Management Buzzwords Explained: Value, Value-Added and Value-Chain

This is the twelfth in a series of essays that addresses management topics. The first ten explored "hot button" issues; the next ten satirize management "buzzwords." I base these essays on countless provocative lectures and irreverent discussions as a nutty professor of Business Administration.

In a previous essay, I examined the buzzwords "system" and "synergy." They're not really buzzwords, they have important meanings when used properly. I just hate the way they have become abstract, vacuous substitutes for economic concepts that managers, especially new managers learning the ropes, need to know. I continue this examination by looking at the terms "value," "value-added," and "value-chain." I address them here because all five terms are related. In fact, one set is the more basic form of the other.

Let's start with the word value. Most people seem to have a better understanding of this term than the managers I'm concerned about. So I'll keep the context confined to business, and the production of goods and services that people buy.

Think like a consumer. Think about something that is physically close to you at the moment; your computer, your eyeglasses, your fuzzy-wuzzy widdle puppy, anything at all that you bought. If I asked you "what is its value," what would your answer be? Remember, I didn't ask you what you paid for it, I asked you to estimate its value. Right off the bat you can see that I'm suggesting there's a difference between price and value, especially when it comes to little Sparky there.

Let's start over.