This page serves to give some of my thoughts on activity and value, value creation, etc.; and, in particular, what activities do or do not serve value creation how.
It began as a bit of a placeholder, in order to get a particular itch out of the way, and should not be seen as an even remotely full treatment. The contents are also a bit off-the-top-of-head in order to preserve some thoughts for later use, and it might well be that I will ultimately settle on different exact categories, examples, and the like. Worse, as I noticed during writing, this is one of the cases where the act of writing reveals so many holes in my previous thought that I must decry my take at the beginning of writing as far too superficial. (And while the text has to some degree been adapted to accommodate thoughts during writing, the adaption is by no means complete and I make no guarantee that these “thoughts during writing” reflect my future take. The result is, however, a fuller treatment and less of a placeholder than originally intended.) Note, in particular, some excursions at the end of the text, which mention some of the complications that I came across.
A closely related topic is productivity. While productivity does not feature that heavily in the text as it is, it can pay to keep matters of productivity in mind during reading. (I almost titled this page “Activity and productivity”, with a slightly different intent in contents, but changed my mind during planning. Such a page might follow at a later date. As might be suspected from the below, unproductive meetings were an early motivator.)
A general point that I will usually not mention is that of costs and opportunity costs. This point would complicate the discussion considerably without bring great, well, value to the discussion. Nevertheless, I encourage the reader to keep it in mind, e.g. in that an activity that fails to create value while incurring some cost can be argued to outright destroy value, while an activity that creates exactly as much value as it costs, is not truly value creating in the net. Indeed, even an activity that creates value (relative what was) might lose value (relative what could have been) after factoring in opportunity cost.
The same applies to the subjectiveness of value: Different persons will find different value (or lack thereof) in different things and what is mentioned below as e.g. “adds value” is best read as “adds value in the eyes of some” (the performer of an activity or whoever orders/finances the activity, in particular). At an extreme, the value added in the eyes of the one might be value subtracted in the eyes of someone else. (An obvious example is animation in computer programs/on web pages.) It might be tempting to speak of value only in terms of money (be it money, as such, or things that have a value in money). In many cases, including many relating to business topics, this might be viable; in others, it is not—there are different types of value than what money brings and the value that various individuals attach to money can vary extremely widely.
The usually (! cf. below) best activities are those that create value. For instance, in a factory, an activity that produces, in whole or in part, a product that can be sold at a profit creates value.
The scope is far wider than mere production, however. For instance, adding a lawn to a house can be seen as adding value. For instance, so can something that increases the net capital/assets/whatnot of a business.
The lawn example also shows that what adds or does not add value can often be subjective, and that it is important to have one’s priorities clear.
A further complication is that the border between activities that create value and those that facilitate value creation (cf. below) can be hard to draw and depend on the perspective of the speaker.
A wide range of activities can be seen as facilitating value creation, e.g. provision of raw materials, hiring of new employees, and productive meetings.
Usually, these are secondary to activities that create value, but they are also often necessary for value creation (consider a factory that is at a standstill through lack of inputs) and can sometimes result in a very great future gain in value creation (consider the replacement of an old and outdated machine with a newer and far more productive version). In the last case, these activities can trump those that directly create value, notwithstanding that the former are pointless without the latter.
Scrum could be seen as a framework to facilitate value creation. It has comparatively little to say about the low-level work, but is driven by a mentality of keeping work going, identifying and removing obstacles to work, constantly looking for opportunities to improve work, how to ensure that work actually delivers value, etc.
These include (but are not limited to) most activities that are referred to as “maintenance” or are sometimes described with a word like “maintaining” (say, “maintaining a lawn”), “repairing”, “replenishing”, and similar (as well as their variations).
However, they will rarely be involved in the type value creation found in a factory—they can maintain the value of e.g. a machine used to create products, but the products, themselves, rarely need value maintenance.
Naturally, activities that hinder value creation also exist, e.g. those that arise from incompetence in those who should create value, from indifference among third-parties, whose activities might be hindrances, and from deliberate sabotage by enemies. Indeed, in the case of the original saboteurs, we had deliberate sabotage by those who should create value, which shows how varied the cases can be.
A particular issue in my own work history is that of unproductive meetings, including those that went on after they had stopped being productive, those that never were productive, those that might have brought value to the person who called the meeting but not in proportion to the time lost over the sum of all participants, and, of course, those that contained participants that were not needed for the meeting but were still kept away from actual work and value creation. Paradoxically, such meetings tend to become the more frequent, the worse a project is behind schedule, which makes it even harder for the value creators to keep up. (Ditto other types of overhead, e.g. progress reports.)
The wish of management and/or project management to be better informed in such situations is understandable—and I would not object if sufficient positive effects came from increased meetings and other overhead. The problem is that, in my own experiences, such effects are too small or entirely absent. Unlike in Scrum, in particular, these meetings hardly ever help development get on with the work, hardly ever remove obstacles, hardly ever lead to a renegotiation of scope or targets, whatnot. Instead, they lead to, say, ten developers sitting around a table for an hour instead of performing productive work. Project management might then have the ability to show higher-ups numbers and to say “Look! I held a meeting! I was doing something!”, but this comes at the cost of reducing the chances of success.
The last shows a potential key problem, that it becomes more important to be seen as “doing something” or to divert blame than to actually achieve success. Another key problem, and one which applies equally in less stressed situations, is that too many in project management lack basic math skills—including the realization that a one-hour meeting loses one man-hour per participant. (As well as some related insights, like that a one-hour meeting often comes with preparation time, time to go from desk to meeting and meeting to desk, waiting time because some key participant is late, etc., which can expand the nominal one hour considerably.)
As a partial counterpoint, the positive effects of a meeting are often less obvious than the negative to the invited participants (e.g. a group of software developers). However, this is a far lesser problem in almost all situations that I have so far encountered.
Also note how productive meetings is something the Scrum pushes very hard. (But also how poor Scrum masters have been known to screw up badly here.)
Activities that outright destroy value can be surprisingly common, at least, if we count the overlap with the previous section and activities where the (gross) value falls short of the cost. A common problem is that the means of destruction are often sufficiently oblique that they are overlooked or pretended-to-be-overlooked, as with much of public policy, where we also have complications like value for the one being created (or, more often, transferred) in combination with a (usually greater) loss of value for someone else and/or a gain for a small group at the cost of the overall economy.
However, more direct and obvious destruction is also possible—and might even be justified. A classic example is a farmer caught by so low prices for some perishable good that he would lose less money by destroying the product than by taking the transportation costs to bring it to market. This is not a good solution, but it might be the lesser evil. (While most cases of value destruction are avoidable negatives.)
Strictly speaking, the classic example involves not even bothering to harvest some perishable, to prefer that it “rots in the ground”. This is a worse fit for value destruction, however.
The same can apply to e.g. a business with a surplus of an outdated and unsellable-at-a-profitable-price product line. Destroying the surplus can be cheaper than perpetual storage or a virtual give-away at distant stores—especially, when such a give-away could cut into the market for a new product line. In some cases, there might even be some value to extract through the destruction of the product, because some part or some raw material is re-usable.
In some old movie (maybe, a Chaplin one, but my memory fails me), I saw a very interesting borderline case, which also shows how easy it is for the naive to misunderstand a situation: Used up old banknotes were taken away to be burnt (or otherwise destroyed)—causing the protagonist to despair, seeing an apparent fortune about to go up in flames. In reality, the loss of value was much smaller than the nominal value of the banknotes, and might have amounted to less than the paper that they were printed on. The reason? These banknotes had been replaced by newly printed banknotes to the same value and the point of the destruction of the banknotes was not a destruction of value but to ensure that no-one would use what amounted to the “same” banknote in both its physical incarnations, the newly printed and the old-and-used-up one. (Where “same” is somewhat metaphorical, because the switch was over many banknotes in a group, not over many banknotes, each taken individually.) The true destruction of value, then, took place through the continual wear-and-tear, while the burning was part of a scheme to maintain value (in the specific sense of usable banknotes in physical circulation).
Here we also see that maintaining value of some specific type often comes at a cost of some other type.
What would have happened, had the protagonist grabbed a truckful of money? He, personally and specifically, might have been suddenly rich (or, e.g., thrown in jail for theft of a truck and whatever crime the taking of the old banknotes would have amounted to). However, as more money than intended would now be in circulation, the currency at hand (likely, USD) would have lost in value, just as if the government had printed more banknotes than was needed to replace the old ones. To boot, he might have (slightly) disturbed the government’s monetary policy, have reduced the comfort of money use for those who received his old banknotes, have forced the renewed replacement of the same banknotes, and whatever other complications might apply. (And this even assuming that no-one minded or at all discovered the theft—else a slew of other types of costs could be relevant, notably, relating to a police investigation.)
He might as well, to a good approximation, have stolen a truck with newly printed banknotes, even though these were intended for use and not destruction—and even though many who would not object to the theft of the old banknotes might see the theft of the new ones as “obviously wrong”. (Concerning “approximation”: I suspect that stealing the old banknotes would be slightly more damaging from a societal point of view.)
Value can also be transferred and/or transformed. Consider taking some amount of money out of a safe, going to a dealer in physical gold, buying an ingot, and returning with the ingot to the safe. Here money has been both transferred and transformed, while gold has been transferred. (From the point of view of the buyer.)
Cases of this are so common, with or without the involvement of money, that the topic might be worth a page of its own (and, at a minimum, separate sections on this page for transfer and transformation), but I lack the motivation for such a treatment and cut a few corners in order to wrap up the text. I do note, however, that the main idea behind Capitalism is that two parties engage in some type of value transformation (e.g. an exchange money–gold resp. gold–money, depending on perspective) that is intended to leave both parties with, in some sense, more value than before, because they have different priorities, opportunities, whatnot, and both are better off after the transformation. (However, this sense of more value can be much wider than in most of the rest of the text, and includes e.g. that apples make better food than banknotes, that an investment in raw material can lead to valuable products down the line, and that a new kitchen appliance might depreciate horribly in money/resale value as soon as it is unpacked but that it can also be a great time saver for its new owner.)
Among the many things not discussed we have issues like “no-op” activities that do not change the overall situation (but which can be harmful through e.g. opportunity costs and wasted time) and activities that are hard to classify, as with e.g. marketing.
For no-op examples, consider an office worker checking for new email despite the correct expectation of not having any new email or someone giving something a shine when the shine has no practical effect, maybe, even is invisible in daily work. (A problem with good examples is that it is hard to draw borders to other cases, especially, after considering opportunity costs.)
For marketing, note how unsuccessful marketing might lose more money than it brings in; how (even successful) marketing can amount to nothing more than a means not to lose ground to the competition and its marketing in a zero-sum market-share game; how sufficiently successful marketing might enable higher prices, which could be seen as a value increaser because the money value of both stock and production is improved, but which could also be seen as a mere price increaser, because the product remains exactly same; etc.
At an early stage, I considered giving an example relating to firewood—that taking a walk in a forest and gathering some wood to replenish a store of firewood would be an example of value maintenance. I found a number of complications with this, however, including that the case could be made when replenishing an existing store to compensate for whatever wood had been used in the days leading up to the walk, while we, instead, might have a case of value creation when the store was first filled. From a formalist point of view, this works reasonably well, but it is dubious whether drawing such a distinction is worthwhile, as both the underlying activity and the overall purpose is the same, regardless of whether that walk is taken to replenish the store or to fill it for the first time. It could even be argued to do harm by complicating matters unnecessarily.
The above paragraph is also a matter of value, value creation/destruction, whatnot, if with a very different type of value than with, say, industrial production and wood gathering. Is a particular distinction a value adder or a value remover?
I suspect that I could dedicate an entire other page to “value in writing”, “value in thinking”, or similar, including such topics as whether my many side-notes add or remove value to the reader. (As is, I rely on the reader to just skip over the side-notes, should he not be interested in them.) But, no, I do not make continual cost–benefit analyses while writing, simply because cost–benefit analyses (in this context!) only rarely would add value or help add value in my eyes.
In a next step, we have questions like whether this wood gathering might not be seen as a value transfer, in that value is transferred from the forest to the storage, rather than created. (Both takes are possible, depending on exact perspective and the exact surrounding concerns, including what would have happened to the wood, had the person at hand left it ungathered.)
And what about the fire? Does the fire destroy value? From one perspective, the answer is “yes”; from another, it merely transforms value from wood to heat; from yet another, it might be seen as creating value, because the wood, as such, could be viewed as more-or-less use- and valueless, while the heat is something of value. The value of the heat, in turn, is ultimately destroyed by e.g. leaking to the outside of the house where the wood at hand is used for heating—which makes feeding wood to the fire an arguable act of value maintenance.
A particularly good example might be the erstwhile handling of firewood by my mother and her brother/my uncle:
The latter spent years, maybe decades, splitting wood that he stored in an old barn, at a yearly rate of gross increase that he could not realistically actually use up for heating his house during the same year.
His official claim, to my vague and possibly faulty recollection, was that the wood would serve to heat the house in future years. My personal suspicion is that he actually used splitting wood, and the activities around it, as a great form of exercise and as an excuse to get some time for himself.
This the more so, as the heating-by-wood was only complementary to electric radiators, both for him and, below, for my mother.
In contrast, my mother bought a load of wood once a year, to fill the needs for that year, which my uncle would cut into roughly right-sized pieces with his chainsaw, and which would then be split and stored immediately adjacent to the house by some combination of him, me, and my stepfather. (While the aforementioned barn was next to a forest and a few kilometers away from my uncle’s house.)
Now, with mother and uncle, when did we have value creation, maintenance, transfer, whatnot? Was it different in the two cases and, if so, why?
Other classification issues include who creates value and who merely facilitates value creation. For instance, a software engineer might see himself as the value creator and those in the sales/marketing/whatnot departments merely as those who work on turning the value into money, while those in sales/marketing/whatnot could take the opposite view. (Ditto e.g. constellations like software engineer vs. product manager, which matches the below example of driver vs. map reader more closely, but which might also be less obvious to an outsider.)
Consider some types of car racing: The car is occupied by two persons, a driver and a map reader. The typical perspective is that the driver is the one who is at the center of activities—if in doubt, because there are plenty of cars being driven without map readers but none without drivers. (The recent “self-driving” cars make this claim incorrect in the now; however, excepting rare special cases, these likely post-dated the first car races by more than a century.) The map reader, in turn, is a helper who simply saves the driver the need to stop, or to slow down while taking his eyes off the road, in order to read the map—quite a bit like the electronic navigational helpers found in modern cars and/or on modern smartphones.
However, an alternate (and not obviously inferior) perspective is that the map reader is the one in charge, the one who decides where the car is to go, and that the driver merely executes the physical driving, in a manner similar to the chauffeur of a millionaire in an old-time movie.
A third perspective (and, in my outsiders’ impression, the one that dominates within the sport) is that the two form a team of (to some approximation) equal partners.
In as far as drivers carry more prestige, still tend to be more at the center, whatnot, it might be less a matter of who-creates-what-value and more a matter of who-is-how-fungible. If (as I, with my outsiders’ impression, suspect) the art of driving the car sufficiently well to be competitive is harder to master than the art of reading a map sufficiently well to be competitive, map readers are more fungible than drivers, which makes them less prestigious and less valuable to the overall team.
Whether the idea of value creation applies to car racing could be disputed, but the same idea applies regardless.
A similar, but far more extreme and far less speculative, example is found in golfer–caddie pairings.
A potentially very interesting example is found in mixed-doubles tennis, where (on a sufficiently elite level) the female player seems to be the weaker link and, therefore, less fungible than the male player—even should the male player be the better of the two measured by criteria like “Who would win if they squared off in singles?” or “Who would win if they squared off in doubles, each teamed with a clone of him-/herself?”.
In all the discussed cases, note that other factors than individual ability matter for team success, e.g. personal compatibility and how much experience the two have of working with each other.
The following is an automatically generated list of other pages linking to this one. These may or may not contain further content relevant to this topic.