Value creation is the primary aim of any business entity. Creating value for customers helps sell products and services, while creating value for shareholders, in the form of increases in stock price, insures the future availability of investment capital to fund operations.
From a financial perspective, value is said to be created when a business earns revenue (or a return on capital) that exceeds expenses (or the cost of capital). But some analysts insist on a broader definition of “value creation” that can be considered separate from traditional financial measures.
“Traditional methods of assessing organizational performance are no longer adequate in today’s economy,” according to ValueBasedManagement.net. “Stock price is less and less determined by earnings or asset base. Value creation in today’s companies is increasingly represented in the intangible drivers like innovation, people, ideas, and brand.”
When broadly defined, value creation is increasingly being recognized as a better management goal than strict financial measures of performance, many of which tend to place cost-cutting that produces short-term results ahead of investments that enhance long-term competitiveness and growth.
As a result, some experts recommend making value creation the first priority for all employees and all company decisions. “If you put value creation first in the right way, your managers will know where and how to grow; they will deploy capital better than your competitors; and they will develop more talent than your competition,” Ken Favaro explained in Marakon Commentary. “This will give you an enormous advantage in building your company’s ability to achieve profitable and long-lasting growth.”
… the word behind the success of every individual or an organisation and it is this word which is most wanted by each one of us even in our day to day transactions. In the relationships we make, in the products we buy, in a job we wish to undertake, in every employee we appoint, we look for the word “value”, preferably substantial. Even the most valuable golden ornament can not be sold, if the buyer does not see the value in it like the design, look and feel etc. In one word, the world will not move forward without perceiving the “value” in what they want to own or be a part of.
In fact, creating “organisational value” is a logical process and the activities are interlinked with one another. To start with, the first step in enhancing invaluable value is :
- Clarity of VISION on the organisational big picture and aligning all the activities towards achieving the VISION.
- Making every employee “valuable” through their contributions towards organisational goals.
- Upgrading constantly products and services that the customers perceive value in them, of course much better than the market offerings, and
- Building most capable and performing functional teams, especially marketing that can take the company’s products/services to the target customers effectively, convert, retain, evangelize and expand the customer base continuously through substantial and sustainable value creation and
- Most importantly, creating “value” to the customers by offering ULTIMATE CUSTOMER EXPERIENCES by understanding and mapping customer journeys throughout the business continuum.