TWENTY

The Value-Engineering Principle

Value engineering is a simple method of evaluating the usefulness of a new product by asking some key questions:

1. What is the product or service? Describe it through the mind of the consumer.

2. What does it do? Exactly? How does it improve the life or work of the customer?

3. What does it cost?

4. What else will do the same job?

5. What does that alternative cost?

Human beings are often described as “homo economicus,” or economic man (or woman). We always seek to get the very most at the lowest possible cost, all things considered. If you have a product or a service that is similar to that of others in the hearts and minds of your customers, your price has to be equivalent to or lower than your competitors if you want to survive and thrive in any market.

Very often, this value-engineering principle will lead you to outsourcing. You may find that instead of doing something in-house, you could find another company with better capacities or facilities and save money by having this outside company do the job.

This need to offer the very best products and services at the very lowest price possible is the driving force behind outsourcing and offshoring. People’s desire for low prices is what drives world manufacturing from countries with high production and high labor costs to countries in Asia and Africa with lower costs of labor and production.

ACTION EXERCISES

1. Describe your products or services in terms of what they do to improve the life or work of your customer. How else could you bring about this improvement, or another improvement, for your customers?

2. People buy a product or service to do a job for them that they want and need to be done. What additional jobs do your customers need done that you can offer or develop products or services to accomplish?