What is Value and Why is it hard to define it…

The Merriam Webster dictionary defines value as “the monetary worth of something” and “relative worth, utility and importance”. With respect to product and services value is generally defined with the notion of activity in mind. A value added activity can be defined as adding form fit or function to a product or service, an activity that the customer would be willing to pay for in isolation if they knew it was being done – e.g. Processing a part, laying foundation, Creating code, implementing functionality etc. However, sometimes it is hard to define what value is, mainly because of following reasons
• Most producers want to make what they are already making, and many customers only know how to ask for some variant of what they have already been getting. Because of this it is very important to abandon conventional approach and imperative for both producers and customers to jointly identify value.
• The appropriate definition of value changes once you look at it the whole through the eyes of the customer and not from the perspective of various firms along the value stream. Producers find it hard to redefine the value from customer’s perspective. It is vital for the growth of producers to accept the challenge of redefinition and redefine their strategy to provide what customer thinks is value to them.
• The final element in value definition is to identify the target cost to deliver the product or service to the customer. This is the cost if all visible muda were removed from the process. The value of a product or service should be judged by the question "What is the muda-free cost of this product? Relentless scrutiny of every activity along the value stream, searching for muda at every step, is key to reaching the target cost and hence defining the value.