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Dollars and Sense: Defining Value in Business

 

As Abraham Maslow suggested over seven decades ago, humans have a hierarchical set of needs, including a basic level of needs required for survival—the physiological, like food and air. Businesses are not so dissimilar from us. At the very fundamental level, in order for a business to survive it needs sustenance. And businesses’ fuel is money.

 

Consider the start-up. An entrepreneur has invented Product X; something that will change the world (even if it’s just a small corner). She wants to bring her concept in to reality, so she creates a business around which Product X is built. But no matter what the innovation, location or impact, every start-up seeks the same thing: financial backing to breathe life into their company. Sure, there may be a any number of other factors driving the force of Product X, but when talking about its business aspect, monetary accumulation determines launch or fail. Whether she bootstraps the foundation of the business, or finds multiple venture capitalists to invest, no start-up survives without money. The value of her concept, defined from her company’s perspective, very much has a price tag.

On the other end of the spectrum, we have Globo-Corp, the world’s premiere leading international firm in Services Z. Globo-Corp is a giant; a well-oiled machine that is able to assimilate and replicate other businesses into their portfolio without missing a beat. This corporation is run by the Board of Directors – a group of individuals charged with steering the direction of the firm so that Services Z reaches every feasible country in the world that might require said services. The decisions they make, and pass down to their senior management (and so on, and so on) are driven by a single motivation: keeping the shareholders happy. And how do they do this? By making sure whatever directives they generate ultimately manifests in maintaining or growing the shareholders’ invested wealth in the stock of Globo-Corp.

In the business world, the basic (yet overarching) value of any given project is ultimately defined by a reduction in costs or increase in profits. Even philanthropic organizations recognize this term of value, that is why every not-for-profit must create some sort of funding or fundraising strategy.

Think about the main focus of your previous projects. Some state the obvious outright— the business objective is to increase revenue by A or decrease expenditures by B. Others may use more vague terms, but can still be broken down to this most basic of business necessities. Increasing efficiency? That’s another term for decreasing the amount of resources (time, staff, equipment—all of which have a monetary value) required to perform a certain function. Increasing customer satisfaction? That’s another way of saying we want our customers to be happy so they buy more. Assuming the company wants to survive and genuinely believes the project will assist in that goal, break it down to the most fundamental of levels, and you will discover—it’s all about the money.


For more information, check out this recent IIBA webinar, where Joy Beatty debates whether value is all about money in organizations. Or peruse through this Seilevel blog post and watch the related video on finding and using business objectives related to money.

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