Friday, May 24, 2013

Understanding the changing needs of customers: Akolade

I am giving a presentation at a Financial Analytics for Business Management (for Akolade) conference in Melbourne next week, and provide the presentation (pdf 6Mb; May 2011; Understanding consumer value; other presentations) below:

Key points:
- let's measure value alongside other accounting measures
- Value is complex
- measuring value is complex
- some approaches to measuring value in practice: the Australian National Data Service (where I work: I was interested to know the process ANDS has in place to know what customers value)
- value theory: the 3G mobile phone study (my PhD):

The conference is interested in: Identify[ing] ways to measure and maximize the value of intangible assets...
The presentation in text (and your comments as always are welcome... questions, examples, critique is also welcome as this helps flush out and improve the Value Theory)....

Draft of presentation: (references below)

Understanding the change in customer needs
Jobs to be done theory...

   1.Understanding what customers value in a service environment: Australian National Data Service
    2.Measuring perceived customer value; sensing customer value
    3.Exploring what value means for your customers: Case Study - 3G Mobile phones 2004 - 2009

Business Analytics:
- Statement of Accounting concepts; reliable, measureable; objective

What is value?
- Aristotle: utility, exchange, conspicuous consumption (Gordon 1964)
- Marx (1865): labour theory of value
- Bailey (1838): in the eye of the beholder; subjective
- Vargo and Lusch (2004): co-construction, value conversation

Who are Australian National Data Service?
- customers: Public Sector and Universities, Department
- goal: more researchers reusing research data more often
- funding: $75 million from Dept. of Industry, Innovation, Climate Change, Science and Research
- resources: 50 staff, five states

Measuring Value at ANDS
- Customer contribution: co-investment
- subjective: customer satisfaction
- examples:

Process of tracing Value at ANDS
- Issues Register; documenting issues (245)
- Client Liaison Officers; face to face
- GoTo Meeting; webinars,
- Monthly Informals
- eResearch Australasia annual conference

Issues Register: Value Management in action
- from Progress and Final Reports
- Section to comment on:
- issues needing ANDS facilitation
- issues need direct advice and support
- achievements to share
- Director's review; traffic lights, keywords, weekly review, follow up action
- next steps: status by customer, Business Intelligence, current issues

Understanding Consumers: 3G mobile phones: Value is complex
- what do they value?
- 12 value meanings;
- 80 value elements; Appendix of thesis (Ferrers 2013)
- a simple example
- Consumer quotes

Consumer quotes:

Understanding your customers;
- B2B or B2C
- Value Management
- Value Leadership
- Value Conversation

Key References:

Aust Accounting Research Foundation (1995). SAC4: Definition and Recognition of the Elements of Financial Statements. Viewed online at:

 Bailey, S. (1825). A Critical Dissertation on the Nature, Measures and Causes of Value. London School of Economics (1931), viewed 30.06.2009 at &source=gbs_book_other_versions_r&cad=8#v=onepage&q=&f=false

 Ferrers, R. (2011). Value as a resolution of forces. Viewed online at:

 Ferrers, R. (2011). Beyond Innovation Management: Towards Value Management. Viewed online at:

 Ferrers, R. (2013). A consumer 'value' theory of innovation: a grounded theory approach . figshare. PhD thesis. Retrieved hh:mm, mmm dd, 20xx (GMT)

 Gordon, B. (1964) Aristotle and the Development of Value Theory. The Quarterly Journal of Economics, 78, 1, 115-128; viewed online at

 Kim, W. & Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. Harvard Business School Press. More at:

 Marx, K. (1865/1919). Value, Price and Profit. Melbourne: The Workers Intelligence Bureau.

 Sveiby, E (1997). The New Organisational Wealth: Measuring and Managing Intangible Assets. Berrett-Keohler See summary at:

Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of marketing, 1-17. Available online at:

Wednesday, May 1, 2013

Measuring Innovation: National Value Management

The Science and Technology in Technology in China course has an interesting assignment on measuring an economy's innovation capacity:

Aside from the innovations systems approach (wikipedia), can you think of other methods for analyzing an economy’s innovation capacity and output (from a macro perspective)? If the answer is yes, explain the advantages/disadvantages of the alternative in comparison with the innovation systems approach.

My answer builds on Solow's Growth Model, I learnt about in the Model Thinking Coursera course:

1. A Value Growth Model to analyse an economy's innovation capacity 

My model, the Value Growth Model (VGM), is an extension of Solow's Growth Model with an added Value component. Solow, a Nobel Prize winner (pictured below) in Economics (1990), proposed a formula simplified to:

O = f(L, K, T)
Robert Solow, Nobel Prize winner 1990, Economics

Namely that an economy's output (O) or GDP, is a function of the inputs, labour (L), capital (K) and technology (T) or innovation. So technology allows more output from a given amount of workers and investment. T is really the intangibles left over after the tangible inputs are counted, including innovation, skills, intellectual capital and networks. I will consider T to substitute for innovation.

To O, I add V for value. Value is the intangible benefits consumers get from purchases above what they pay for goods. V can be measured relatively by asking the question of a product, firm, industry or country (X); does X provide more value than last year? A sample of say 1000 people are asked the question on a scale of 1-5, where 1 is much worse and 5 is much better.

Thus, O + V = f(L ,K ,T).

The macro innovation output (T) is thus solved as the residual in the formula after finding values for O, V, L, and K. The innovation capacity is the maximum value of T over time.

 2.Advantages and disadvantages of the VGM model

The advantage of VGM is that T can be found for a sector, firm, industry or nation. The VGM applies equally to services, like health, finance, media and government as well as more traditional manufacturing. The VGM also takes advantage of both tangible and intangible inputs and outputs, and is relatively straightforward to calculate.The VGM model is quite simple to understand. While T is not broken down, it provides a concrete measure of innovation.

The disadvantage of VGM is that the focus is really on output rather than capacity. Capacity is inferred from the maximum T over time, but this assumes that T does not vary randomly, which is not known. The model focuses on financial measures, but excludes the value of connections in the economy; these are included in T. The VGM is less a prescriptive policy guide than a measure like inflation, GDP or unemployment. The VGM is not an absolute measure, since value is measured relatively rather than absolutely.

3. Comparing the VGM with the innovation systems (IS) approach

The VGM is more simple, straightforward and concrete than IS. VGM is a measure whereas IS is a descriptive method of analysis. IS is complex, powerful, dynamic and interactive but it is also a little vague about where to begin since it includes a very wide range of possible information. IS is also more capacity oriented so makes more sense in manufacturing, mining and telecoms sectors where capacity is important, whereas VGM can be used to assess innovation in services, government and non-profits through understanding value created. IS focusses more on inputs to innovation and firms whereas VGM focusses more on outputs of innovation and benefits consumers get from innovation (value). The VGM is more simple, direct and thus quicker and more straightforward to calculate.