The Four Levels of Value: Why Thinking Pays More Than Doing

Consider two owners who each work a fifty-hour week, one of whom bakes in her own kitchen while the other directs a company that runs thirty bakeries. Effort cannot explain the difference between what they earn, because both of their weeks are full. What separates them is the kind of work that fills those hours, and those kinds deserve names, because an owner is able to change which one fills her own week.

I sort every task that a business contains onto a ladder of four levels, which I call the four levels of value. I place each task on that ladder by asking a single question: how many people receive the value of this hour of work? The last article described the bottom level from the inside. This one sets out all four of them, so that you can place your own week on the ladder before you spend anything on climbing it.

Work done with your own hands

The bottom level is implementation, which covers the making, the fixing, and the serving that fill an owner-operator's week. An hour of it produces value for a single customer, so what the business earns rises with the hours until the week runs out of them. The last article measured that ceiling, and there is no reason to measure it twice here. What matters for the map is one property of implementation, which is that it is the easiest of the four kinds of work to buy. Any trade directory holds a list of people selling hours of it, and the work that is easiest to buy usually commands the lowest price.

Work that organises other people

The second level is unification, which means directing the people who do the implementation. A week of unification produces nothing that a customer could hold. The manager who spends it still sets how much every implementer under her produces, because she hires them, trains them against a standard, and keeps their output good enough to sell. The value of one of her hours reaches every customer her team serves in that hour, which is the first multiplication the ladder offers.

That multiplication has a limit of its own. One person can only direct so many others well, so the reach of unification rises with the number of people you employ, and employing more people costs more money. The level still reaches further than implementation does, although it grows one hire at a time.

Work that explains to many people at once

The third level is communication, which means taking what the business knows and explaining it to an audience. A baker working at this level could teach a course, publish her recipes, or explain to a thousand buyers at once why her bread is worth what she charges for it. The hour of effort remains a single hour, while the number of people who receive the value of it rises to the size of the audience. An audience can also grow without your payroll growing alongside it.

Communication depends on the levels below it, because an audience can usually tell whether the person explaining has done the work herself. The knowledge you earned at implementation is the raw material, and communication is what multiplies the number of people that knowledge reaches.

Work that decides what gets built

The top level is imagination, which means deciding what the business makes, who it serves, and why those people would pay for it. Every hour worked at the three lower levels carries out a decision that somebody took at this one. The reach of an hour at this level is therefore the whole business, because a single sound decision redirects every pair of hands, every manager, and every message below it, while a poor one wastes all of them at once.

Imagination is also the scarcest work on the ladder. You can buy implementation by the hour wherever people advertise their trades, and you can hire managers and marketers through the usual channels, whereas the people who can choose correctly what a business ought to build rarely offer that skill for a wage.

The ladder in one table

The third column, read downwards, shows one limit disappearing at each step up the ladder. Your week puts a cap on your hours and the cost of wages puts a cap on how many people you employ, while the size of an audience has no cap of that kind. What work pays usually depends on its reach and on its scarcity. The same day of effort therefore returns more the higher up the ladder you spend it, because each level serves more people than the one below while fewer people are able to do the work.

Where your week goes is where you stand

The four levels describe kinds of work, so your job title says nothing about where you stand among them. Consider an owner of five staff who spends her own week driving the deliveries. She is working at implementation, whatever her business card says, while an employee of hers who redesigned the way the warehouse picks orders would have spent that hour at imagination. The levels also stack on top of one another, because a business needs all four of them every week. Your own position is wherever the bulk of your week falls, and a written list of where your last fifty working hours went will show it to you.

If the bulk of your week falls in work that somebody else could be taught to do, then you have found the same ceiling the last article measured, and the way up begins with the first climb, which is paying other people to do that work. That climb is the uncomfortable one, because the wages start going out before the results come back. The next article covers what you should hand over first, what the written standard behind a handover has to say, and why other people's time is the first purchase worth making.