Identify your “Value Drivers” today
If you are thinking on the lines of health, collaboration of your teams then it’s high time you start pondering about incorporating the understanding of “value drivers”
Background
- Any music lovers here?
- (Sigh) Duh! Who isn’t?
The rise of the number of people (not musicians or someone who is a music aficionado) spending on music or offshoot products & channels linked to music over the last decade has just been staggering.
Take a look at these graphs:
They’re all happily northbound, aren’t they?
Let’s delve a little into the “value” added by these apps:
You look at a new album being announced by an artist. The whole album end-to-end (usually a pirated version) is parallelly made available on YouTube as it gets released over some proprietary online channel, or sometimes much before that actual release date.
When some may argue that’s not a High Res upload, the sampling rate is degraded and is so damn low you’re not going to be able to differentiate between sounds, the truth is that’s just applicable to 0.5% of the market. The 99.5% are really unaware as they just don’t know how to tell those sounds apart.
I put it to you!
Can you distinguish the sounds produced by each of these parts of an acoustic drum set?
Probability is seemingly low!
So, the value add the users are getting off each of these online streaming apps is evident, but how much are the record labels & artists are making is a burning question as it has been for quite some time now?
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(back to topic…)
Core Elements - Actors & Value
Consider a typical B2C / B2B setup and you’d see how there are often a minimum of 2 actors at a major level. One of them is a producer / provider and the other one is a consumer / receiver. Both those actors are connected over a platform so as help them derive the best of value.
Examples are countless, let’s consider a few of them here:
Having said that there are businesses where the Platform / App was the Provider / Producer for a long period of time. For ex: all social media platforms.
But, off late that stands changed as well. These platforms have identified the need to throw it open to the creators enabling them to connect with the incumbent users so as to make it viable for everyone using it, “helping identify & derive more value”.
What’s common amongst all those platforms?
It is the VALUE added continuously to not just the users, but ALL the actors involved.
…which brings us to the topic of “Value Drivers”.
What are Value Drivers?
Definition:
Value drivers are often directly quantifiable as they are linked straight to the revenues and can be easily pinned on using a bit of ROI modeling, or in some cases it could be as simple as the net revenue the actors / providers make by offering a host of services using your product.
NOTE: Value drivers could differ based on the actors involved.
Value driver versus the North Star Metric (NSM)?
A value driver is not the NSM
it isn’t a feature request your users demand out of you / your product which will help you nail the adoption numbers
it isn’t the value that your product offers
it is that aspect which ought to pave way for all the above to happen
It could be thought of as a derivative of an NSM or even the inputs to the NSM in some cases.
Let’s take the example of Spotify to understand this.
Now, here’s an interesting stat:
December 2021:
Spotify had paid €26+ Bn. in royalties to the record labels, music publishers & rights holders since its launch
Why are value drivers important?
The reason they are deemed so important is irrespective of the product / the business vertical one is operating in, the time spent on identification of these which is deeply correlative to one of the most important vanity metrics of every viable business there is in the world, which is – “revenue”.
A value driver does not only clear up the route(s) to revenue but also does play a part in building a sense of alignment amongst all teams inclusive of those that don’t have anything directly to do with the business / revenue per se.
One may argue over why that is necessary and the chief value it would add?
Spending some time over the identification of value drivers not only is imperative for the success of an organization or a given product per se but also propels the collaborative health of internal teams.
Imagine the amount of time spent by the internal stakeholders, the heads of those teams over building a shared understanding and aligning their members over the ultimate purpose. That could easily multiply itself with the complexity induced with the number of actors playing their part in the business, however minor or major that could be.
Moreover, say teams like the Devs / Tech / Design are seen majorly solving problems for and building interfaces / modules / Apps for the users (which represents one actor in the system who is also the consumer in most cases). So, there could be information lost over capturing the other side of the story.
“Why does CS team need to know the revenue generation model? What intrinsic value is that going to add really?”
- Simple!
- Because it puts them at a better stead in understanding adhoc requests and resolving queries which otherwise may appear very odd to their ears
Engineering / Customer Support teams often gets on calls to support or hand hold the users or the actors in the system. Often their knowledge being limited to what’s seen on the App, it’s workflow and its usage does really put off the actors and in some cases there’s nobody measuring C-SAT or NPS over that.
How can one solve that!?
The Value Drivers Template
Here’s a template one can suitably fill out and share with the teams so as to build that shared understanding fostering alignment. And the way it could help new joiners connect instantly with the entire product and its capabilities is just an icing on the cake.
You can download the High Res template here on Gumroad: