How Creating Value For Others Has Become The Key To Business Success

Forbes

20-04-2025

Figure 1: Logos of firms creating value faster. in the U.S. Europe and China
Creating value for others has long been a staple of morality, Who has not heard, 'Love your neighbor as yourself"? Today, paradoxically, creating value for others has become the key to business success.
The Mirage Of Scientific Management
This is quite recent. For more than a century, businesses often lost sight of the importance of creating value for others. Many firms pursued the idea of scientific management, i.e. imposing a system of inert processes, methods, structure, and systems on staff in order to make money. Scientific management took off with Frederick Taylor's book, The Principles of Scientific Management, who predicted: 'In the past the man has been first; in the future the system must be first.'
In the 1950s, the Carnegie Foundation insisted on scientific management in its funding of business schools. In the 1970s and beyond, the Nobel prize-winning economist Milton Friedman and his colleagues persuaded businesses to pursue maximizing shareholder value (MSV) as the sole goal of business. In 1997, the Business Round Table endorsed MSV the valid goal for all businesses. As recently as 2023, management guru Gary Hamel defined management as 'simply the tools, the methods, process and structures that we use as human beings to do together what we couldn't do alone.'
This concept of management led to great gains in the 20th century, even as staff engagement was steadily lower and business returns gradually declined. Eventually, in 2019, the Business Round Table realized that business based totally on the self-interest of short-term profits was untenable and officially renounced it.
The New Goal Of Business Management Emerges
Meanwhile, over the last quarter century, firms had already begun implementing the converse of Taylor's dictum. As they found ways to have human concerns modify and drive the processes, practices, and methods, they were able to grow much faster and generate exponentially more value. They began with the customer and worked backwards, while also giving thought to all the stakeholders. In so doing, they began to live a new destiny for business management: creating value for others.
Illustrations of firms that are mostly pursuing this goal and the results they have obtained in terms of long term returns and workplace satisfaction are included below in Figure 1. They include firms of all sizes and in all sectors in the U.S., Europe and Asia.
In one sense, this is like discovering the wheel. For millennia, the human race has known that when we create value for others, the true spirit of living is alive in us. Whatever our kind of work, whether it is a business, a team, a family, a community, a political movement, or even a religion, when we embody the spirit of creating value for others, we become inventive, searching, daring, and self-expressing. We become interesting to other people. We may disturb and upset, but we do so to enlighten and open the way for better understanding.
We have long known that some people are doing the opposite. They are trying to extract value for themselves, or to harm us, or to dominate us, or impose their process or system on us. In so doing, they can become mean, selfish, unpleasant, even inhuman.
What led to the change? It wasn't a sudden moral epiphany on the part of business leaders. It was a recognition by businesses that the world itself had changed. This in turn necessitated change. The internet (and now AI) had given first, to firms, new possibilities for innovation, and then to customers, more choices, and finally to firms again, the potential of new business models that built on extraordinary network effects. The old way of managing couldn't keep up. Managers had to try something different.
The terminology used by the firms varied. Apple talked of a different 'culture'. Microsoft talked about 'mindset', 'empathy' and 'values.' Amazon talked about 'leadership; principles.' Some firms talked of 'mental models' and 'narratives.' The Agile Manifesto spoke of valuing 'individuals and interactions' more than 'processes and tools.' At LVMH, CEO Bernard Arnault talked of giving designers 'freedom without limits'.
Whatever the vocabulary, this new breed of firm used subjective concepts to drive their business processes. Their mental models, goals, mindsets, values, narratives, and purposes were the very things that scientific management had dismissed in principle. The result was an upheaval in every aspect of business practices It might be called a paradigm shift in management, although probably no more than 20% of public firms have yet made the transition.
Instead of trying to fix individual issues by adding patches to a framework of scientific management, the fastest growing firms transformed almost every aspect of management.
Figure 2: Hierarchy of authority vs Network of competence
Each of the firms in the transition is unique. Some concentrate more on one dimension than another, depending on the particular needs of their context. Each of them has flaws, including some that are serious. In effect, none of them is a model that can or should be copied directly. But the principles of management that they have discovered require attention.
What we are seeing here is not a fad. This is not something that was cooked up last night and will evaporate in a flash. It's not just a theory. It's based on hard financial and social facts. It's been gathering momentum for several decades. And it has roots in countries around the world. In fact, there's now a lot of solid knowledge about how and why this new kind of management works.
What the other 80% of firms have to do is to unlearn most of what they know about management and, in the process, get to know the organization of the future. They can learn from the practices of the leading firms and understand how they achieved their success. They should not set out to copy their practices exactly. Those practices were right for those firms in their settings. In transitioning to the new, firms have to develop principles and practices that are right for their own setting.
They also need to learn why change is inevitable. To be master of their fates, they will have to embrace new ways of thinking and communicating and acting. Their organization will need to become, in effect, a new organizational life-form. Almost everything will be different. But it will also exciting. Suddenly, the firm will be in sync with its context. Management will for once have pizzazz.
And read also:
The Management Paradigm Driving The World's Fastest Growing Firms
Understanding Why Networks Of Competence Crush Hierarchies Of Authority
FIGURE 1 5-YEAR TOTAL RETURNS OF FAST GROWING FIRMS IN US, EUROPE AND CHINA 250419