THE VALUE CREATION CYLCLE: FRAMEWORK FOR RECOVERING TRUST
The crisis that paralyses Europe, has been analysed over and over. The financial system failed which has led to a trust crisis in both THE economy and society. Consequently, money and profit have become infected words. And those who talk about money and profit have become personae non gratae.
Stigmatizing others might cool the anger of disappointment, but it’s only temporary. Eventually every individual will come to the point of saying ‘now what’? A system such as our economic system can’t just be ignored and abandoned.Besides, people vary in their opinions: what is the right thing to do and according to whom? If the system fails and politics fail and banks fail and CEOs fail, then it becomes easier and easier to point out the next failure. Health Care? Education? Public transport? The fight against crime? Pollution? Unemployment? Leaders? Countries? How can we achieve a breakthrough in this destructive way of thinking? The answer lies in value creation. In defining what we value. To determine value and to implement it in our daily lives, in organisations and society, we need a different framework. &samhoud developed such a framework. It’s called the Value Creation Cycle (VCC). The VCC is the answer to the question ‘now what’? It is inclusive, so money and profit are part of it, just like any other value element.
Value creation concerns, on the one hand, value for all stakeholders: employees, customers, shareholders and society. If we want to create value sustainably, three waves of value are important. First, Lead the Value, which involves all activities required to mobilise energy, working on a good, lofty and inspiring vision and strategy. In short, everything that is necessary internally to achieve a resounding success. We called the second wave Manage the Value. This concerns the actual achievement of results, making profit and continuous improvement and renewal. The third wave – Market the Value – is focused on carrying along and inspiring the outside world, positively influencing reputation, market expectations and public sympathy towards the organisation.
THE VALUE CREATION CYCLE
The Value Creation Cycle is a framework for the various concrete steps which organisations can take to energise the three waves of value. The Value Creation Cycle consists of Mobilise Energy, Take Ownership, Set Direction, Make it happen and improve, Inspire Others and Change holistically.
- Mobilise energy: this is about creating a sense of urgency or excitement which really gets things moving.
- Take ownership: this link concerns commitment at the top of the organisation, creating a leading coalition and determining the extent to which you wish to involve people in developing the direction.
- Set direction: this is the link concerning the actual formulation of the vision, the brand, the business transformation model and the strategy required to realise it.
- Make it happen and improve: this is about actually realising the vision and strategy by living the vision and the brand, executing the strategy and empowering entrepreneurship in the organisation.
- Inspire others: this is about promulgating, demonstrating and sharing the results achieved.
- Change holistically: this is about supporting and confirming the change process to bring it into existence as a whole. Leadership development, team development, change management and the achievement of breakthroughs in the culture are crucial elements here.
Nothing gets moving if there is no energy. Therefore, the chain usually starts with the mobilisation of energy. Energy arises when people in the organisation gain a sense of urgency. That is an uncomfortable feeling that arises because you are forced to confront the facts. In his book ‘Good to Great’, Jim Collins uses the splendid term ‘brutal facts’ to describe this situation. These brutal facts give rise to thoughts such as “If we take no action now, in five years’ time we’ll be out of business” or “We’re lagging behind our customers”, and “Now I can see what our customers think of us, I’m ashamed”. Fostering a sense of urgency is an extremely effective way of mobilising energy, the only downside being that it has negative connotations. Fortunately there is also a positive form, namely a sense of excitement. This arises when people glimpse new opportunities which connect with their inner drive. A sense of excitement is accompanied by completely different thoughts, such as “We are so good at this, we must expand it further” or “We can create an entirely new market with this idea”, and “Our dream is to…”. The story goes that in its early years Nike was driven by the motto Crush Adidas! Although it is a fairly aggressive motto, it is conceivable that at the time the still relatively small Nike derived a lot of energy and excitement from it. Energy does not usually arise from the production, analysis and presentation of thick reports, although they often contain enough information to scare the living daylights out of you. Energy arises when you feel, experience and participate in what is going on. That requires see – feel – change methods. These are experiences that affect you. They could include interviews with competitors, videos of angry customers, cool hunts for places that reveal the latest trends, customer journeys, employee arenas, films, listening in on call centre operatives and other similar methods.
Of course something must be done with the energy that is mobilised. It is quite valuable if there is a sense of urgency or excitement, but at a certain time someone must take responsibility. That is the essence of the second link, the initial requirement being that the senior management of an organisation must demonstrate ownership. “This is my problem and I’m going to deal with it. I’m going to put all my energy into it and make sure we take the right steps. I’m responsible and accountable for that.” When such words are spoken with conviction by the senior managers of an organisation, the listener is fired with genuine hope that something good is going to happen. Of course, that does not mean senior management will deal with it on its own, because although leadership starts with commitment from the top it must be more widely supported within the organisation. The creation of a leading coalition that also takes its responsibility and participates in the creation of value is a decisive step in this regard. This is about people with formal and informal influence, who on the one hand are firmly rooted in the organisation but on the other hand have sufficient critical distance to lend energetic support to the desired changes. It is also wise to consider at an early stage who within the organisation you want to involve in determining the direction. The need for people to not be too restricted in their thinking was demonstrated in the research entitled ‘Organisatievisies in Nederland’ (‘Visions of Organisation in the Netherlands’), which we conducted a few years ago. This revealed that involving people from multiple layers of the organisation has a positive impact on the quality and loftiness of the vision and strategy. And ultimately on the results.
With the sense of urgency and with the right people, the direction is then determined. This is about developing the vision of the organisation, formulating the Higher Goal, the Audacious Goal, the Core Values and the Core Qualities. This is a fundamental process that simultaneously defines the core of an organisation and the course for the years ahead. This vision is then supplemented with a business transformation model that is as solid as can be, a strategy that is so clear that you know what you have to do tomorrow and an authentic brand that is able to connect with and inspire the outside world. If you wanted to encapsulate these components in a metaphor, you could say that the vision is your destination. Your strategy map is your route map. The brand is the way in which you invite your fellow travelers to go with you. And the business transformation model is the engine in your car. The importance of a good business transformation model has increasingly been recognised in the last few years. In a good business transformation model you first clarify which customers actually make up your primary target group, but also which are not part of your primary target group. That is an important choice, with numerous consequences! You then define what you want to offer these customers, something known as the value proposition or offer. Next, you determine how you are going to organise everything to deliver your value proposition to your primary customer, in other words your operations. Finally, you define the channels through which you are going to serve customers, this is referred to as delivery.
Make it happen and improve
No-one can deny that accomplishing your ideas and plans is more important than the ideas and plans themselves, unless you want to carry on dreaming and writing… The Make it happen and improve link is therefore the essential link for inspired and disciplined action. And it involves quite a lot! In the first place it requires people to live the organisation’s vision, day after day. Visionary organisations go all out to live the vision. They do so for example in employee induction programmes by genuinely reflecting on the vision of the organisation and what it means. Vision films are shown and discussed. The vision arises again in people’s assessments, in the art that hangs on the wall, in the design of the buildings, in the business cards given to customers, in the training courses which employees attend and so forth. It requires exceptional effort to keep the vision in people’s heads, hearts and feelings. But it will lead to a great deal of inspiration. Discipline is also called for, however, in emphasising the consistent implementation of the strategy in day-to-day practice and at all levels of the organisation. That is done by putting the customer at the centre and thereby constantly internalising the voice of the customer. That is coupled with robust performance management. On the basis of a short weekly cycle, discussions take place within each team on the status of the various objectives, the likely sticking points in the week ahead, what assistance is required and what was learned and improved in the previous week. In this way processes are continuously improved on the basis of the principles, instruments and tools offered by the Lean approach. Lean offers extremely useful guidelines and insights, provided it is not used solely as a cost-cutting programme. Lean was originally intended to create greater value for customers and employees, and indeed to bring about improvements on the financial level. By deploying Lean techniques in this way, it can be used as a lever to realize the vision and strategy and to develop people. Because developing and empowering the right people is an important precondition in order to be able to do all this. That is done by providing them with the required tools and teaching them the required skills to serve customers well. By letting them develop a personal vision and strategy, people in the organisation will discover their dream. In that way you can empower people in the organization to become entrepreneurs, laying the basis for further improvement and renewal of the organisation as a whole.
What has been achieved must be shared! And although the expression ‘Be good and tell it’ could be branded as arrogant or ‘rather 1980s’, success should always be shared. The outside world can learn from what is going well and share in it. Other people can improve as a result, and you will also improve. Just think from what you can learn when other people look at things with you and give feedback. And think about the pride and satisfaction generated in the organisation when people from far and near come to see how your organisation has gone from good to great.
Although the circle now appears to be complete, an essential element is still missing. Something else is related to all the previous steps. Something that goes beyond, but also has to support the previous links. On the one hand it concerns the development of leadership and team effectiveness, since a change process focused on value creation demands a great deal of the leaders and the teams. And every phase and every step brings about new challenges for the leadership and the various teams. Determining the course requires different skills of managers than for example the conduct required in executing the vision and strategy. On the other hand it concerns the management of the change process. Because although the previous links may appear to constitute a step-by-step plan of separate, stand-alone steps, that is by no means the case. All links must be connected to one another. Careful and consistent management of such a change is a discipline in its own right, and careful consideration must be given to when to do what. Throughout this process everything is done to enrich the organisational culture and even create breakthroughs in the culture. In that way external stimuli can be brought into an internally focused culture. For example, in an energetic ‘can-do’ culture more light can be cast on the human factor. Now that we have briefly explained the various links in the chain, it should be emphasised that none of these links in the chain can be omitted when creating sustainable value. These links, placed in a circle, must not be seen as a ‘checklist’ in which you tick off the various steps one by one and then say with a sense of satisfaction that you have ‘dealt with’ them. This is actually a never-ending cycle just like building a healthy and valuable organisation is an continuous task. That is something every entrepreneur will concur with. Because we continue to build. Together we build a brighter future.