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Value creation is any process that creates outputs that are more valuable than its inputs. This is the basis of efficiency and productivity. The following are illustrative examples of value creation.
CommoditiesA farmer uses land, equipment, water, labour, sunlight and seeds to grow onions. This process creates value from resources.ProductsA firm manufactures eye glass frames on a production line. The eye glass frames have greater value on the market than the cost of inputs such capital, labor, energy and materials.ServicesA bank uses technology, labour and capital to offer mortgages to customers. This has value to customers as it allows them to pay for a property as they use it.
ProcessesA customer support process takes customer issues and inquiries and uses technology and labor to resolve the issue or answer the question. This has value to the customer, so much so that a customer may only purchase products and services that offer customer support.MachinesA machine in a job shop drills holes in metal. This is part of a value creation process that creates parts for high speed trains from materials.
Information TechnologyA software service takes inputs such as data and computing resources to generate monthly customer invoices. This has value to a firm as they need to send customer's invoices in order to collect revenue.WorkA craftsperson uses labor and tools to create a canoe from wood.Knowledge WorkA designer uses software to create a design for a chair. The design may have value as chairs with a useful and attractive design may command high demand on the market. Generally speaking, design is a significant factor in the perceived value of goods and services.|
| Type | | | Definition | Any process that creates outputs that are more valuable than its inputs. | | Related Concepts | |
Business Models
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