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3 E's of Value Creation

The journey to holistic value

Let's nail it - those obsessed with savings only look at a single link of a complex value creation chain. It's not just about the Needs to Resources transformation - it's about the impact we created.  

The following sketch isn't my idea—I found it elsewhere and adjusted it to my beliefs.

In the procurement context, we should look at economies but remember Efficiency and Effectiveness. 

Like anyone else's, our work must be measured by its impact. Savings don't create an impact. We must consider whether we made our company more competitive or our society a better place (affordable prices, new business for SMEs, cleaner environment, etc.) 

Our actions and decisions are deeply interconnected, and their actual value is often more significant than the sum of their parts. The flow from economy to effectiveness in the (procurement) process isn't just a chain of steps; it's a value-creating journey that can make or break the success of an entire endeavor.

Let's unpack this process to understand the journey to holistic value.

Needs 

It starts with understanding the business needs. Many of our colleagues still have to work on getting that far and challenging the needs. 

Cost 

Next, we examine costs, but it's not only about finding the cheapest option. We take a different approach to expenses to ensure you’re getting the best value for your money and the best satisfaction of your business needs. Every nickel and dime should work as hard as possible to fulfill the needs.

Resources

Resources (people, materials) are what we are getting for our money. Quality resources mean we did a good job getting all those at a fair price.

Initiatives 

Initiatives are our game plans. They could be projects, strategic partnerships, or new processes to improve efficiency.

Outputs 

Outputs are immediate results of your initiatives. They're the visible deliverables, a sign that things are moving as expected.

Outcome 

Outcomes are the changes that occur as a result of our outputs. It’s the difference our work makes to the business, whether that's increased sales, better customer satisfaction, or streamlined processes.

Impact 

Finally, impact is the long-term effect of our outcomes. It’s the lasting change in our company or the broader market.

We wrote about the perceived value earlier in this post. Perhaps one way to describe it is to imagine the transition of a cost into an outcome., e.g., once our project delivered its projected benefits. At this point, not many of us would evaluate the project's impact other than counting its monetary gains.    

At the base lies 'Holistic value' – the ultimate goal. It represents the journey of value creation, with all the stops mentioned above. Holistic value is about sustainable success, achieved when the economical, efficient, and effective use of resources, initiatives, and actions come together harmoniously.

It is my personal take on the hot topic of value. It is not a revelation but an attempt to find order in the entropy.  

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This post first appeared on The Good Spending, please read the originial post: here

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3 E's of Value Creation

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