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Value Creation in Business: Definition & Example

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  • 0:04 Value
  • 0:27 What Is Value Creation?
  • 1:42 Creating Value
  • 3:40 Lesson Summary
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Lesson Transcript
Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Value creation and business go hand in hand. In this lesson, you'll learn more about this business concept, examine why it's important, and discover strategies for implementing it with employees in the workplace.

Value

What's the secret behind turning a seemingly empty field from this:

value, creation

Into this?

value, creation

Quite simply, it's the work of farmers who use their land, equipment, labor, seeds, and care to create something valuable from something that means nothing to most of us.

In this way, farmers participate in value creation, or creating value from their resources into something valuable to others.

What Is Value Creation?

Without value creation, businesses wouldn't be in business at all. Think of value creation as the ground floor of every organization. As you create value (like the farmer turning seeds into crops), the elevator moves up. When it reaches the top floor, there are consumers waiting and ready to pay for the value created, which generates profits for the business. If there's no value creation, the elevator never leaves the ground floor and the customers look for value elsewhere.

As you can see, value is created from work. Think about it this way: many suppliers provides parts and components that go into creating the vehicle you drive. These parts alone don't hold much value to you, do they? But, when these resources are combined with the skill and work of employees at automobile manufacturing plants, they are transformed into a drivable vehicle. That car or truck provides value to you, so you purchase it. The auto manufacturer, in turn, receives the profits from you, the consumer.

The importance of value creation to both the business and its consumers should now be easy to recognize: Businesses need value creation because it provides financial well-being and keeps them competitive in the marketplace, and consumers need value creation because it provides the products and services we need in our daily lives.

Creating Value

Making space and time in a business that can be devoted to value creation is essential. It requires a commitment to understanding why value creation is vital and investment in the people, processes, and resources that can help a business innovate and stay at the top of the game.

Here are some strategies businesses can use to put a priority on value creation:

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