Why We Live Today In An Age Of Value Creation

Forbes

5 days ago

Co-founder/co-CEO of Robinhood Vladimir Tenev (Getty Images); its mission to "provide everyone with ... More access to the financial markets, not just the wealthy" getty
Despite dire newspaper headlines, the fact is, we live today in an age of extraordinary, sustained value creation. New ways of creating value have enabled fast-growing enterprises of all sizes in most sectors and in many countries to create unprecedented new value in dynamic workplaces with continuous innovation. These enterprises have already transformed the world economy. This is not a theory: it's a fact. It's not something that needs to be invented. It's already happened.
Meanwhile, autocrats, grifters and self-interested firms still trying to extract value operate behind smokescreens of worthwhile purposes and experience no more than spasmodic growth, with generally low levels of staff engagement and little if any real innovation.
Why don't all businesses realize that they would do much better if they embraced value creation?
Some 25 years ago, humanity began a major change. It occurred when some businesses started to think differently. They asked themselves: 'What if instead of aiming to make money, we set out to create value for customers? It's so much easier to make contact with customers with the internet and customers already have much more power than before. So why not accept this and give them what they want and need?'
The impact was magic. It happened so rapidly it's hard to recall how dramatically we chose to live differently. Very quickly, with the help of these businesses, we transformed how we work, how we communicate, how we get about, how we shop, how we manufacture things, how we bank, how we receive health care, how we get educated, how we raise our children, how we play and watch games, how we entertain ourselves, how we read, how we listen to music, how we watch theater and movies, how we engage with nature, how we understand history, how we worship; in short, how we live. The transition was accelerated by the COVID pandemic that began in 2020.
When firms aimed consistently at value creation, something else remarkable happened: they found that they made much more money than firms that aimed at making money. Not just more money: They made exponentially more money,
And their workplaces were generally more engaging because staff believed in creating value for customers.
At first, it was just technology firms. But pretty soon, it was occurring in almost all sectors and many countries: Retail, agriculture, manufacturing, pharmaceuticals, finance, even fashion.
Firms of all sizes: big, medium and even tiny firms.
So now perhaps 20% of public firms are focused on creating value for customers.
What about the other 80% of firms still focused on making money and extracting value for themselves? Why don't they embrace creating value when it would make them so much more money?
In the industrial era of the 20th century, management thinking reflected an internal view of the firm. Management was about making the firm operate more efficiently and effectively within a relatively stable world, with given systems, processes, and practices. The firm did what it could for the customer within the constraints of its existing systems. Top management knew best and issued directives to the rest of the organization, using steep chains of command to ensure order. Car companies competed against other car companies, banks with other banks, and so on. Managers saw themselves as solving the equivalent of familiar jigsaw puzzles. If they could fit the pieces together into the correct pattern, they could extract, and take, the value they believed to be their due.
Value creation requires different thinking. The perspective is mainly external. Success depends less on the internal workings of the firm and more on its ability to master a turbulent unpredictable world of exponential technological possibilities and to delight unpredictable customers. Competition can come from anywhere. Innovation is pivotal and involves not merely improving what already exists, but creating what is new. Firms aspire to generate new possibilities of working, operating, interacting, playing, and living for its customers. In the process, the firm can create new experiences for them, just as artists create works of art. Staff, partners, and sometimes customers, are active in the creative process. The firm is not merely copying or learning known rules. Profits are emergent effects of invention and creation. They are the results of making rather than taking, often out of literally nothing but the imagination.
When the product itself is digital, firms can grow quickly and attain global reach within a few years. In the industrial era, such scope usually took decades. In digital firms, many of the dis-economies of scale—the difficulties that came from being big—have tended to disappear. Instead, global scale—and the firm being the best in the world at what it does—can become almost mandatory. From Scarcity To Abundance
In the digital age, radically different business models have become possible and even necessary: from markets to platforms; from ownership to access, from workers to co-creators of value, from sellers and buyers to providers and users.
Firms that mastered the requirements of the new age have benefited from what economists call network effects. Users get more value as other users join the network, both as an increase in value to all other users and as an encouragement of non-users to join the network.
Whereas the industrial era was largely based on scarcity, digital services are based on abundance. Exponential technologies can generate an almost infinite array of digital services. It has become possible to make instant contact and converse with anyone from anywhere, buy anything anywhere, access the entire world's information, listen to almost any piece of the world's music, take, share and view unlimited photographs, and create and stream videos, all at zero, or a near-zero cost. The winning firms are those that have found ways to deliver, and monetize, parts of this blizzard of possibilities. The Emergence Of Deep Purpose
The dynamic of industrial-era management was all about the brain—measuring and calculating every possible metric, analyzing the past for clues to the future, and studying ratios and relationships. The passion, if any, concerned being rational. Shows of emotion were almost verboten . At most, there was talk of mindset. The heart supposedly had no role.
In the 21st century, the heart became exposed. Pervasive access to digital information collapsed the distinction between public and private content, and leaders could no longer hide behind press releases. Casual remarks made in private could become headline news. In the low-trust context, unflattering narratives—both true and false—became pervasive in social media. Some leaders began to see that they needed to present themselves and their firms as they are and express honestly what they believe. There has been a growing recognition that the whole person—including the heart—is key to leadership in this emerging world.
Building trust in companies and their leaders isn't easy, given many decades of dissembling. Commerce had become the antithesis of the authentic. Moreover, inside the firm, rah-rah HR workshops compounded the offense by attempting to manipulate the staff's very sense of self, getting them to profess feelings that they had never felt. Fixing The Flaws Of The Digital Winners
At the same time, we learned that digital technology can also have potentially devastating negative effects. It can be used to create tighter and more minute monitoring and control than even the worst tyrant, while invading without permission every nook and cranny of individuals' private lives, and turning human connections into zombie-like interactions, as customers and employees find themselves dealing with robotic machines or AI rather than people.
Some actors became very wealthy very rapidly, while those less able to adapt fell by the wayside. In a winner-take-most world, big firms grow steadily bigger and are tempted to exploit their dominance. In due course, the winners can be demonized, while the losers exercise political pressure to prevent change and redress their own suffering. These phenomena—familiar to business historians—are now playing out and are frequently—and mistakenly—seen as unprecedented.
The lessons of history can be helpful. The rapid accumulation wealth is not necessarily a sign of wrongdoing. Yet the abuse of newly-acquired power is common and must be addressed. Regulations designed for different technologies need to be rethought so as to encourage benefits for everyone while limiting winners' inevitable missteps. Self-regulation by winners to resist the temptation to crush every competitor must be part of the solution.
Current bipartisan efforts to regulate big technology firms have assumed a strident tone. These phenomena are common in the transition from one technology to another. The challenge is to understand the facts underlying the claims and counter claims, find ways to depoliticize decision-making, and implement effective regulation. Transitioning To The Age of Value Creation
Transitioning from traditional management to the age of value creation involves changes in the way people speak, think, feel, act, and interact with their fellow human beings. It cannot be absorbed by traditional conferences with 'sages on stage', panels of speakers debating the changes, or reading an article or a book.
It is mainly learned from encountering the experiences of other practitioners either through live interactions or through narratives. There is a need to learn from practitioners who have lived and practiced the change and learned what worked and what didn't in their context. Yet outsiders can't tell participants what would work in new contexts. Businesses themselves have to discover what the new way of thinking, speaking, feeling, acting and interacting might mean for their own workplace and their own business.
And read also:
Revolutionizing Business: From Management To Value Creation
How Creating Value For Others Has Become The Key To Business Success Appendix 1: Self-interested Organizations and Value Creating Enterprises
Summary of prevalent differences between self-interested vs value creating firms Stephen Denning Appendix 2: Firms with a track record of sustained fast growth
Appendix 2: Firms with a track record of sustained fast growth and engaged workplaces Stephen Denning; Seeking Alpha