Definition

value driver

Contributor(s): Diann Daniel

A value driver is an activity or capability that adds worth to a product, service or brand. More specifically, a value driver refers to those activities or capabilities that add profitability, reduce risk, and promote growth in accordance with strategic goals. Such goals can include increasing shareholder value, competitive edge and customer appeal.

Value drivers are the factors that are likely to have the greatest impact on a company's success, and they are specific to different industries and companies.

For example, the value drivers motivating a healthcare company to move certain business processes from on-premises to cloud-based systems would be different than those motivating a manufacturing company seeking to implement digital manufacturing technology and link different data silos and processes of the manufacturing lifecycle. Determining a true value driver requires thinking of long-term gains, and not getting swayed by trendy processes or technologies that don't add tangible value or are only a short-term win.

There are different categories of value drivers, whether types, such as growth drivers, operational drivers or financial drivers, or levels, such as generic or business-unit specific.

When action is required to realize a particular value driver -- for example, managing inventory turns  or variables that affect working capital -- the value driver must be defined at an explicit and commensurate level where action can be taken towards its realization. For example, a C-level executive has overarching insight and high-level responsibilities that are very different than that of a front-line manager, yet each can carry out important value-driving actions.

This was last updated in November 2016

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