In a simplified way, we could define “value creation” as the action of satisfying a desire, or solving a problem, at an attractive cost for the customer. The cost is expressed not only in terms of money, but also of time, comfort, access, etc.

With the above definition, we could say that a company is a system whose primary objective is to create value for its customers. This system is integrated in turn by three large subsystems.

1. THE DESIGN SUBSYSTEM

The purpose of this subsystem is to design the value to be created. Its main functions are:

• Assess the capabilities of the organization. The ones you already have and the ones you can, and want, to acquire. This function is key to the following, so it must be carried out very carefully, objectively and honestly.

• Choose the customers for whom you are going to create value. Since it is impossible to serve all possible customers, the company must select those that, it believes, it can best serve.

• Choose the desires or problems that are going to be attended to, of the chosen clients. The selected clients have an infinity of wishes and problems that the company either cannot solve, or it can, but in an inefficient way. Therefore, you should focus only on those desires or problems that you can attend to very efficiently. This function requires taking the time and making the necessary effort to get to know the selected clients in depth.

• Design the products that will satisfy the chosen desires. Products are the concrete way to satisfy wants or solve problems. And everything necessary for its use (for example, installation, training, maintenance, etc.) should be considered as components of the product.

• Design the way in which the designed products are going to be delivered to the chosen clients.

• Design the price at which the designed products will be offered to each customer (or segment).

• Calculate the maximum cost at which the designed products must be produced and delivered to each client (or segment), so that the operation is profitable in the long term.

2. THE EXECUTION SUBSYSTEM

The purpose of this subsystem is the creation, communication, and delivery to customers of the designed value. Its main functions should be:

• Design the necessary processes to produce and deliver the products to the selected clients.

• Design the policies required to produce and deliver the products to the selected clients. Fundamentally, it is about establishing limits and guidelines for decision making.

• Design the necessary structure to execute the necessary processes.

• Attract, hire, train and retain the people who must execute the necessary processes, following the established policies and under the structure of the organization. To attract, retain, and get the most out of people, a good salary is not enough, but the company must also offer them a meaning or purpose that motivates them to do what they do, and a means of professional and personal growth.

• Establish and cultivate relationships with suppliers. Suppliers must be seen, to some extent, as partners of the company and as such, their relationship with the company must be productive for them.

• Where appropriate, establish and cultivate relationships with distributors. Like the suppliers, they can be considered as partners of the company and also their relationship with the company must be convenient for them.

• Communicate to customers that the company has the products they need.

• Secure the required working capital. To operate, the company requires financial resources that can come from different sources:

  • Shareholders who receive an acceptable return on their investment.

  • Shareholders who still DO NOT receive a return on their investment but who believe that in the future they will and therefore are willing to continue investing.

  • Bank credits.

  • Company profits.

3. THE ENVIRONMENT MONITORING SUBSYSTEM

The company is part (a subsystem) of a larger system that we can simply refer to as “environment”. It is obvious that the environment affects the company.

For this reason, the main functions of the environmental monitoring subsystem are to analyze it in order to detect both opportunities and threats for the company in time.

Points to be monitored:

• The validity of the assumptions on which the company is created. Were the wishes and problems of the selected clients correctly diagnosed? Do customers appreciate the value received?

• New wishes and problems of existing customers.

• Customers that could be served, and that are not being served.

• Other companies that are (or could be) offering the same value to the same customers.

• Different products that might serve the same needs (not wants, but the underlying needs) that ours serve.

• Technological advances.

• Social, political and macroeconomic changes.

• Changes in laws and regulations.

• Demographic trends.

• Etcétera.

As in any system, all the elements of the company are connected and must interact in such a way as to maximize the potential of each of them in order to achieve the system’s objective in the most efficient way possible: to create value for its customers.