Whenever I ask entrepreneurs what is your business purpose, I usually get a firm reply as ‘earn more money’. Though it is agreed to some extent that business should make money, in order to the existence of any business the purpose should not be only to earn money. The purpose, however, should be to deliver higher value to customers and by which you generate money. The approach towards money will destroy the very essence of business in the long run.
“A business that makes nothing but money is a poor business” – Henry Ford
We make the profit by not selling product or services to customers but by adding value to their life by providing what they want.
What is Value?
The customer is not interested in the kind of technology, no. of people working in the company and the management. They are really interested in how the product or service adds value to their life. Value is considered from the customer point of view. It is the performance, features and service which is expected by the customer in place of the money they spent.
How to identify Value?
Think yourself as a customer!
Walk through the process. Start from raw material receipt to final product out. Look at the process from the point of adding value. Ask yourself one question every time when you see the activity,
“Are my customers paying for these activities?”
If its NO! Then it is a Non-Value added activity.
Non-value added activities are generally identified as overproduction, waiting, transporting, over processing, inventory, unwanted motion, defects.
Value should be seen from adding performance, features and service which is expected by the customer in place of the money they spent. Remaining all activities are non-value added activities. An organization’ success lies in improving values by removing the non-value added activities