Why A Value-Focused Approach Marks The Next Step For Digital Teams

by Rushika Kumar — Expert, Rajan Julka — Specialist, McKinsey & Company

A shift in mindset is underway across digital teams responsible for delivering products and services. Continually evolving consumer behavior and consistent technology and market disruption has seen a switch in focus from delivery-based planning to value and impact. Traditional success metrics prioritized the timely delivery of projects with stable requirements, but in an Agile world these are now giving way to the need for innovative, creative solutions — even if these take longer to realize.

Rather than throwing digital teams into disarray with products that wallow in permanent development, this commitment to value-focus is empowering tech practitioners to solve today’s business challenges with a laser focus on customer centricity. This article explores the power that a value-focus can have on products and services and outlines how digital teams can navigate this change in mindset.

Unleashing Value

As a concept, value is a function of many different variables. Think of it as a multivariate equation — some of the attributes that often find themselves as variables are price, cost, satisfaction, memory, social responsibility, competitive offerings, emotional response and experience. These are combined into a fine cocktail in the customer’s psyche and ultimately determines a key economic concept known as the customer’s ‘willingness to pay’ (WTP).

“Everything is worth what its purchaser will pay for it.”

Publilius Syrus, first century B.C.

For example, consider a time when you happily made a ridiculously expensive purchase in full knowledge that the product didn’t warrant anything close to the asking price. Now think of another purchase that may have cost you nearly nothing but remained unforgettable for decades. Across both examples, it is evident that the ‘value’ equation has involved variables other than price which have had a material impact on the customer’s WTP.

Organizations that fail to identify all constituent attributes that determine how customers perceive value for their product or service often see suboptimal results in terms of revenue, penetration and profitability. It’s therefore crucial that teams responsible for building these products understand the end user’s expectations –do they simply require a tangible service that satisfies their unmet needs, minus the associated costs? If yes, your product’s equation would look rather simple:

Tangible benefit of product/ service derived — costs involved for customer to utilize the product/service = Value for your product/ service

An example of this equation in action would be an online submission of a passport application that invokes a small fee. It can be assumed that in most countries the act of physically filling a form and lining up at the passport office in person could be more time and effort consuming and most consumers with access to a computer and the internet, would see benefit in spending the minor fee and utilizing the seamless, online process.

However, if the value equation of your product is more complex it may resemble:

Tangible benefit of product/ service derived + customer experience + emotional response generated + sentimental value — costs involved for customer to utilize the product/service = Value of your product/ service

Let’s look at an example of how this might manifest. Imagine spending a large part of your childhood traveling in your first family car. The happy memories associated with this car are priceless to you. One morning you spot an advert in newspaper’s classified section listing a car of the same model and color at a price clearly higher than an older car warrants. You feel a rush of emotions and memories overcome you and decide to purchase it. As expected, the car spends more time in your garage than on the road but you lift the covers every so often, give it a nice clean and smile at the rush of mirth it brings to your life. This is more complicated than our initial equation, but this myriad of complex factors all coalesce to ultimately inform the proposition’s value.

To summarize, digital teams would benefit from asking a series of questions about their target users when developing a tool or service. These include but are not limited to:

1. Who is our customer?
2. What unmet need are we trying to fulfill for this customer with our product/ service?
3. How are we differentiating this from our competition and how might we sustain a competitive edge?
4. What does the ‘on-ramp’ (onboarding and welcoming process, customer support etc) and the ‘off-ramp’ (post use surveys, loyalty recognition, retention strategies) look like for our product and how will this enhance our offering? How does our overall customer experience manifest?
5. How are we measuring ourselves (incorporating all variables of the multivariate product value equation) and thereby product/service ‘success’ and incorporating this into our product roadmap?

Developing A Value-Focused Mindset

Once we begin to appreciate how ‘value’ manifests in the context of our product or service, we must very quickly develop a mindset that is obsessed with maintaining this ‘value’ focus.

We have seen how value can mean different things for different customers and contexts, and this incorporates but is not limited to multiple variables such as price, experience, emotional response and social responsibility. Developing a value focused mindset requires digital teams to zero in on these drivers and keep them at the heart of the product’s development. This focus can be maintained by establishing value-based metrics that will help measure how development is progressing within each of these variables.

Finally, we must complement this by setting aggressive goals for our product. OKRs (objectives and key results) are a fantastic way to set goals and orient the organization towards a north star, while also keeping teams honest and obsessed with the concept of value.

How Do We Measure Value?

Metrics of value will differ depending on a product’s user and the organization the digital team belongs to. You can start to measure the value your team achieves by defining value in your own context — these metrics could include:

• Customer satisfaction
• Product quality
• Innovation rate
• Returning users
• Employee engagement
• Inclusive culture
• Empowered teams

Some of the below powerful questions could help define value for your team:

• Is it useful to our customers?
• Is it going to change the user behavior in a positive way, as we are attempting to?
• Are users using it?
• Are we measuring the impact that we thought a feature would deliver?
• For whom are we delivering value?
• Are we validating our hypothesis?
• Are we taking feedback regularly and infusing it in our product/service?

Taking time to think through your value enablers and working in collaboration with teams, stakeholders and users could help tap into hidden potential for your product or service.

Putting A Value Focus Into Practice

With a framework in place to maintain this focus, we then move on to building products that deliver on value. There’s no one set process here — a product’s success is largely determined by the collaborative culture within a digital team rather than a cookie-cutter sequential approach. Below we’ve included a selection of attributes we commonly observe in digital teams that have curated a value-focused culture:

• They foster innovation and creativity at every level — in today’s consistently disrupted world it has become far more important to maintain a high degree of creativity and curiosity among every employee. Acquiring and retaining high-skilled talent becomes easier when a team is energized and empowered, with everyone from the top down taking ambitious leaps that add value to consumers, stakeholders, employee happiness and others who can have an impact.
• They’re highly collaborative: these teams prioritize hiring great collaborators over those who are just great thinkers. Today’s business challenges are complex and the landscape continually shifts, so teams need to work together to respond quickly and shift direction on a project if fresh user values are identified.
• They think beyond the scope where appropriate: Agile has brought more flexible, nimble and iterative approach to digital development, providing room to think and work out of the box. The experimental mindset of failing fast and often has the power to unleash all new horizons that could lead to customer delight.
• They frequently interact with the end user: A team that deliberately sets time aside to observe and interact with users almost every day by conducting user interviews and collecting user feedback. This helps to enhance the team’s user-centric way of thinking and ultimately puts user satisfaction at the heart of the roadmap, driving lasting value and impact.

A product or service can be rolled out on time and under budget, delivering the precise technical specifications outlined in its conception phase — but this is all meaningless if it remains untouched or unappreciated by the end user. A shift to value-based planning enables digital teams to maintain a focus on developing products that users choose to use. As more organizations migrate to this way of thinking, we should see an increasing number of products which are more creative, deliver better results and resonate with the end user for far longer than products that came before.