Alien versus Predator:NCVO takes on Added Value

Last week I attended my first ever Performance Hub event at the National Council for Voluntary Organisations in London.  The event was jointly run by NCVO and the New Economics Foundation and played to a full house.

In essence the message was:

  1. the third sector doesn’t understand ‘added value’
  2. ‘added value’ is therefore a concept that is passed it ‘sell by’ date
  3. luckily we have developed a concept that can take its place – called ‘full value’
  4. even more luckily we have managed to reduce this to a 2×2 matrix that can be explained easily.

Now the origins of ‘added value’ are pretty old and extremely well respected.  Like any models or concepts they have their uses and their limitations – but this concept has done much to drive economic development, competitiveness and strategy over the last 3 decades.  Michael Porter, Harvard Professor and father of the ‘value chain’ has just celebrated 30 years of world leading consulting developing the competitiveness agenda using the concepts of value added, the value chain and the 5 forces model.

No doubt he will be devastated at the judgements passed down on his work by the NCVO.

While I admire the nerve of the Third Sector to challenge the business orthodoxy I can’t help but think that sometimes it shoots itself in the foot.  Surely if the idea is still good enough for the Institute for Strategy and Leadership at Harvard Business School we should not be too quick to dismiss it out of hand and replace it with a dinky 2×2 matrix?

Perhaps we just need to work a little harder to help our client group understand the concept and reflect on how it maybe used to add value to our work in making our communities better places to live and work.

My bet is that Michael Porters ideas might just outlive the neat little 2×2 that NCVO suggest should be used to replace it.  I will certainly be a little more circumspect before I hop on a train to London to receive the wisdom of NCVO.

Not that the day was bad!

I met some wonderful people.  We were all reminded of the importance of the unforeseen benefits of our work as well as the hard outcomes that we were paid to achieve.

Comments

  1. Hi there.

    Interesting to read your reflections on the afternoon, thanks for posting them up. I think I share your healthy scepticism towards anyone brandishing a 2×2 matrix and telling people it is going to change the world.

    I feel I should clarify what I was saying about added value and what I wasn’t in case I kick off a war between the third sector and the Institute for Strategy and Leadership at Harvard Business School, a terrifying thought.

    We’re not seeking to challenge or replace Porter and value analysis. As you point out, it is a concept that has been successfully used by a vast number of businesses to analyse the value each element of their business add to raw materials. The economic concept of added value is clear, as is Porter’s management and planning tool: the value-chain.

    My problem is with the muddled thinking involved in the application of the term ‘added value’ and to describe the contribution of the third sector to public services. In this specific context, there has been no agreed definition of what added value is and how it should be fairly assessed. At most, added value here been described in vague, general terms, as the benefits to society of greater third sector involvement in public services that stem from the distinctive characteristics of the sector. I tried to sketch out in my presentation some of the bad consequences of applying this muddled thinking in the procurement cycle.

    Full value is an attempt to move away from crude generalisations and towards a focus on individual third sector organisations understanding and communicating the different ways in which they can create value.

    I think some organisations will find it helpful to map out who they create value for and where in the organisation value is created. Thinking about primary outcomes, secondary outcomes and satisfaction created for users and non-users of their services can be useful to some organisations who are getting used to planning and monitoring the changes their work makes.

    The aim of our work on this is to help organisations to start telling the full story of their success so that they can help shift people’s perceptions of them, and the ways in which they are of value. If some charities, social enterprises and community groups find value-chain analysis more helpful than the exercises in our guide, I’ve no problem with that at all!

    And I have to ask, was I supposed to be the Alien or the Predator?!

    Cheers,
    Jake
    (from the Performance Hub)

  2. I suspect Jake that there was just as much muddled thinking about the concept when it was first applied in the private sector. It’s a bit like differential calculus – just because it takes a long time to master does not mean that it should be replaced by something simpler.
    And you are the Predator ;-) The private sector concept is the Alien and therefore needs ‘replacing’. In fact we should embrace it, understand it and learn to love it for what it can do for us!

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