Value and impact

I think it's important that organisations understand that they must create create value. But what is this "value" thing, in general? And how does it apply to mission driven businesses, in particular?

In one sense, value is just money. And it is important for organisations (even social enterprises, even charities) to make money. To quote Danny DeVito's character from the film "Heist":

Everybody needs money. That's why it's called, you know, "money".

Organisations cannot exist unless they have a way of making money. Sales, grants, donations... it actually doesn't matter what kind of income it is, but it does matter that it is generated in a fairly reliable and repeatable way, as a result of the work the organisation does. All organisations in other words need to do things that someone is willing to pay for.

This actually leads us to a richer definition of value. Value is "what the customer is willing to pay for", or "what matters to the customer (using ‘will they pay for it?’ as a test)".

This is one of the most powerful framings that we can put in our organisational toolbox. We are here to do the stuff that "matters to the customer" and using income as a proxy. The commercial reality is still there in this framing, but the deeper motivation is an inquiry into the customer's world. Who are they? What problems do they have? Where do they want to be? How can we help them? These are all great questions to ask whenever we are stuck as a team, whenever we are navigating uncertainty and change as an organisation.

For charities, value is made complicated by the fact that the people who pay for their work are often not the people who receive it. They have two customers. They have to do work that grant funders are willing to pay for and that solves problems for their beneficiaries. This can be a delicate balancing act. Funder priorities and beneficiary needs are not always in sync. It's true that as a charity you exist more for beneficiaries than you do for funders - the mission is the most important thing. But if you don't keep an eye on what funders value (and are willing to pay for), you can solve a lot of problems...and still run out of money.

For mission-driven businesses more broadly, there may be only one customer, but there is still a balancing act between "value" and something else. Organisations that are for-profit but that still, like charities, see their mission as the most important thing have to ask if they are doing what the customer cares about, but they also have to ask whether that advances the mission. I call that other thing, that mission-related outout, "impact".

My friend Laurie Young, who helps companies use technology more effectively, made the point to me that companies don't exist to solve any customer problem, but only a subset of them that matter to the company. In other words that it's bad business strategy to become solely focused on the customer, and not to also focus on the business - "but is this right for us? Should we be the ones solving this problem?". So in a way this value and impact trade off is one that is happening in all organisations, all the time.