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The Key to Creating Intrinsic Value in Business

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Value creation is the essence of business. Value is what attracts and keeps customers. Value is what attracts and retains employees. It’s also what attracts and maintains relationships with investors, suppliers, distributors and the wide range of other stakeholders who are critical to the firm’s long-term success.

A business that does not create value will eventually fail.

How to Create Value as a Means to an End

To know how to create value in business, it’s helpful to understand what it is. It may seem a simple matter, but it is actually a topic that philosophers have debated for millennia. For many business people, value roughly translates into price, the amount someone else is willing to give us in the marketplace, in exchange for our good or service. This is the notion of “exchange value” and it is the secret sauce of supply and demand and what makes a market whir.

Economists also talk about a slightly different notion of value, which is its “use value,” or utility.  Here, we’re talking about how valuable something is to me. It’s not the exchange value that you and I both agree on, but how much use I as an individual get out of particular product or service. Our different perspectives or circumstances might well result in wildly diverging valuations for the very same thing.

Use value and exchange value are critical things to get right when you’re running a business. If you don’t know how to assess the use value, or utility, of a particular technology, process, or even of a person, you are going to misunderstand how they fit into the overall value-creation process of your firm. If you don’t know how to properly assess the exchange value of your resulting goods and services, you will fail to read the market, and falter in marketing and sales.

Use value and exchange value undergird modern economics and our understanding of the way business works. They are also both examples of a broader notion of value called “instrumental value,” which is to say value, as a means to some other end. With use value, a machine or a person is as a means to create products and services. With exchange value, those products and services are a means to earning money.

If you’re getting the instrumental value of the inputs or the outputs of your business wrong, you’re probably not going to be in business over the long-haul. There is a class of businesses, however, that work with instrumental values, while also keeping an eye on another type of value.

How to Create Value as an End in Itself

While instrumental value is a means to some other end, “intrinsic value” is a fundamental consequence of something’s very existence.

Intrinsic value is not the kind of topic you find most economists spending their days contemplating. Although value investors use the term in a specific sense, the kind of intrinsic value I’m talking about is more the domain of philosophers, spiritualist, psychologists and anthropologists, musicians and artists.

Every once in a while though, you will bump into a business person who seems to operate in this field of intrinsic value creation. You tend to find them in those businesses that focus obsessively on quality or on design. You can also see their telltale marks in firms that seem to pay inordinate attention to how their products and services are actually being used by customers – not just whether those customers are satisfied with them, but whether they are successful with them.

Creating Intrinsic Value for Customers

From a customer perspective, we all know that there are some products whose value extends far beyond mere economic calculation. It might be our child’s teddy bear, our wedding ring, or a book whose message or story touched us deeply. The same is true, of course, with services. It might be an ambulance driver going above and beyond the call of duty, a sympathetic person at an airline call center during a family emergency, or a college professor who changed the direction of your life.

For these people, and in some cases, the organizations behind them, the product or service is not just a means to make money. These offerings have intrinsic value in themselves. In other words, with this rare breed of business, the object of production and the act of service create meaning through the ways in which customers interact with them.

One might say that these products and services have a certain something, a quintessence, that cuts to the essence of their value proposition, channeling a kind of invisible, intrinsic value to their users.

Every time a child hugs a teddy bear as she nods off to sleep at night, value and meaning are created. That value isn’t captured in the books of the teddy bear manufacturer, designer or retailer, but it is there, quietly accruing in thousands of little beds throughout the world, invisible to the calculations of the economist.

Creating Intrinsic Value for Employees

As important as these myriad sources of uncalculated value truly are, it still undervalues the full intrinsic value creation of most firms. This hidden component of value centers on the meaning we create through our work.

For every kid whose life takes a change for the positive as the result of some professor’s extra little bit of attention, there is a teacher who derived some sense of purpose from trying to make a difference. For every beautifully designed car, there is a team of designers who gained a wonderful sense of meaning from getting that one right. In some of these cases, there may be financial rewards associated with these employees’ extra effort, but that’s not the reason they do it. As author Dan Pink explains so wonderfully in “Drive,” they do it for reasons that go far beyond rational economic considerations. They do it for a sense of “autonomy, mastery and purpose.”

In other words, part of the reason we go the extra mile in our work centers on a type of value that goes beyond our traditional notions of economic exchange.

There is something tremendously powerful about our drive for meaning. When we find meaning in our work, it can act as a powerful aphrodisiac, an injection of inspiration capable of getting us through the most trying of times. It might be the firefighter who has seen her work translated into a saved life. It might be an engineer whose solar panel design single-handedly resorts in the reduction of millions of pounds of carbon that might otherwise be dumped into our atmosphere. Or it might be that teacher who has seen the effect his connections with students can have on the long-term direction of their lives.

For these people, work is not simply a means to a paycheck. For these people, work creates value through helping them to create meaning of their lives. It is what enables them to be of service to the world and the company’s that offer this type of work create a powerful attractor for the best and brightest employees.

Meaning, Mission and Value Creation in Business

Businesses that know how to engage this quintessential quality of intrinsic value creation have a huge advantage over firms that wield purely instrumental notions of value creation.

Firms that create intrinsic value through meaning face a kind of paradox. That meaning and purpose, that desire to serve a mission, is what creates economic value for the firm. It’s what brings people to work and what draws customers in. No mission, no money. And yet, missions are ultimately dependent upon the firm’s ability to generate revenues. No money, no mission.

Managing this paradox of value creation requires that firms get a much deeper understanding of the nature of the value they create – both value as a means to money and as an end in itself. Businesses that know how to master the tension between instrumental and intrinsic value creation are businesses that know how to translate meaning into money.

These are the truly great mission-driven companies, the ones that attract and engage us the deepest.

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About the Author

This article was written by Gideon Rosenblatt of The Vital Edge. Gideon ran an innovative social enterprise called Groundwire for nine years. He worked at Microsoft for ten years in marketing and product development, and created CarPoint, one of the world’s first large-scale e-commerce websites in 1996. The Vital Edge explores the human experience in an era of machine intelligence.

Entrepreneurship

Women on Top in Tech – Daphne Ng, CEO of JEDTrade

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(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Daphne Ng is the CEO of JEDTrade, a blockchain technology company focused on trade, supply chain, and financial inclusion projects in ASEAN. She is also the Scretary-General at ACCESS and Exco. of Singapore Fintech Association

What makes you do what you do?
I was introduced to blockchain technology in 2016 after I left my corporate banking career after 10 years. It was my mentor who first got me interested in this technology, which I then went on to delve further into, on its potential applications in the lending and trade finance space – domains where I came from.

How did you rise in the industry you are in?
Being in the space for 2 years and actively involved in the ecosystem, I was able to bring on the projects, network and a good degree of thought leadership in this vertical. Early on in the startup journey, our team faced many challenges. And to me, the key to rising above failures are two essential factors – resilience and support. While resilience is innate, I received a lot of help be it in terms of connections or advice. ‘Nobody succeeds without help’ rings very true for me.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
From the start, I focused on my domain expertise in trade finance and the application construct of how blockchain and DLT can be applied to these use cases. Also, my strategy from the start was to build a technology company made up of 80% tech and engineers, which is also our key competitive advantage today. At the end of the day, deliverables are about strategy and execution, which includes building and leading an ‘A’ team.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work?
I have many mentors, which includes our company advisors (all of whom are well-known in this industry) and mostly informal mentors I meet via my connections, and on various occasions and circumstances. Creating opportunities also means putting myself in the right place, at the right time. And in my case, these were mostly organic and genuine friendships formed from the initial connection.

How did you make a match if you and how did you end up being mentored by him?
To me, a match in values is very important. It also takes humility to ask for help and be willing to listen to advice, which is important in order for mentorships to be successful – be it formal or informal.

Now as a leader how do you spot, develop, keep, grow and support your talent?
I love this question! I am passionate about building strong teams and helping my people grow. I abide by the 3Rs when identifying talents: resourcefulness, resilience and right values. And then I invest in the ‘potential’ and this means giving them room to lead, make decisions and take risks.

Do you consciously or unconsciously support diversity and why?
My support of diverse talents, skillsets and characters can be seen in the make-up of our core team – all helming specific roles and each bringing their own value to the table. We need the sum of all parts to build a great company.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
Great leaders emerge in times of failures and challenges, never abandoning the team, and always putting the team’s interests before her own. And I consciously live by these mottos every day.

Advice for others?
My advice to other entrepreneurs: be resolute and dare to be different. If you are going to follow others, then you will end up on the same path as them. No right or wrong; but I would rather chart my own path. This June, we are officially launching our blockchain project, Jupiter Chain (www.jupiterchain.tech), which have garnered much interest in the industry, even before we made it public. We believe this project is the epitome of marrying innovation with practical implementation, and we want to be the first to truly operationalize blockchain for our ecosystem projects in this region.


If you’d like to get in touch with Daphne Ng, please feel free to reach out to her on LinkedIn: https://www.linkedin.com/in/daphne-ng-%E9%BB%84%E7%91%9E%E7%8E%B2/

To learn more about JEDTrade, please click here.

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Callum Connects

Jace Koh, Founder of U Ventures

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Jace Koh believes cash flow is the lifeblood of your business. Understanding it will enhance your ability to run and manage your business.

What’s your story?
My name is Jace Koh and I am the Founder of U Ventures. I’ve always been inclined towards investment and entrepreneurship. I’ve played a hand in starting businesses across these industries – professional services, cloud integration, software and music. I believe that succeeding in business is tough, but that’s what makes the rewards even sweeter.

What excites you most about your industry?
Everything excites me. These are my beliefs:

  • Why is accounting important?
    The accounting department is the heart. Cash flow is like blood stream, it pumps blood to various parts of the body like cash flow is pumped to various departments and/or functions in a business. It is vital to the life and death of the business.
  • Is accounting boring?
    Accountants are artists too. They paint the numbers the way they want them to be.
  • What makes a good accountant?
    A good accountant can tell you a story about the business by looking at the numbers.
  • Why is budgeting and projection important?
    Accountants are like fortune tellers, they can predict the numbers and if you wish to understand your business and make informed decisions, feel free to speak to our friendly consultants to secure a meeting.

What’s your connection to Asia?
I was born and raised in Singapore, and here’s where I want to be.

Favourite city in Asia for business and why?
Singapore is my favourite city. We have great legal systems in place, good security and people with integrity. Most importantly, we have a government that fosters a good environment for doing business. I recently went for a cultural exchange programme in Hong Kong to learn more about their startups. I found out that the Hong Kong government generally only supports local business owners in terms of grants. They’ve recently been more lenient and changed the eligibility to include all businesses that have at least 50% local shareholding. But comparing that to Singapore, the government only requires a 30% local shareholding to obtain government support. In the early days of starting a business, all the support you can get is precious. It’s great that we have a government that understands that.

What’s the best piece of advice you ever received?
The best time ever to plant a tree was 10 years ago as the tree would have grown so big to provide you with shelter and all. When is the next best time to plant a tree? It is today. Because in 10 years time, the tree would have grown big enough to provide you shelter and all.

Who inspires you?
Jack Ma. His journey to success is one of the most inspiring as it proves that with determination and great foresight, even the poorest can turn their lives around. I personally relate to his story a lot, and this is my favourite quote from him, “If you don’t give up, you still have a chance. Giving up is the greatest failure.”

What have you just learnt recently that blew you away?
I’ve faced multiple rejections throughout my business journey, and recently came across a fact on Jack Ma about how he was once rejected for 32 different jobs. It resonated very deeply and taught me the importance of tenacity, especially during tough times.

If you had your time again, what would you do differently?
Nothing. I live a life with no regrets. Everything I do, regardless of whether it is right or wrong, happy or sad, and regardless of outcome, it’s a lesson with something to take away.

How do you unwind?
I love to pamper myself through retail therapy and going for spas. I also make a conscious effort to take time off work to have a break outside to unwind as well as to uncloud my mind. This moment of reflection from time to time helps me see more clearly on how I can improve myself.

Favourite Asian destination for relaxation? Why?
Taiwan! Good food with no language barriers and the people are great!

Everyone in business should read this book:
I don’t really read books. Mostly, I learn from my daily life and interactions with hundreds of other business owners. To me, people tell the most interesting stories.

Shameless plug for your business:
We’re not just corporate secretaries, we’re “business doctors.”
U Ventures is a Xero certified advisory firm that goes beyond traditional accounting services to provide solutions for your business. You can reach us on our website: http://uventures.com.sg/

How can people connect with you?
Converse to connect. You can reach me via email at [email protected] or alternatively, on LinkedIn here: https://www.linkedin.com/in/jacekoh/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started,
built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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