This week I’ll be exploring the value of geospatial technology. 

I hold that geospatial technology does not create value, but rather serves as an important tool contributing to the creation of value. This distinction is important because if we want to build more impactful technology and sustainable profit growth we must understand how value is truly created and how we can contribute more effectively.

To dissect this distinction, I’ll first establish a working definition of what I mean by “value”. Then I’ll dig into examples of the important role geospatial technology plays in creating value and how distinguishing between different types of value can inform better geospatial product development. 

 

Defining Value

 

Value should not be confused with money, for if you were stuck alone on a desert island with no transportation or communications, all the money in the world would be worthless. 

 

Value is far more than money. It’s intimately tied to the ultimate benefit consumers receive from goods or services that solve their problems. To support this, I’m going to start by identifying a basic formula for value, then distinguish four types of value contributing to this formula: Represented Value, Contributed Value, Potential Value, and Realized Value.

At its most basic, Value = Benefit – Cost. Therefore, for something to have positive value, the benefits must exceed the cost of producing said benefits. Moreover, benefits don’t materialize out of thin air, they require problem-solving action to bring them into reality, and actions come with costs. From energy and resource costs to opportunity and labor costs, producing benefits and creating value requires incurring costs by taking action to solve problems. 

However because value creation follows costly actions, we must have a way to drive action prior to creating value. This is a good time to distinguish the three types of value I identified above.

  • Represented Value is what most people think of when they say something “has value”. It is a way to communicate the perceived worth of something. Although something’s Represented Value is most commonly communicated with how much money can be exchanged for it, Represented Value can also describe sentimental value, utility value, etc. 
  • Contributed Value describes all the actions taken throughout a supply chain that transform raw materials, labor, and energy into goods and services with the potential to solve problems (for my purposes this includes supporting admin, R&D, operations, etc.). Contributed Value consists of costs and potential benefits to actors within a supply chain, but it does not produce direct benefits for consumers. Contributed Value is where value creation originates.
  • Potential Value describes value between the time it is contributed and when it is realized by a consumer. In an ideal world, the goal of Contributed Value is to create value, but until value is realized by a consumer, it is merely Potential Value.
  • Realized Value results from actions that solve problems directly for consumers. Realized Value must produce benefits yielding a Represented Value greater than the cost of Contributed Value for value to have been created. There is an exceptionally small list of categories that almost all Realized Value fits into. These include problems relating to providing consumers with: Food, Housing, Clothing and Personal Care, Health/Wellness, Utilities, Transportation, Education Entertainment.

To produce Realized Value at scale, modern economies have spawned from complex supply chains consisting of various actors providing Contributed Value in exchange for Represented Value. And yet, until a benefit is realized by a consumer, value has not been created, it is only potential. This is because the Represented Value of the ultimate consumer solution is what’s subdivided to drive the entire preceding Contributed Value supply chain.

Let’s explore this assertion with an example. As an essential building block to life, we wouldn’t be here without access to consumable food. 

Yet, while food has Potential Value by merely existing, existing alone is not enough to yield Realized Value. The key word for shifting Potential Value of food to Realized Value is access. Realizing value with food requires someone taking action to make it accessible for consumption (to maximize Realized Value it must be consumed in reasonable portions prior to expiring, but that’s a rabbit hole we don’t need to go down).

Our ancestors contributed value by hunting, gathering, and preparing food for consumption, culminating in Realized Value at mealtime. Today, a single piece of produce may travel the world before value is realized. Hundreds if not thousands of actors contribute value including site selection for farming, staffing for planting, and harvesting, vendors for shipping, storing, preparing, managing risk, advertising, and ultimately selling the piece of produce at a local market. Only upon its final sale for consumption is value truly created, yielding a final Represented Value greater than the original Potential Value and the sum of the cost of Contributed Value. 

If at any point in this supply chain the piece of produce goes bad before it’s purchased by an end consumer, the benefit is never realized and the original Potential Value is destroyed, leaving only the costs of the Contributed Value, thus yielding waste. Waste also results if the cost of the Contributed Value required to get the piece of produce to market is so high that consumers are unable to afford the resulting Represented Value, making it inaccessible. 

One of the worst things about modern economies is that the power of Represented Value, specifically money, has such an allure that many businesses have shifted focus from solving problems, thereby creating value, to the illusion of contributing value in pursuit of Represented Value. You see, it’s much less risky to contribute value than to be responsible for ultimately realizing value. This is because, as I mentioned above, those providing Contributed Value get paid before the supply chain culminates in the final consumer transactions representing Realized Value. 

 This is one of the primary reasons that consultants, bankers, marketers, lawyers, and other providers of Contributed Value get a bad rap. Many of them never produce benefits for their business customers sufficient to justify the cost, yet often the costs must be incurred before a business can know this. Some of these folks truly want to contribute value, they’re just not very good at it. Still, others know they don’t actually produce Contributed Value, instead making their primary business purpose the pursuit of Represented Value. Sometimes they’re even aided by regulatory schemes, connections, monopoly conditions, or powerful persuasion engines. This is often referred to as rent-seeking and it’s one of the most destructive economic forces there is. 

 And yet, there are great lawyers, financial advisors, accountants, marketers, consultants, and technology companies truly contributing value to businesses solving problems for consumers. These actors understand the ultimate problem their business customers exist to solve. They don’t pursue Represented Value at the expense of truly contributing value, and as a result they are able to penetrate markets more deeply because the benefits their solutions provide far exceed the cost, enabling more efficient value contribution.

Whew! Now let’s explore how geospatial technology fits into this value equation. 

 

Building Better Spatial Businesses by Understanding the Role of Geospatial Technology in Value Creation

 

To achieve greater market penetration and more sustainable profit growth, geospatial technology producers must not only intimately understand the ultimate value their customers contribute to creating, but their products must be action-oriented to ensure people are able to use them to produce benefits surpassing their cost. 

 

Like all tools, geospatial technology does not create value itself. Rather, because everything exists somewhere, spatial technology contributes value by helping people make more informed decisions resulting in more efficient value-contributing actions. In this capacity, spatial technology has become one of the most important tools contributing value to almost every supply chain on earth. 

And yet, geospatial technology is encountering a watershed moment. Firms born from building awesomely powerful technology are struggling to find their way into profitability, let alone sustainable profit growth. This phenomenon results from what is commonly referred to as “solutions in search of problems”. 

 

I believe this is because most geospatial products are developed by people who are incredibly brilliant and technical. They place a high Represented Value on the power of spatial data and analysis to help solve virtually any problem, which is appropriate if it’s in the right hands. The problem is that they build their technology for people who are also technical and able to unlock the extraordinary power of data in a similar way. This has resulted in an ecosystem of geospatial value contributors contributing data and services to other technical value contributors amassing a ton of Potential Value, but yielding relatively little Realized Value in comparison.  

You see, value is only created when it is realized by consumers, meaning tools, analysts, and data scientists don’t actually create value. To be clear, geospatial professionals of all types contribute profound value serving as seeds for value creation. But their work is merely Potential Value until it is:

conveyed to those responsible for making decisions 

AND

then communicated to those responsible for acting on the decisions 

AND

those actions result in benefits realized by consumers. 

And this is just the end of a very attenuated spatial product value chain. Much like the piece of produce, if the data and resulting spatial insights aren’t acted upon in time or don’t produce benefits exceeding their cost, they result in waste rather than value.

 

Therein lies the problem: geospatial technology requiring high levels of expertise and organizational maturity to operationalize is too far removed from the day to day of what most businesses actually do to produce Realized Value for consumers. 

Moreover, incorporating such technology into operating processes is expensive. Meaning either the benefits to be gained must have a solid, and specific, business case to justify the costs, or the value contributors using it must have so much money they can afford to take a risk on the Potential Value promised by the technology. So far the geospatial business model has largely been driven by the latter, and these customers are difficult to capture from geospatial incumbents. 

 

So what’s the solution? 

 

We must build geospatial technology products people can easily use to take action. And I don’t mean just for advertising, site selection, and insurance pricing. There must be a clear and efficient stream of value from our products all the way through to the production and delivery of the goods and services CONSUMERS need for value to be realized.

Food producers must be able to easily determine which crops need attention, which markets they can deliver to most efficiently to reduce waste, and how they can invest in their land to make it more resilient so people are fed.  

Roofers must be able to easily identify the customers that need service, monitor supply chains to ensure procurement keeps up with demand, and hire/dispatch their crews to ensure people’s homes stay dry.

Utilities need to be able to efficiently manage their infrastructure ensuring safe delivery of water and energy to their customers and removal of waste so people stay warm, hydrated, and clean.

Miners must be able to locate and extract resources efficiently and safely to supply downstream value contributors with the raw materials necessary to build cars, roads, solar panels and other goods/services satisfying consumer needs. 

The list goes on and on, always resulting in some positive benefit for people in the form of Realized Value from problem-solving action.

 

Thus, achieving greater market penetration and sustainable profit growth requires understanding not only the internal problems of our customers, but the ultimate problem they contribute to solving for consumers. Most importantly, it’s not enough to make spatial data available for analysis with awesome spatial technology, a feat in and of itself, we must collapse the currently attenuated geospatial value chain by developing action-oriented products and services that are easily operationalized. 

 

And that’s the topic of my next blog: What does action-oriented mean?

 

Thank you for reading! I’d love to hear your comments and feedback.