Refactoring Value
A challenge for today’s society is to comprehend the economic values of Earth’s ecosystems and ecosystem services, for often they are taken for granted.
The global world is dynamic and diverse; to survive in a "VUCA" reality, organizations, large or small, that cross boundaries are on the way to drive business transformation. Refactoring in business transformation discusses related concepts like value engineering and cost-benefit analysis, which share the goal of improving efficiency and effectiveness. Value engineering and cost-benefit analysis are formalized methods to improve existing products and processes.
Value engineering is a formalized process used to improve existing products and processes. Value engineering focuses on describing the primary function of every product and component using an action verb and a noun. Then, engineers consider all possible methods and calculate the cost for each. For example, an automobile’s dynamo, or generator, generates electricity. The engineer considers all other possible methods of generation, calculates a cost for each, and compares the lowest figure with that for the existing dynamo. If the ratio is reasonably close to unity, the dynamo can be accepted as an efficient component; if not, the engineer examines the alternatives in more detail. The same treatment is applied in turn to each of the parts out of which the chosen component is built, until it is clear that the best possible value is being obtained.
Cost-benefit analysis defines the function of each part of a product or process and measures its benefits or effectiveness. The costs of obtaining each part are reviewed, considering material, labor, investment cost, and downtime. These processes are continuous, with new materials, manufacturing techniques, and operations offering chances for improvement. Cost-benefit analysis is an attempt to measure the social benefits of a proposed project in monetary terms and compare them with its costs. It helps organization decide which specific projects should be undertaken. If the ratio of benefits to costs is considered satisfactory, the project should be undertaken.
Here's how it works:
-Determine the benefit-cost ratio: This is done by dividing the projected benefits of a program by the projected costs. A program with a high benefit-cost ratio will take priority over others with lower ratios.
-Account for variables: Both quantitative and qualitative factors must be taken into account, especially when dealing with social programs. The monetary value of the presumed benefits of a given program may be indirect, intangible, or projected far into the future.
Consider the time factor: Variable interest rates, tying up of funds, and the disruption of normal cash flow must be factors in the analysis if an accurate benefit-cost ratio is to be determined. The value of a particular resource does not remain the same over time. Money that is not spent may grow in value, simply by gaining interest or investment value.
Estimate benefits: Benefits must be assigned a numeric value, often in monetary terms. Policy makers may conduct surveys or view the benefit in terms of the output of a policy (the number of individuals who were served).
The value of contemporary organizations or societies is multilateral (employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, brand value, and societal value, etc). So the value management needs to be multifaceted and innovative. A challenge for today’s society is to comprehend the economic values of Earth’s ecosystems and ecosystem services, for often they are taken for granted.
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