Value
3 min read
Value is one of the most important economic concepts Designers need to learn. What is it, how is it measured and how to design for it?
Value is an economic concept. It can be thought of as comprising three elements.
Revenue Gains
Cost Reductions
Emotional Contribution
The most obvious measure of revenue is sales but there are others. Engagement metrics are a form of revenue gain since there is a well established relationship between usage and revenue.
Cost reductions are a form of profit gain since it reduces the cost of goods sold or cost of operating. The reduction of those costs will drop right to the bottom line. Making code more efficient so it requires fewer servers is a cost reduction. Designing a flow that automates a previously labor intensive effort is cost savings.
Revenue and cost are tangible and objective measures of value. Because they are tangible and objective they are more easily measured. As a result, they often dominate the dashboards and cultures of tech companies.
The third form of value is Emotional Contribution. This is a subjective form of value. When people talk about feel good factors, trust or delight they are talking about emotional contribution.
Emotional contribution is much harder to measure (but not impossible). Even when there are defined measurements people have a difficult time agreeing on the relative value of this data. This is because each person assesses these factors personally leading to cognitive biases that make it difficult to objectively assess.
Designers highly value aspects of emotional contribution. They put a premium on small details, the overall "feel" of the product. They get a lot of value from these things and assume others do as well.
Another group of people in the company may not get as much value from these things and will not see them meaningfully contributing to the success of the product. They will be dismissive of spending resources on things like polish or delight. More accurately, the don't understand how to prioritize subjective value over objective value.
If the team can only work on one feature and the choice is to add a series of subtle animations and interactions to the product or build a feature that could potentially increase usage by 1% the objective feature will win.
This creates a tension between the people pushing for more value to be created through emotional contribution and those who value revenue or cost reductions.
The paradox is that emotional contribution is where pricing power lives. It is the greatest opportunity for profit since it accesses people's desires more than their logic.
This lack of agreement on value creation is at the core of many disagreements inside teams. Designers, often outnumbered, struggle to connect the value of the things they care about with those the broader product team or leadership cares about. This disconnect is best understood through the lens of values and the gross profit margin of the company.