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In reviewing various studies into what drives organisational success, it is clear that there are many ways to succeed. The fad of the day may grab headlines and create bestsellers with recipes for business success, but ongoing and constructive debate continues about the relevance and value of today's fashionable practices when compared to long-established commercial principles and approaches. What appears to shine through this debate are two fundamental concepts. Firstly, that companies which are most successful over the long term are those which incorporate their cultural values at the core of their everyday business operations, ie. they implement values-based management practices. Secondly, it is the basics that matter - comprised of both the business values that underpin a company's culture and the business value proposition offered to customers and stakeholders. A more holistic view of business combining these two concepts elevates the importance of the cultural and emotional well-being of a company and its people - the emotional quotient - alongside organisational objectives such as return on investment. The right mix of these should ensure that companies celebrate success. By being transparent about values and allowing customers and partners to experience these values at every interaction, a company will distinguish itself from its competitors. VALUES-BASED MANAGEMENT PRACTICES
The view that values should underpin all management practices is endorsed by Mohanbir Sawhney, McCormick Tribune Professor of Technology at Northwestern University's world-renowned Kellogg School of Management in the United States. He advocates that corporations must see values as the foundation upon which the edifice of value creation must rest (Sawhney, 2002). He believes businesses are living entities that should constantly evolve. He talks of evolving companies as those which, among other things, define their purpose in terms that embrace the common good. They have corporate values that both reflect the collective values of all employees and align with individual values. Their leaders harness the emotions and spirit of every individual toward a common purpose that everyone understands while being authentic in their values and commitment to social responsibility. These evolving businesses are a good reflection of organisations with their corporate culture and business practices underpinned by core values. I believe that by being transparent about values and allowing customers and partners to experience these values at every interaction, a company will distinguish itself from its competitors. My experience has been that companies, especially highly successful ones, operate in a constant state of evolution. In fact, the more successful a company is, the more willing it tends to be to re-engineer itself right to the core. It is also willing to use its values-based management practices to evolve and improve its relationships and co-dependencies in its customer and partner ecosystem to support achievement of its business goals. A VALUES-CENTRIC BUSINESS
An evolved business knows how to balance self-interest with common good. It understands that to generate and retain customer loyalty it needs to provide more than functional or economic value through the goods and services it provides. Such a business grows by developing an emotional connection with its customers and its partners. This emotionally derived value is driven by intangibles such as service experiences, trusted relationships and brand reputation. As much of this value is intangible cultural capital, it is often one of the most under-estimated and under-invested areas by organisations. Yet, considerable evidence suggests there is a strong link between such psychological value and an organisation's effectiveness. In Built to Last Successful Habits of Visionary Companies, Collins and Porras (1994) showed companies which consistently focused on developing a strong corporate culture over a period of several decades outperformed companies which did not by a factor of six, and outperformed the general stock market by a factor of 15. As an example, Microsoft is a company which is in the evolutionary process toward a company values + business value model. And with in-depth employee collaboration, Microsoft has developed a comprehensive set of company values to underpin every aspect of what each employee does to deliver business value to customers, partners and the wider community. Despite the logistical challenges this model brings, it also provides the means to increase staff morale and team collaboration while increasing accountability across the business. It can also create pride in an organisation, a sense of belonging and put forward the right amount of challenge for high achievers. These characteristics are among the key drivers rated by Unlimited magazine's Best Places to Work survey, New Zealand's largest employee climate survey, for retaining happy employees. As such, companies adopting a values + value approach have the added advantage of creating a healthy workplace at the same time. My view is that for a company values + business value management approach to be sustainable, it needs to be built on four distinct pillars: - Values must be embedded organisation-wide to provide a platform for common purpose and promote an understanding of a company's strategic mission.
- Values must be at the core of business engagements and be transparent in day-to-day operations.
- Values must be aligned with customer expectations of an organisation operating in a trusted relationship.
- Values are company-defined, value is customer-defined.
Such values-based practices are important because as Peter Drucker, the patriarch of management theory, observes: 'What the business thinks it produces is not of first importance. What the customer thinks he is buying, what he considers value, is decisive.' This in itself presents its own challenges since, as Drucker also notes: 'What is value for the customer...is anything but obvious.' I believe, however, that if organisations return to the basics and embrace the belief that the sole purpose of an organisation is to create value for its customers and to be fairly compensated for its efforts, it can establish what wouldn't otherwise be obvious. The view of Sawhney (2002), that true customer-centricity demands that you believe and act on the basis of customer value, is sound. As he contends, you cannot offer value to customers without first changing you organisation's values, even if it means getting back to the basics. Ultimately, what companies believe in determines how they think and act. Their actions and behaviours in turn manifest themselves in their offerings. I concur with Sawhneys' belief that firms which adopt the value mindset think differently about the customers they focus on, the value proposition they create for their customers, the growth strategy they employ, the way they organise their marketing and sales organisation, and the way they measure and reward success. When you contrast a company with a traditional product mindset, as Sawhney has on a number of important dimensions of business, the difference in a company's purpose is enlightening. This is illustrated in Table 1.
| Dimension |
Product mindset |
Customer value mindset |
| Strategic focus |
Product leadership - winning by launching innovative products and
adding features to products. |
Customer value - winning by creating and delivering superior value to customers. |
| Growth driver |
Primary demand - sell broadly to new customers. |
Selective demand - sell deeply to existing customers. |
| Offerings |
Horizontal products with limited customisation. Delegate solutions design
and delivery to partners. |
Customised vertical solutions. Collaborate with partners to design and
deliver solutions. |
| Pricing strategy |
Perpetual license pricing to maximise revenue from transactions. |
Value-based pricing to align value creation for customers with value
capture for the firm through subscription pricing and gain sharing arrangements. |
| Sales organisation |
Product-centric organisation with multiple faces to a customer. |
Customer-centric organisation organised around key customer segments
or customer accounts, with a single face to customer. |
| Marketing operations |
Emphasis on product launches and breadth campaigns to increase reach
and influence customer perceptions. |
Emphasis on ongoing customer engagement and customer value assessment/tracking. |
| Success metrics |
Product revenues and product profitability. Declare success at product sale. |
Customer satisfaction, profitability and growth. Declare success when
customers experience success. |
| Monitoring and tracking |
Periodic surveys of customer satisfaction with products. |
Ongoing tracking and continuous improvement of the total customer experience. |
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Source: Sawhney (2002) By focusing on defining value as customers do, designing your offerings based on what customers value, and measuring you performance in terms of the value that customers experience, you will be well on your way to creating successful customer relationships. Yet despite the obvious benefits, developing a company values + business value management practice remains for many organisations an elusive challenge. In studying why some companies succeed better than others, I have come to the conclusion that companies which fail are invariably those whose values remain at the periphery. Values are 'worn' when it suits and discarded when not. Such companies have not put values at the core of what they do, much less tried to live the values in their daily operations. Ultimately, what companies believe in determines how they think and act. Their actions and behaviours in turn manifest themselves in their offerings.
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