What is Value and How to Create More of It

Value drives every decision and action in our lives and business. Yet, we rarely examine what it means and how to create more of it.

I wrote this article as part of the content for Business Design Mastery - a course helping designers learn business, which we’ll launch later this year through Design Waves Lab. I think you will find it insightful too.

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You need a ride home.

You call Uber.

You get home.

Uber solved a problem for you and created value.

You also solved a problem for Uber. It needs money to provide its service and generate income for its owners and the driver.

Every time you call an Uber, order a burger, and open TikTok you exchange value: your money, time or attention (or all three) for a solution to a problem you have.

You may ask, “what problem does TikTok solve for me?” and you’ll be right: TikTok, Disney and Gucci don’t solve “real” problems, as in keeping you safe, fed, or helping you get your job done. But they do add value by addressing more abstract needs:

• TikTok -> keeps you entertained and socially engaged with your friends.

• Disney -> keep boredom away.

• Gucci -> helps you tell the world who you are (or more often than not, who you want to be).

To sum it up, value is the benefit you get from having a problem solved. In this context, “problem” captures any want or need that adds richness to your life.

It can’t possibly be that simple

Investopedia, the Wikipedia for business and finance, appears to have a different take on value:

“...in finance, it's [value] often used to determine the worth of an asset, a company, and its financial performance.” (source)

On the surface, Investopedia’s definition looks different. But if we unpeel a layer, it really comes down to the same thing: solving a problem.

Take a basic asset all businesses have: laptops. It’s valuable because it solves a problem for the company. It enables its other assets - employees - to design wireframes, write code, and ship products. The wireframes and the code base are also assets with their own value because they solve the problem of building products. The products themselves have value too because they also solve problems - for the company’s customers and the company itself.

Businesses measure the value of their assets in money, usually by quantifying the future cash flows they will receive from an asset.

The logic is simple: you invest money in building a business today with the expectation that you will get more money in the future to compensate you for all your hard work and the risk you’ve assumed.

Pick any TechCrunch article and you’ll see this logic play out. Take this headline:

Colossal Biosciences raises $200M at $10.2B valuation to bring back woolly mammoths

No need to read beyond the headline to figure out how investors are thinking about the value of this business. They are investing $200M with the expectation that their investment is worth $10.2B. At its core, this expectation is based on the fundamental belief that Colossal Biosciences will solve a big enough problem for someone to generate tremendous value and capture enough of it for the business to be worth $10.2B.

I’m grossly simplifying the process of valuing a company but the fundamentals apply.

Thinking of value only in financial terms is reductive

Monetary value is just one type. In business, just like in life, value comes in different forms:

Functional Value

It refers to the practical usefulness of something. Does it solve a problem? Does it make a task easier or more efficient? Does it meet the user's needs in a tangible way? A product roadmap, testing script, and user flows have functional value that’s usually hard to measure in dollars.

Contextual (System) Value

Businesses and digital products are systems. They are made of parts with functional value, which, when brought together in a system, are more than their sum. They generate system value. Take Instagram’s like button. On its own, it has little value, but it delivers outsized system value. It defines how Instagram works.

Intrinsic Value

Anything has its own inherent value detached from price. Your favourite sweater keeps you warm and makes you feel cozy. This is its intrinsic value. Its commercial value might be zero because it’s an old sweater with ketchup stains on it.

Social Value

Products and services don’t live in a vacuum. In one way or another they are useful to society as a whole. Bluesky and libraries have one thing in common: they bring people together and help us build communities. This is a social value.

Psychological Value

Products, services and people bring us joy, delight and satisfaction and this way they deliver psychological value.

Fair Market Value

In finance, there is a formal definition of FMV, which loosely goes something like this: the value of something expressed in cash and available for purchase in an open and free market with numerous buyers. It’s the golden standard of value when it comes to buying business assets.

Strategic Value

Often, we buy something not only because of the immediate value we’ll derive from it. Acquiring something may place us in a favourable position in the future, even if we are not quite sure what it could be.

In 2013 Google acquired Waze for $1.3B. Then, seemingly, it did nothing with it. The giant must have seen some strategic value in owning the technology.

You generate value by solving problems

No matter the type of value, the only way to create it is to solve a problem. You may argue that the intrinsic value of something doesn’t come from solving a problem. It’s true that in the traditional sense of “problem”, intrinsic value is not a result of a solution. Still, it’s a manifestation of a need that has been met and a benefit that has been realized.

You may love Patagonia as a brand for what it stands for. Your association with it meets your need of supporting a cause that makes a difference in the world. On a more psychological level, it meets your need to be seen as the type of person who cares about nature.

Any phone on the market will meet the functional needs you want from a phone. Why pay double the price for an iPhone? Because owning an iPhone meets a set of needs a Xiaomi phone can’t. Iphone satisfies your desire to be seen as a certain type of person: the kind who appreciates the latest technology and can afford to get the best on the market.

Of course, the iPhone goes beyond simply providing a functional product that looks cool. It adds intangible value by meeting your need for delight and enjoyment while doing daily tasks.

On a personal level, this is the reason why I prefer Threads over all other social media apps. It provides me with the most delightful experience, which makes me feel good. This is how designers add value, which if Threads monetized, translates directly into cash flow (more on that later).

Putting a number on value