buy features, bell and whistles; they buy results! Customers buy from us because they have problems to solve - defined in terms of their issues and needs - and we have solutions to those problems that adhere to their business standards and are implemented under their constraints. Growth occurs when we consistently provide solutions with this in mind. From this observation, we can state…

…The Value Principle

Value Propositions - solutions, benefits - promote growth only when customers consistently experience the results they expect!

Sounds obvious enough but it's important for two major reasons:

  1. It emphasizes that value propositions are the engines of growth, and
  2. Customer experiences using the propositions ultimately define how well the engines work.

Growth is the main goal of most companies; financial growth based on developing a customer base of repeat buyers. We think our "growth engines" may have all the necessary components to achieve this goal - quality, time to market, service, and the "right" products and services - but these value proposition building blocks are only a part of the total solutions customers expect. Not only that, because these components are the entry fee we all pay to enter today's economy, our competition has them as well.

What will separate our companies from our competitors is making sure all value building blocks used to define value propositions are created, improved, and applied based on The Value Principle (building blocks such as perpetual innovation skills, customer communication, consistent execution, plus all others considered essential to success). Each building block must be defined with a focus on the contribution they make to the results customers want, understanding that this will lead to the results we want.

Which leads us to the second major reason The Value Principle is important: Just any old results won't do. All of our value propositions deliver results. But we have to make sure it's the results customers expect to experience regardless of how appropriate we think our solutions are to solving targeted problems - i.e. our perceptions of our benefits. We don't get to define "appropriate" before or after the results are in; that's up to our customers. Therefore, our perceptions should be formed by proactively learning about the experiences our customers expect and not by assuming what those experiences should be.

If the "results" of our solutions end with a match between our perceptions and our customer's expected experiences then we have "Value Nirvana" - our company and the customer expected the value to produce certain results and the customer experienced it. The companies that have the closest match are usually the competitive leaders.

When we build a value proposition we tend to put the efforts in terms of our success - probably financial - and not in terms of the business results our customers need. How many times have we put selling our goods and services in terms of solving our customers' problems so they can sell more and by how much? How many times have we put offering our value propositions in terms of our customers' financial success? Are these questions raising a distinction without a difference? Maybe. But ask yourself this: "Would we act differently and produce different 'total solutions' if we put our customers' goals ahead of our own?"

The Value Principle reminds us to proactively define our propositions - characterized in terms of products, services, knowledge, and operations - with the results our customers need to experience foremost in our mind.

Applying the Principle

From The Value Principle we can derive several rules. Since our goal is to maximize the probability that our customers will be able to create business success using our value, three such rules are:

1. "Results" can only be accurately predicted if we know our customers' businesses - their goals, operations, customers, competitors, and industries.

Our companies can't create value that turns into the business results our customers plan for if we don't profoundly understand the "who, why, what, how, when, and where" of their business challenges.

2. Value propositions need the proper "care and feeding" so they can always be positioned to create an equitable value exchange over and over again!

If we sell our customers something that is supposed to solve their problems and it doesn't, the value exchange that transpired probably won't occur again. It doesn't matter that we built the greatest "mousetrap" ever, it just matters that it caught mice. It's only then that customers feel they got their money's worth. Then they buy again and again which causes our company to grow!

"Care and feeding" means we have to be vigilant about the quality of our value propositions' building blocks. We have to have the right assets with the right characteristics, possibly for each market we serve, recognizing they are constantly under assault by change, trends, customer needs, critical issues, and the competition.

3. Customer expectations have to be pre-set; they tell us what they want and we tell them what we can do, and vice versa, until both of us clearly understand expectations.

Even though we want to "delight" our customers, we have to let them know what we can and can't (or won't) do in light of their requirements and our abilities. They will be delighted when their problems are solved instead of getting "promises" that can't be kept due to our constraints.

Pre-setting expectations will help keep surprises, especially negative ones, to a minimum. For example, we're surprised when:
· Our computers crash after we load in a new program,
· We expect a delivery to contain all items ordered and some are missing,
· Our costs are not what they were advertised to be, and
· New customers get a better deal on purchases than we do as loyal ones.

Our customers rely on our companies to be an integral part of their value propositions used to advance their business. When we don't set the proper expectations about performance and surprises occur - especially at inopportune times - then our growth expectations will be re-set, which could surprise us.

The Value Principle is only good if it drives us to take actions. Therefore, the following steps outline how to apply this principle to your value creation efforts (a list of questions for each step will follow):

Step 1: Develop a deep understanding of your customers' business needs - financially, competitively, and operationally. This includes understanding their goals plus future sales, marketing, and product development (etc.) activities. Put these needs in terms of issues and problems your customers are facing and will face.
Step 2:

Adding your knowledge from Step 1 to your knowledge about (e.g.) industry trends, technologies, emerging markets, and your company's abilities to create and deliver the solutions, form a complete picture of the value propositions that will best help position your customers to attain their goals.
Note: Your company's abilities could be constrained by, for example, resources, skills, market segments pursued, and time. Identify these constraints and either mitigate them or let your customers know how they could affect your solution's performance.
Start developing your perceptions (or opinions) about potential solutions and what form you think they should take, how they should perform, and how completely they solve the problems.

Step 3: Understanding expectations is part of understanding requirements. Make sure you learn the outcomes your customers expect from using your solutions - "why, what, who, how, where, when" not to mention tangible results - and about what they expect not to happen implementing them. Adjust these expectations with your constraints and capabilities, communicate them to your customers and readjust based on their feedback.
Step 4: Develop a realistic (and as complete as possible) group of potential experiences (results) customers can have applying the value (along with the probability of each occurring). Work with your customers to verify that the experiences are going to help them meet their business goals. Evaluate the impact of any "negative" experiences on your and your customers' businesses.
Step 5: Based on the above, develop a value proposition implementation feedback plan to collect information on and monitor how well your prediction process is working: find out what the real experiences were versus what was predicted. Go to Step 1.

In summary, the Value Principle is valuable because:

  • It gets us to act pro-actively.
  • It gets us to think about the consequences of a "perceptions only" solution.
  • It gets us to think about our value proposition in terms of results.
  • It gets us to think about what really drives growth.
  • Finally, The Value Principle encourages us to consistently update the proposition based on our customers' business objectives and operations.

Remember, it's our customers' growth that really defines our growth!

Jonathan Narducci uses his 30+ years of experience in business, management, and quality systems to lead international companies in their search to locate and implement the ideas that helps craft the business performance needed for the business results expected. For more information visit

More articles by Jonathan Narducci
More articles on Management Insights