by Jeroen Geelhoed, &samhoud consultancy
Value creation is one of those terms which every organization can visualise but which is difficult to define. When do you create value? For whom is it valuable and how do you measure value? In this article we introduce the Waves of Value.
What is lasting value?
Lasting value creation means that your organization starts with a cycle that leads to success. We only speak of lasting value if value is created for all stakeholders:
- Shareholder value – higher profit and a better price earnings ratio
- Customer value – better service, greater customer satisfaction, better connection between the customer and the organization, higher profit per customer
- Employee value – employees connecting better with themselves, with colleagues and the organization in relation to better performance
- Social value – connecting better with society and making a contribution to society
Organizations with this approach to stakeholder value perform in the long run 10 times better than the average!http://blogs.hbr.org/2013/04/companies-that-practice-conscious-capitalism-perform/
But, creating value for all stakeholders is not easy. On the contrary, it requires a great deal of work on various fronts. In our book Creating Lasting Value we identify three waves that lead to lasting value. http://samhoud.tv/video/the-secret-for-creating-lasting-value
The first wave: Lead the Value
The first wave concerns the inside of an organization. When you enter an organization that has incorporated this first Lead the Value wave, you can sense it immediately. You notice it when you speak to employees. You notice that there is energy, a sense of urgency or a sense of excitement about getting down to work and doing things together. There is also a clear and inspiring vision and strategy that gives people meaning and direction. As a result, the employees work with inspiration and passion and have their customers’ interests at heart. The leadership is characterised by taking ownership, setting direction and demonstrating solidarity with the organization. Such organizations also have a well-designed business model and a clear target group. This target group has a clear offering and an intelligent revenue model providing a basis for economic success. Organizations which excel in Lead the Value have a healthy culture, which provides unity but at the same time harnesses the power of complementarity and diversity. It is logical that the first wave is at the centre of the model. After all, it generates the other waves. At the same time, the first wave alone is completely insufficient to create sustainable value, because results must also be delivered. Check your organization on the first wave, Lead the value. Is there:
- Energy, a sense of urgency and excitement about creating value for all stakeholders?
- An inspiring vision?
- A clear strategy?
- A sound businessmodel?
- A management team that takes ownership?
The second wave: Manage the Value
The second wave of value creation relates to ‘make it happen’: executing the strategy and demonstrating performance. Organizations that are good at Manage the Value show results! They score highly in customer satisfaction rankings. Customers recommend them and employees have high productivity. Such organizations make a profit, year after year. These organizations are also able to improve themselves and offer new products and services. The second wave concerns an organization’s execution power. Manage the value is about living the vision in day to day life. But also bringing in the voice of the customer, conducting performance dialogues and optimizing value streams. And last but not least by empowering entrepreneurship within the organization. Check your organization on the second wave: Manage the value. How does your organization perform on:
- Customer satisfaction or Net Promoter Score
- Employee Engagement and productivity
- Having frequent performance dialogues with the teams on all levels of the organizations
- Living the vision and values in daily practice
- Bringing in the voice of the customer
The third wave: Market the Value
Market the value is about showing and sharing the value you create and celebrating success. It is about inspiring others. We make a distinction between two mainstreams: Showing yourself and Sharing your value. Show yourself involves brandingyour track record, publicizing what you stand for, being open to others and participating in rankings, like Great Place to Work for examplehttp://www.greatplacetowork.com/ . It is important that you show the world the progress you have made and celebrate it. The world must be able to see it and experience it! The second element is about sharing. How can an organization share more with others? This can be achieved by participating in networks, giving back to stakeholders, co-creating with the outside world and entering into partnerships in which co-creation occurs. The motto is ‘Do well by doing good’, so share your wealth, knowledge and culture with the world and promote your connections with people who wish to bind themselves to your organization. Think about movements around organizations like Zappos and Starbucks.
Organizations that are effective in the Market the Value wave earn a good reputation and are attractive employers. People talk positively about such companies. The outside world has confidence in their leadership and expects the organization to be ready for the future market and to anticipate the relevant trends. It will also inspire others to build a better future.
Check your organization on the second wave: Market the value. How does your organization perform on:
- Company attractiveness
- Stock price
- Number of ‘fans’ or people that can be defined as a movement around your organization
Applying these three waves of value leads to value creation for all stakeholders. Most companies have their preferences. Some are Lead the value oriented. Others (I think most) will be Manage the value oriented. Some like Market the value most. But for lasting value we need all three. It will create to the companies we need in these times. Join this movement of companies creating lasting value. Together we build a brighter future.