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What is Value?

Updated: Nov 7, 2022

Hi, I’m Nate Barber. Welcome to the 4th video in our 10-part series celebrating Opgrade’s 10th anniversary. Thanks for watching, and thanks for celebrating with us!

OK, video four. What is value?

In our previous video, “What is Lean?”, I discussed how Lean has 5 fundamental principles that act as a road map for understanding and deploying Lean in our organizations. To recap, those 5 principles are:

  1. Define Value

  2. Map the Value Stream

  3. Establish Flow (where you can)

  4. Implement Pull (where you can’t flow), and

  5. Pursue Perfection

Today’s video, then, dives deeper into the first of these principles.

So, what is value? When we talk about value in our companies, value is often a pretty nebulous term. We have no problem saying we need to deliver value to the customer, but what does that really mean? If you’re like many of the people I’ve met, you may not think delivering value to the customer is part of your job. Delivering value is something the sales people handle, because they’re the ones who talk to the customer. Or maybe shipping? They’re the ones who actually deliver our product to the customer, right? That must be it. Value is the product we sell, so it’s the shipping department who delivers value, right?

Well, that’s actually not too far from the truth.

Customers buy our products, or services, because the value of what they get is greater than the value of having their money in their pockets. It turns out, customers are really good at defining value for us. They give us money for the things they value. It really is that simple. In Lean, Value is defined as those thing that, if we did them more, customers would pay us more.

So which things, if we did them more, would our customers pay us more? If we buy more raw materials, will customers pay us more? Well, no, not by itself. What if we schedule a bunch of production batches? No, not that either. What if we move things around on forklifts a lot? Would your customers pay you more if you moved things around more? Of course not. About the only transporting they’d be willing to pay for is the last transport, when you move it to them.

What you might be starting to understand, is that there are a lot of things we do in business that don’t create value for your customers. In fact, the only things that can create value, are those that change the fit, form, or function of something. That’s the second part of the Lean definition of value. All that raw material you bought, when you actually transform it into something else, that’s the value creating step. But value creating isn’t limited to just manufacturing. If you change the form or function of information, that also can create value. Frankly, that’s how Opgrade creates value for our customers. We change the form and function of information in the minds of those we teach and coach.

A third important point about value, is that something can’t be considered value added if you’re having to do it again, if it’s rework. No rework ever creates value, it’s just fixing something that was defective the first time. Why didn’t we get it right the first time? That’s when it would have created value!

So there they are, the 3 requirements for work to be considered value added, or VA.

  1. Your customers must be willing to pay you more if you did it more, and

  2. The work changes the fit, form, or function of something, anything, including information, and

  3. It isn’t rework

If your work doesn’t meet all three of these criteria, it can’t be considered value creating work. It’s what is called Non-Value Added work, or NVA. That can be tough to hear, right? My job is NVA. Hmmpf.

It’s at about this time that you might be asking, “so if my work isn’t value creating, am I not valuable?”

NO, that’s not at all what I'm saying, so let’s put this into some context.

Firstly, it may surprise you, but even in good companies, only 3-5% of work is really, truly value added. There will probably always be a lot that has to happen for the value added work to happen. In any organization, the odds are, that your work isn’t value added.

Secondly, who is your customer? We must always consider the end-customer as the real customer, but who receives the value of your work? Many of us have internal customers in our organizations, those who are part of our organization but receive our work product. Payroll is a great example of this. I’m sure you’re a nice person, but would you come to work without a paycheck? Of course not. You are Payroll’s customer, since you receive a paycheck, yet payroll can’t be considered value creating because your end customer wouldn’t pay you more if you spent more time on payroll. These functions, like payroll, are what we call Business Required NVA, or BRNVA.

Thirdly, the most valuable people in any organization are those who improve it. Even if your entire job is pure NVA; everything you do is all waste, if you’re working to reduce that waste, you’re making the company better, making your job better, and creating the capacity for you to do something much more interesting than wade knee-deep in your company’s waste.

And that’s what Lean is all about, eliminating waste. Let’s call a spade a spade. If it’s true NVA, it’s all waste. Waste is the exact opposite of value. It’s everything we spend time, money, and energy on that ultimately provides zero value to our customers. It doesn’t even facilitate value. Why are we spending time, money, and energy on that? It’s silly, really. Let’s stop doing the silly stuff. Let’s get rid of the waste and make your job better. Let’s make it easier to get things done and make your life better at work. If Lean isn’t making someone’s life better at work, we’re doing it wrong!

Speaking of easier, to make it easier to spot all the silly stuff we do, the Lean community has come up with several acronyms for the different types of waste to help us remember them better. The original 7-letter acronym is TIMWOOD, T-I-M-W-O-O-D, which is now the 8-letter acronym TIMWOODS, T-I-M-W-O-O-D-S. You may have also heard of DOWNTIME, D-O-W-N-T-I-M-E, or WORMPIIT, W-O-R-M-P-I-I-T, two other 8-letter acronyms that mean roughly the same thing as TIMWOODS. Google will be happy to fill you in on what those acronyms are. We at Opgrade use a modification of WORMPIIT, as W-O-R-M-P-I-T-T. We do this for a couple of reasons, 1) because a client asked us to, and 2) because PITT, P-I-T-T, makes me think of Brad Pitt, and WORM PITT therefore makes me think of worms in Brad Pitt’s hair. There’s a good visual reference for you. Poor Brad Pitt. Though I’m sure he’d still be incredibly good looking even with worms in his hair.

Ok, so, because I’m sure you’re wondering, the acronym WORMPITT stands for

  • Waiting

  • Overproduction

  • Rework

  • Motion

  • Processing

  • Inventory

  • Transportation, and

  • Talent

These are the 8-wastes. Most of them are pretty intuitive. Some are less so. I won’t go into all of them in depth now, because this video is already long enough, but I will talk briefly about the first three:

  1. Waiting is probably the most prevalent waste. You’ll see it everywhere. Material waiting to be processed. Workers, waiting on decisions. Emails, waiting on responses. Waiting is everywhere.

  2. Overproduction is more common than you might think. Anytime you make something in a batch, you’re overproducing, and you’re literally requiring more waiting. It’s for this reason that overproduction is also probably the biggest source of all the other wastes. And

  3. Rework is probably the most expensive waste, at least traditionally. Every waste we got to experience the first time, we get to experience again. And again. And probably again, and again, and again. Rework is very expensive. If rework isn’t the most expensive waste, then Talent is. If you’re not acting at the top of your scope, what is that costing your organization? If you’re not asking the people in the process how to improve your processes, what is that costing you? How many solutions have you passed-up simply because you didn’t ask your team? That could be astronomically expensive!

Ok, that was 4 wastes. I snuck in Talent. Ya got me.

But what I got is no more time, so I’ll end with this:

Often it can be easier to spot wastes in our organizations than it is to truly understand if work is value added, so these 8 wastes are helpful in showing us the silly things we do that we should probably, definitely, stop doing. That’s what Lean is all about. Let’s stop doing the silly stuff, and spend more time on value. Let’s make our work better, and easier. Let’s spend 10 minutes today ,to make tomorrow 1 minute better, forever.

The only problem is that once you see waste in your organization, you can’t unsee it. You’re welcome.

Next week’s video will be “What is Value Stream Mapping?”

Until then, thanks for watching, and thanks for celebrating Opgrade’s 10th anniversary with us.

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