MODULE 1: FOUNDATIONS OF VALUE CREATION
This module sets the stage by exploring the fundamental connection between needs, value, and goals in organizations.
Through an engaging story, The Value of Milk, we will discuss how value is created along a supply chain and how different
stakeholders contribute to and benefit from this value. We introduce core business concepts like the value chain,
constraints, cost leadership, differentiation, and the impact of external forces such as government policies and market
competition.
➔ General course objectives
• You understand the concepts of Need, Value & Profit and the relationship between them
• You understand the role of value thinking for both business management as well as innovation
• You understand how organizations are structured and managed
o business is structure you create to create value
• You can make a design a concrete business model using the value proposition and business model canvas
• You understand the concept of sustainability (and the perspective it sits in) and you know the SDG’s
NEED – VALUE -GOALS – PROFIT
LEARNING OBJECTIVES
• You understand the difference between a need, a value, a goal, revenu and profit
• You understand that a business model is used to develop the relationship between these concepts
o business model: system/methodology that ties everything together
• Mastering business modeling gives you the ability
o To better understand your role/position and its possibilities/constraints
o Developing your own business
• BUT: you need to practice (mistakes will be explained)
INTRODUCTION
Every business or organization starts with a need—a problem or desire that someone has and that needs to be resolved.
Identifying this need is the foundation of any activity, whether it’s providing a product, a service, or a solution. When this
need is fulfilled, the receiving party experiences value. Value can be functional (solving a problem), emotional (creating
satisfaction), or societal (benefiting the community or environment). When value is delivered in a well-structured and
efficient way, the providing party achieves its objectives. For commercial organizations, this often means profit, but other
objectives may include customer satisfaction, citizen comfort, or societal impact. Understanding the relationship between
need, value, goals, and profit is key to designing sustainable and impactful business models.
What is sustainable: managing the tension between nature and culture
• nature: everything that is being made by the kosmos (gravity & evolution)
• culture: the fact that the human species organize themselves
,MILK: (SUSTAINABLE BUSINESS MODEL )
NEED ➜ VALUE ➜ PROFIT
Business is always connected with a monetary value; it is about making money
= WRONG business is about the NEED
• Somebody wants to drink milk ➜ NEED
• To fill this NEED ➜ somebody created a SOLUTION
• SOLUTION is good ➜ PROFIT
• PROFIT = the money you have at the end of the day when you worked
• How much people are willing to pay = VALUE
If you don’t know what your customer is asking; you don’t have a business model.
Need: kid wants milk ➜ parents go to store and pay 1 EURO (incl VAT)
• VAT: value added tax (since 1970), has to be payed the moment you have a transaction between consumer and a
supplier (only between them)
• Value added for the shop is convenience = you pay a tax on that particular value
Grocery store owner gets 0,82 EURO (money without tax bc he has to pay this to the government) ➜ He earns 0,14 EURO
Income statement: explains how the money we are getting is getting
there
REVENU: what the grocery store gets (not the money you make)
COGS: the cost of goods sold ➜ most of the time half
Gross profit: still not the actual profit
EBIT: Earnings before interest and taxes (almost yours)
Earnings: some to the shop (to do maintenance), some to the shop
owner
Business = a good model to optimize this system
If a business only focuses on earnings and not on the needs of its clients it will go out of business.
Business model canvas:
To make sure the income statement that is positive
There are many different ways of working, doing your business and it is interesting
to know you place in that cycle.
INPUT ➜ YOUR WORK ➜ APPLICATION
,Everything starts with NEED, if you understand that NEED than you have to translate that into a VALUE that you could
provide. You always have to focus on the VALUE not the PROFIT. Focus on the value you are adding to the client rather than
the money.
KNOW WHAT VALUE YOU PROVIDE
sometimes the word value is used in a different way = share holder value
• value of the store (the buidling)
• value of the inventory (all the things on the shelves)
• value of profit
• reduced by depth
a shareholder has a part of the company
The only corporate social responsibility a company has is to maximize its profits - Milton Friedman (1970)
He is a strong believer that the only thing that matters is to maximize the shareholder value. He thought that free markets
would solve everything and that a big government is not needed to influence it. He thought that poverty did not have to be
solved, it would be fixed by businesses.
The reason why neoliberalism is taking place, the growing distance between the rich and the poor, is a consequence of this
‘free market’- thinking
sustainability is focusing on the need of the client
efficiency: what is the moment they will still buy and walk away to buy from someone else
Milton freeman is wrong as he only focuses on the money, so people will walk away as their need wont be the primary
objective.
THEORY OF CONSTRAINTS
Most important part: if you focus on value when you are doing business, you are sustainable. Because value means you
are fullfillling a need and that need is a request of somebody who need something and if you fulfill that need you are in that
moment creating value which contributes to the system you are in. Sustainability is are we capable of in the longterm
creaitng aditional value.
The fact every proces/business has a limitation. Finding the answer to the fact ‘what is the maximum value you can get
out of a business?” is taling about the theory of constraints
LIMITS TO VALUE CREATION
Now we know that organizations are supposed to create value in order to obtain its goals, we can ask ourselves what is the
maximum value we can realise? When do achieve the required profit? What is the most wanted customer satisfaction? and
most important, where did we get this values? If we say we aim for a profit of 100 kEUR, we often are anxious te end up with
less then what we have set as a goal? But why could we not aim for 120 kEUR or 200, or 500? What is the limit to value
creation?
This question is of extreme importance, because if we know what limits the value, the profit of whatever we want to
measure, we also know how we can increase that value. To address this question, we will discuss the concept of "Theory
of Constraints", as develop by Elyahu Goldratt. We will not fully learn how to apply the theory. We will discuss two main
concepts:
• Throughput
• Constraint
, LEARNING OBJECTIVES
• You understand the concept of Goal-thinking
• You understand throughput
• You understand the five focusing steps
➜ example: mc donalds
How come that mc dondalds, something that is artificially created, everybody knows.At the end of the day, hamburgers
come out of the shop. At the end of the week they put out 2000.
Why not 3000…. Depends on elements
ingredients / manpower / machines
Which of these elements is the limiting factor… still same amount of customers…
answer can not be given, finding where the bottleneck is = theory of constraints
The amount of hamburgers/hour is the unit to use when starting the measurements.
Where is the bottleneck in mcdonalds: You need to know what the inventory is
THROUGHPUT
If you want to know if you are making optimal amount of money, if the value that you are producing is at its most optimal
point, you will have to think in terms of throughput.
The amount of value that you can create depends on the sizes of the ‘pipes’ of your company.
• throughput = Value per time unit
Every business has a ‘bottle neck’ somewhere = something that limits you. The amount of resources you have available
determine the amount of value per hour you can produce.
Theory of constraints principle: When you are running a business, identify your pipe (you can use the cow-milk business
model). Then ask yourself: ‘what is limiting me in producing more’ (not asking more money)
What is your throughput?
1. Identify the constraint (bottleneck)
a. what is limiting you from doing more (time, clients, material,…)
2. Exploit the constraint
a. stop doing what you do when it is not working
3. Subordinate everything to the constraint
4. Elevate the constraint
5. Go to step 1
Theory of constraints is not a one time exercise you do every month. It something you do on a permanent bases because it
shifts around. Managing the bottleneck helps you in making the maximum value of your organisation.
Not only is the constraint an evolution, but the value also changes.
This module sets the stage by exploring the fundamental connection between needs, value, and goals in organizations.
Through an engaging story, The Value of Milk, we will discuss how value is created along a supply chain and how different
stakeholders contribute to and benefit from this value. We introduce core business concepts like the value chain,
constraints, cost leadership, differentiation, and the impact of external forces such as government policies and market
competition.
➔ General course objectives
• You understand the concepts of Need, Value & Profit and the relationship between them
• You understand the role of value thinking for both business management as well as innovation
• You understand how organizations are structured and managed
o business is structure you create to create value
• You can make a design a concrete business model using the value proposition and business model canvas
• You understand the concept of sustainability (and the perspective it sits in) and you know the SDG’s
NEED – VALUE -GOALS – PROFIT
LEARNING OBJECTIVES
• You understand the difference between a need, a value, a goal, revenu and profit
• You understand that a business model is used to develop the relationship between these concepts
o business model: system/methodology that ties everything together
• Mastering business modeling gives you the ability
o To better understand your role/position and its possibilities/constraints
o Developing your own business
• BUT: you need to practice (mistakes will be explained)
INTRODUCTION
Every business or organization starts with a need—a problem or desire that someone has and that needs to be resolved.
Identifying this need is the foundation of any activity, whether it’s providing a product, a service, or a solution. When this
need is fulfilled, the receiving party experiences value. Value can be functional (solving a problem), emotional (creating
satisfaction), or societal (benefiting the community or environment). When value is delivered in a well-structured and
efficient way, the providing party achieves its objectives. For commercial organizations, this often means profit, but other
objectives may include customer satisfaction, citizen comfort, or societal impact. Understanding the relationship between
need, value, goals, and profit is key to designing sustainable and impactful business models.
What is sustainable: managing the tension between nature and culture
• nature: everything that is being made by the kosmos (gravity & evolution)
• culture: the fact that the human species organize themselves
,MILK: (SUSTAINABLE BUSINESS MODEL )
NEED ➜ VALUE ➜ PROFIT
Business is always connected with a monetary value; it is about making money
= WRONG business is about the NEED
• Somebody wants to drink milk ➜ NEED
• To fill this NEED ➜ somebody created a SOLUTION
• SOLUTION is good ➜ PROFIT
• PROFIT = the money you have at the end of the day when you worked
• How much people are willing to pay = VALUE
If you don’t know what your customer is asking; you don’t have a business model.
Need: kid wants milk ➜ parents go to store and pay 1 EURO (incl VAT)
• VAT: value added tax (since 1970), has to be payed the moment you have a transaction between consumer and a
supplier (only between them)
• Value added for the shop is convenience = you pay a tax on that particular value
Grocery store owner gets 0,82 EURO (money without tax bc he has to pay this to the government) ➜ He earns 0,14 EURO
Income statement: explains how the money we are getting is getting
there
REVENU: what the grocery store gets (not the money you make)
COGS: the cost of goods sold ➜ most of the time half
Gross profit: still not the actual profit
EBIT: Earnings before interest and taxes (almost yours)
Earnings: some to the shop (to do maintenance), some to the shop
owner
Business = a good model to optimize this system
If a business only focuses on earnings and not on the needs of its clients it will go out of business.
Business model canvas:
To make sure the income statement that is positive
There are many different ways of working, doing your business and it is interesting
to know you place in that cycle.
INPUT ➜ YOUR WORK ➜ APPLICATION
,Everything starts with NEED, if you understand that NEED than you have to translate that into a VALUE that you could
provide. You always have to focus on the VALUE not the PROFIT. Focus on the value you are adding to the client rather than
the money.
KNOW WHAT VALUE YOU PROVIDE
sometimes the word value is used in a different way = share holder value
• value of the store (the buidling)
• value of the inventory (all the things on the shelves)
• value of profit
• reduced by depth
a shareholder has a part of the company
The only corporate social responsibility a company has is to maximize its profits - Milton Friedman (1970)
He is a strong believer that the only thing that matters is to maximize the shareholder value. He thought that free markets
would solve everything and that a big government is not needed to influence it. He thought that poverty did not have to be
solved, it would be fixed by businesses.
The reason why neoliberalism is taking place, the growing distance between the rich and the poor, is a consequence of this
‘free market’- thinking
sustainability is focusing on the need of the client
efficiency: what is the moment they will still buy and walk away to buy from someone else
Milton freeman is wrong as he only focuses on the money, so people will walk away as their need wont be the primary
objective.
THEORY OF CONSTRAINTS
Most important part: if you focus on value when you are doing business, you are sustainable. Because value means you
are fullfillling a need and that need is a request of somebody who need something and if you fulfill that need you are in that
moment creating value which contributes to the system you are in. Sustainability is are we capable of in the longterm
creaitng aditional value.
The fact every proces/business has a limitation. Finding the answer to the fact ‘what is the maximum value you can get
out of a business?” is taling about the theory of constraints
LIMITS TO VALUE CREATION
Now we know that organizations are supposed to create value in order to obtain its goals, we can ask ourselves what is the
maximum value we can realise? When do achieve the required profit? What is the most wanted customer satisfaction? and
most important, where did we get this values? If we say we aim for a profit of 100 kEUR, we often are anxious te end up with
less then what we have set as a goal? But why could we not aim for 120 kEUR or 200, or 500? What is the limit to value
creation?
This question is of extreme importance, because if we know what limits the value, the profit of whatever we want to
measure, we also know how we can increase that value. To address this question, we will discuss the concept of "Theory
of Constraints", as develop by Elyahu Goldratt. We will not fully learn how to apply the theory. We will discuss two main
concepts:
• Throughput
• Constraint
, LEARNING OBJECTIVES
• You understand the concept of Goal-thinking
• You understand throughput
• You understand the five focusing steps
➜ example: mc donalds
How come that mc dondalds, something that is artificially created, everybody knows.At the end of the day, hamburgers
come out of the shop. At the end of the week they put out 2000.
Why not 3000…. Depends on elements
ingredients / manpower / machines
Which of these elements is the limiting factor… still same amount of customers…
answer can not be given, finding where the bottleneck is = theory of constraints
The amount of hamburgers/hour is the unit to use when starting the measurements.
Where is the bottleneck in mcdonalds: You need to know what the inventory is
THROUGHPUT
If you want to know if you are making optimal amount of money, if the value that you are producing is at its most optimal
point, you will have to think in terms of throughput.
The amount of value that you can create depends on the sizes of the ‘pipes’ of your company.
• throughput = Value per time unit
Every business has a ‘bottle neck’ somewhere = something that limits you. The amount of resources you have available
determine the amount of value per hour you can produce.
Theory of constraints principle: When you are running a business, identify your pipe (you can use the cow-milk business
model). Then ask yourself: ‘what is limiting me in producing more’ (not asking more money)
What is your throughput?
1. Identify the constraint (bottleneck)
a. what is limiting you from doing more (time, clients, material,…)
2. Exploit the constraint
a. stop doing what you do when it is not working
3. Subordinate everything to the constraint
4. Elevate the constraint
5. Go to step 1
Theory of constraints is not a one time exercise you do every month. It something you do on a permanent bases because it
shifts around. Managing the bottleneck helps you in making the maximum value of your organisation.
Not only is the constraint an evolution, but the value also changes.
