Business Value Always Stems from a Solved Problem, and that’s Why
The identity between business and the problems it solves is more than a slogan: it’s the business’s profound logic
The most obvious facet of a business is the money it earns. But that’s misleading because the money a company gains (or loses) takes meaning only when related to the value it delivers to its clients.
It helps to remember that money is not value but an exchange of value. The money a business earns measures the value clients are willing to exchange to gain an advantage from a product.
But, what’s value?
Definition of value
Once the market assesses it, agreeing on what is valuable is trivial. Before that, measuring how much something does value remains challenging.
We can assume that the price estimates the value, but how can we determine if a specific price is right?
Moreover, demand and offer heavily influence the price. Still, they say nothing about the right price on day one before the market starts judging a product or even a category of products.
The point is that the value is feedback.
You cannot know feedback before receiving it. Demand and offer express the progressive feedback adjustment based on the environment.
How do we define the value?
I propose a definition by subtraction:
Definition: The damage of not having a product measures its value.
The advantage of this definition is that it’s intrinsically related to those potentially damaged by not having a product, which is the product’s target market.
Moreover, this definition relates a product’s value to the problem it solves: the damage that measures its value is the effect of leaving unsolved the problem that the product addresses.
Proof of the definition consistency
Let’s assume that the definition above is wrong: the value of a product and the damage of not having it are uncorrelated.
When you buy something, you exchange value: a product against a certain amount of money, which is a potential value exchange, in turn.
If we assume that the product’s value has nothing to do with the damage of not having the product, you may buy a product that damages you. It would be an irrational purchase. It may happen, but not massively and for a long time; otherwise, the logic of such a market would consistently be random.
Random markets rapidly disappear because they miss a practical direction. Consequently, the product’s value definition I propose to use is logically consistent: when denied, it implies contradictions (random markets.)
Conclusion
It’s a given of the experience that an unsolved problem implies some damage; otherwise, we wouldn’t call it a problem.
The equivalence between value and solved problems leads to the equality between missed value and damage. And it’s much easier to estimate some damage – which is something tangible – than estimate an abstract advantage.
The definition of value that I propose helps people responsible for generating measurable value. It gives a direction.
For example, think of the Product Owner role. The Scrum Guide defines that role as a value maximizer, which evokes a lot and means nothing without explaining the value in an actionable way. Quoting the Scrum Guide:
The Product Owner is accountable for maximizing the value of the product resulting from the Scrum Team.
The definition of value I propose provides Product Owners with an actionable tool.
Final caveat: Markets are made up of humans. It’s not necessary that problems that, once solved, give value to a product are objectively essential to solve. It’s about perception, instead. And it’s about choosing the most relevant problems: the value follows.
Whatever problem you chose to solve, that problem is the source of the value of its solution.
Products are solutions.
