What element is crucial to determining whether an activity is value added or non-value added?

Determining whether an activity is value added or non-value added heavily relies on the perspective of the customer. This is because value is inherently defined by the customer’s needs and expectations. An activity is considered value added if it directly contributes to meeting those needs or enhancing the customer’s experience. In contrast, if an activity does not provide direct benefit or satisfaction to the customer, it is deemed non-value added.

For instance, a manufacturing process may include several steps; however, only those steps that enhance the product's value to the customer—like ensuring its quality or improving delivery time—are considered value added. Any processes that do not enhance the product from the customer’s viewpoint are viewed as wasteful and can be eliminated to streamline operations.

Although other perspectives, such as management, employee, and market views, are important for overall performance and strategy, they do not directly influence the categorization of activities with respect to customer value. The customer's perspective is paramount as it ultimately drives the success of any business.