Value Creation
Value Creation and Business Success by Paul O 'Malley
from The Systems Thinker, Vol. 9, No. 2
Copyright © 1998 Pegasus Communications, Inc. (www.pegasuscom.com). All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from Pegasus Communications, Inc. If you wish to distribute copies of this article, please contact our Permissions Department at 781-398-9700 or permissions@pegasuscom.com.
The most successful organizations understand that the purpose of any business is to create value for customers, employees, and investors, and that the interests of these three groups are inextricably linked. Therefore, sustainable value cannot be created for one group unless it is created for all of them. The first focus should be on creating value for the customer, but this cannot be achieved unless the right employees are selected, developed, and rewarded, and unless investors receive consistently attractive returns.
What do we mean by value creation? For the customer, it entails making products and providing services that customers find consistently useful. In today 's economy, such value creation is based typically on product and process innovation and on understanding unique customer needs with ever-increasing speed and precision. But companies can innovate and deliver outstanding service only if they tap the commitment, energy, and imagination of their employees. Value must therefore be created for those employees in order to motivate and enable them. Value for employees includes being treated respectfully and being involved in decision-making. Employees also value meaningful work; excellent compensation opportunities; and continued training and development. Creating value for investors means delivering consistently high returns on their capital. This generally requires both strong revenue growth and attractive profit
from The Systems Thinker, Vol. 9, No. 2
Copyright © 1998 Pegasus Communications, Inc. (www.pegasuscom.com). All rights reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without written permission from Pegasus Communications, Inc. If you wish to distribute copies of this article, please contact our Permissions Department at 781-398-9700 or permissions@pegasuscom.com.
The most successful organizations understand that the purpose of any business is to create value for customers, employees, and investors, and that the interests of these three groups are inextricably linked. Therefore, sustainable value cannot be created for one group unless it is created for all of them. The first focus should be on creating value for the customer, but this cannot be achieved unless the right employees are selected, developed, and rewarded, and unless investors receive consistently attractive returns.
What do we mean by value creation? For the customer, it entails making products and providing services that customers find consistently useful. In today 's economy, such value creation is based typically on product and process innovation and on understanding unique customer needs with ever-increasing speed and precision. But companies can innovate and deliver outstanding service only if they tap the commitment, energy, and imagination of their employees. Value must therefore be created for those employees in order to motivate and enable them. Value for employees includes being treated respectfully and being involved in decision-making. Employees also value meaningful work; excellent compensation opportunities; and continued training and development. Creating value for investors means delivering consistently high returns on their capital. This generally requires both strong revenue growth and attractive profit