This reflects how value increases the further downstream the impact of a product or service is felt.
As the term implies, Value in Use is the immediate value from using an item or service e.g. cutting timber with a saw, driving from A to B in a car, locating an item in a warehouse. However, the value of that item is likely to increase when you look beyond its immediate utility to consider the long-term impact of it. That is, provided it lasts or keeps performing for the long term.
This is the value you won’t get over time if a product or service or it doesn’t perform as expected e.g. a lower-quality item may cost less and be just as useable (now) as the higher quality item. However, there is a risk that it might not last as long. Thus the value you’re expecting to get from it in later years say, is at risk.
Let’s now look at a simple example to see how those come together. In this case a saw blade in a timber mill
A saw blade with tungsten tips lasts five times longer than a non-tungsten blade. That is value
However, a tungsten blade costs eight times as much as a regular blade. On the surface, not a good deal. However, let’s look at Value In Use
Because a tungsten blade only needs changing every five hours instead of every hour like a regular blade does, there is:
That is value, which may offset the added cost of the tungsten blade. There is more to it than that though when we look longer term:
Because the saw has less downtime the production process is faster and the output of cut timber is higher. Let’s say 20% for this exercise. That is more value.
Because timber output is increased 20%, we ship 20% more finished product and so make 20% more gross margin e.g. extra $ thousands for only $ hundreds increase in cost. That continues year after year. That is far far more value.
Whilst the difference in cost of blades is $800 vs $100 say, the added volume and margin in finished product is an order of magnitude greater.
The point here is that value is not inherent in a product (hence it has no ‘value proposition’). It’s what a Buyer receives depending on how s/he uses the product.
In inventing a solution, look to value being generated as far downstream as possible, but not so far that it becomes nebulous and stretches credibility.
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