Value creation the definitive guide for business leaders

The book clearly explains why a fundamentally new type of investment and CEO leadership is required and has to be supple-mented with new C-level executive positions in order to focus the

the dissemination of usable knowledge by publishing innovative and high-quality research and teaching content Today, we publish over 900 journals, including those of more than 400 learned societies, more than 800 new books per year, and a growing range of library products including archives, data, case studies, reports, and video SAGE remains majority-owned by our founder, and after Sara’s lifetime will become owned by

a charitable trust that secures our continued independence Los Angeles | London | New Delhi | Singapore | Washington DC | Melbourne

This is a rich and rewarding book which will launch organizations into the world of value creation for customers and other stake-holders and will convert good CEOs and companies to great ones with longevity and higher profitability This book is a conceptual breakthrough which goes beyond the great Total Customer Value consulting work Gautam did for Godrej.

—David Frigstad

Chairman, Frost & SullivanFor those who want to learn to create value, you’ve come home to this brilliant book This book integrates hugging customers and customer-centricity to unleashing the power of value creation for business success

This eye-opening book is about common sense, and gives you instantly practical ideas without being a burden on your time Incorporating Gautam Mahajan’s uniquely creative concepts will change your mind-set and lead you to superior achievements

—Jack Mitchell

Chairman, Mitchells Family of Stores;

Author, Hug Your Customers and Hug Your People

Definitive Guide for Business Leaders It is very timely given the

current conversations about value creation around the world and the waste created by driving stock prices on a quarterly basis with rewards going to a limited few The book is a valuable catalyst, which should result in a more robust dialogue about long-term value creation for enterprises large and small The key take away is that customer-centric businesses create value for all stakeholders which should result in higher valuations and stock prices over the very long term

—Edward A Lapekas

Retired CEO and Chairman of the Board, American National Can Group and former President and Chief Operating Officer, Beverage World Wide Division,

Pechiney (later Rio Tinto)Insightful Full of harsh realities about the world of marketing and management as you know it

Gautam suggests a new vision, common sense and human authenticity an excellent springboard for a much needed marketing turnaround Marketing with Meaning!

—Professor Luiz Moutinho

Foundation Chair, Marketing Adam Smith Business School,

University of Glasgow,

UK Adjunct Professor, Marketing, Graduate School of Business,

University of South Pacific, Fiji

Founding Editor, Journal of Modelling in Management (JM2)

The days of waging battle against customers are gone Now, success comes from getting in the trenches with the customer and working toward a win–win outcome To survive in a world of supremely educated buyers who, above anything else, are time-poor, hungry for insight, and demanding progress, unless you can assume the customer’s perspective, enriched by your experience with other similar customers, your outcomes will never be great This is the

provides priceless signposts to get started on that journey.

—Donal Daly

CEO, The TAS Group;

Author, Account Planning in Salesforce

I loved this book No one globally knows more about buyer–seller

dynamics than Gautam Mahajan, author of Value Creation: The Definitive Guide for Business Leaders Likewise, no one knows more

about how senior management should change these dynamics

to create new value for both company and customers—which

in some cases multiplies the bottom line, rather than just lifting profits incrementally

As Gautam relates, too many CEOs and senior managers discount the payback potential of adding customer value But

he believes these executives will soon regret their reluctance to embrace customers when their companies start experiencing lim-ited growth and diminishing value in the near and long term

He peppers his clearly written, no business-speak narrative with real-life examples of companies both creating and destroying enterprise value His examples should persuade most CEOs and management readers to change course in the direction of true cus-tomer-centricity that taps into customer value, rather just talking the talk without walking the walk

Unfortunately, as Gautam reminds us, most graduate business programs resist change and continue teaching future executives to embrace cost-control as their primary goal, which can doom them from the start He also throws shade at the commonplace corpo-rate practice of focusing first on increasing shareholder value—which Jack Welch calls “the dumbest idea in the world.” Creating shareholder value is an outcome, not a goal

On a practical level, Value Creation: The Definitive Guide for Business Leaders lays out for CEOs and senior managers the change

process for moving their organizations from company-centric to real customer-centricity And when their companies start adding value to customers, they typically get a long leg up on still inwardly focused competitors

accrue value to themselves by stripping value away from ers He addresses fundamental shortcomings of common win–lose strategies that ignore the latent opportunities for sellers to extract more value from customers Instead, he urges CEOs and executives

custom-to focus on win–win opportunities custom-to add value custom-to cuscustom-tomers, in ways that will add value back to the company, especially at a time when customers are gaining new power and customer loyalty is eroding at an alarming rate

For CEOs, senior execs and middle managers wanting to anticipate where higher-ups are steering their companies and

why, Value Creation: The Definitive Guide for Business Leaders is

without question the right book at the right time

—Dick Lee

Author, We Are Buyers You Are Sellers You’re Busted

This book is fantastic, a 10 out of 10! Gautam provides CEOs with a practical guide to rediscover the customer relationship

as an inspirational source of innovation that is applicable to any industry, and is very much needed today to drive lasting competitive advantage for sustainable, profitable growth!

—Brent Zions

Value Creation Transformation ConsultantThis book is a gem! While it is geared to CEOs, its style will be appreciated by anyone interested in helping their organization maximize the long-term value they create and minimizing the short-term value they destroy Sprinkled throughout this book are real-world examples from real companies, analyses from widely respected sources, and references to articles which are available to everyone If you are either beginning the value creation journey

or updating your successful strategy, you should look no further than this book for information, inspiration, and insight

—Sam Klaidman

Principal Adviser, Middlesex Consulting

or would he want his employees engaged or passionate about their jobs? Also, would he want his customers to be satisfied

or to be loyal customers? Well this doesn’t happen by chance,

in fact so many companies and organizations around the world need to read this excellent book by Gautam Mahajan covering

a great assortment of very important topics This is a must read for executives, practitioners, and professionals who will see so many of the different components to create customer value in their organization I use this book as a desk reference and finding myself referring back to the many critical topics Gautam is truly a respected global leader, speaker, editor, and mentor

—Jim Carras

Chairman, Customer Value Creation International

In this excellent, very important book that supplements and extends the theory of value innovation and the creation of “blue oceans” as described by Kim and Mauborgne, Gautam Mahajan describes the priority, strategy, and difficult complexities of value creation as the core of a new generation of investment and man-agement theory and practice that is now required in all businesses The book clearly explains why a fundamentally new type of investment and CEO leadership is required and has to be supple-mented with new C-level executive positions in order to focus the organization and its partners on creating new value for customers

in order to survive past an average life expectancy for businesses that has decreased to about 12 years while creating value for all stakeholders including employees, business partners, and society

—William L Miller

CEO, Innovation Extension Center LLCGautam Mahajan has created a new handbook for customer value New ways of intelligent and outcome-oriented thinking are combined with an individual approach for the 21st century

in management and benchmarking of value-driven customer

really important, as well highly recommended for lecturers and students in international business schools.

—Urs Hauenstein

President and Visiting Professor, International Council for Leadership, Governance, Entrepreneurship, Management, Swiss Quality

Competencies and QualificationsThis book isn’t just good reading, it’s a new mindset If you are a CEO, it will help you build your company successfully As a result

of applying the concepts in this book you will create value for your customers and for your company

Additionally, apply the long-term strategies outlined in this book, in detail, and you will see that success is so much more than something that can be captured by having short-term focus

A concept in this book that is examined carefully is how to create value for your customers before you can take value from your customers What an incredible idea, giving more so you can receive more As a business owner who has always presented a

“Nice is Right” strategy, I can relate to the author of this book He really “gets it.”

If you own a business, run a business or just want to find out the importance of adding and providing value to your business relationships, this is the book for you A must read

—Doug Sandler

Author, Speaker, HuffPost Blogger

Nice Guys Finish First

#1 Best Seller Ranking on Amazon

A content-rich framework for creating sustainable value to your customers, employees, partners, suppliers, distribution channels—and thereby, ultimately to stockholders—in a series of stand-alone, yet connected, chapters There is something within the material for everyone, irrespective of where you may be on

finding fresh new opportunities to powerfully lever the word

“value” for your business

—Harvey Thompson

Author, Who Stole My Customer?? Winning Strategies for Creating

and Sustaining Customer Loyalty (Second Edition)

Former Head of Customer Value, IBMEvery CEO’s job is about creating and delivering value to all stake-holders And this book is guaranteed to start the CEO’s day on the right track—that of understanding and focusing on key aspects

of internal and external customer value, presented with an easy narrative style that helps refocus on the fundamentals of addressing customer expectations Better than your first cup of coffee!

—Kall Ramanathan

Value Creation & Strategy—Blog website The Mobile Ecosystem in India—BlogCreating customer value is essential for success, and Gautam Mahajan’s latest book is a must reading on how to do it! It really

is good It flows well, has great substance, a solid logic which causes one to think and helps put many conflicting concepts in their proper place

—Ray Kordupleski

Founder of Customer Value Management;

Author, Mastering, Customer Value

Professor, Customer Value, University of Montana, USAYesterday, the landscape for competitive business owners extended between the Yellow Pages and a 20-mile radius around your con-sumer Today, competition is global With efficiencies in tech-nology and greater access to consumer information, the edge is

no longer guaranteed to the company with the biggest marketing budget—it’s going to the company that offers their customers

Creation.” Gautam Mahajan’s book offers many tips, ideas, and insights for the value-focused CEO to attain just such an advantage.

—Charles E Gaudet II

Best-selling author,

The Predictable Profits Playbook: The Entrepreneur’s Guide to

Dominating Any Market and Staying on Top

One of the most important tasks in marketing is to create and communicate value to customers to drive their satisfaction, loyalty, and profitability This new book will keep you enlightened on both concepts and application of value creation and it serves as an influential source for academics and practitioners alike

—Werner Reinartz

Professor of Marketing, University of Cologne

In his latest book, Value Creation: The Definitive Guide for Business Leaders, Gautam Mahajan makes a compelling business case for

the imperative of focusing on value creation Blending his wealth

of experience, personal and practical examples and an abundance

of marketplace research, Mahajan offers practitioners a hands-on toolkit for unlocking the potential of creating value in their own organizations Not fearful of challenging conventional wisdom (see his premise about the notion that companies are to serve a greater purpose than profits), his candid and authoritative point of view will serve leadership well in their aspirations for institutionalizing

a culture of value creation

—Scott M Broetzmann

President & CEO, Customer Care Measurement & Consulting

prison and turns it into an exciting project for the entire organization Today more than ever, CEOs need to be visible and relevant to their highly diverse stakeholders While CEOs are often dragged into a swamp of compliance, this book allows CEOs

to rise as the commanders of value This book provides them the concrete words, discourse, arguments, and frameworks to unam-biguously choose for value creation as central course of action and performance The value creation theme will destroy silos and give the organization a new tangible horizon that extends way beyond the CEO’s own tenure

—Jagdish N Sheth

Charles H Kellstadt Professor, Marketing, Emory University, USA

VALUE CREATION

VALUE CREATION

The Definitive Guide for

Business Leaders

Gautam Mahajan

All rights reserved No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission

in writing from the publisher.

First published in 2016 by

SAGE Response

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Mathura Road, New Delhi 110 044, India

1 Oliver’s Yard, 55 City Road

London EC1Y 1SP, United Kingdom

SAGE Publications Asia-Pacific Pte Ltd

Library of Congress Cataloging-in-Publication Data

Name: Mahajan, Gautam.

Title: Value creation : the definitive guide for business leaders / Gautam Mahajan, President, Customer Value Foundation and Inter-Link Services Private Limited, New Delhi.

Description: Thousand Oaks : SAGE Publications India Pvt Ltd, 2016 | Includes index.

Identifiers: LCCN 2016001974| ISBN 9789351508977 (pbk : alk paper) | ISBN 9789351508991 (ebook) | ISBN 9789351508984 (epub)

Subjects: LCSH: Strategic planning | Chief executive officers | Customer relations Classification: LCC HD30.28 M3234 2016 | DDC 658.4/012—dc23 LC record available at https://lccn.loc.gov/2016001974

ISBN: 978-93-515-0897-7 (PB)

The SAGE Team: Sachin Sharma, Sudeshna Nandy, Megha Dabral and Ritu Chopra

concept of Value Creation and to those I have reached out to and those

that have reached out to me.

My Value Creators are my family, Veena, Karan, and Shiv.

Thank you!

This book is also available as an e-book.

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for purchase of books in bulk

We also make available special imprints and excerpts from our books on demand

For orders and enquiries, write to us at

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Write today to marketing@sagepub.in

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Vivek Mehra, Managing Director and CEO, SAGE India

1 WHY IS VALUE CREATION IMPORTANT FOR CEOs? 1

Long-term Strategy Creates More Value than Short-term Focus 1Why Value Creation Is More Crucial than Value Extraction? 9

8 Signs Why Your Company Isn’t Creating Value 17From Value Grabbing to Value Creating: Lesson for Leaders 23Leadership Training Not Effective: A Contrarian View 27

2 CEOs AS VALUE CREATORS FOR

BUSINESS/CUSTOMERS 33

Think Out of the Box; Think Radically About Your Business 41

Customer Value Management Increases Customer and

Company Value (and Also Increases Sales and ROI) 43

Share of Wallet Goes Up When Your Customer Value Is

Transforming Companies through Value Creation

Not Value Destruction: The Balancing Act 56

Big Brother: Google, Apple, and Microsoft 60

Value Councils Go Beyond Pricing Councils and

The Real Sources of Value: Assets and Performance 67

3 HOW CEOs CAN USE VALUE CREATION

Customers with “Social Value”: Your Customer Ambassadors 84

Creating Value from Your Customer’s Network 85

When Zero Defects Are the Norms, Why Not

4 CEOs CAN SEE HOW THEIR VALUES (AND THEIR

Driving Businesses from Values: Achieve Higher Profits 98CSR or Conscious Capitalism or Capital Consciousness? 100

5 BUSINESS TRANSFORMATION IDEAS FOR CEOs TO

The Leadership Skill of Being Able to Unlearn:

Building Silos or Breaking Silos? Internal Customers

The Memory of Your Experience Is More Important than

Nuisance Value: Value Creation or Value Destruction? 122

6 HOW CEOs CAN AND WHY THEY SHOULD

Why Companies Need to Empower Employees and

Using Employees to Build Market Place Foresight

Is Employee Churn Costing You As Much As

Whom Do I Work For? 140What Does Being Secure Have to Do with Creating Value? 144

7 HOW AND WHY CXOs SUCH AS CFO/MARKETING/HR

8 Ideas for Value Creation for HR Professionals 156

Does Value Creation Need Financial Incentives 162

When You Wake up Do You Say I Will Create Value? 162

8 VALUE CREATION AND CUSTOMER SERVICE/LOYALTY TIPS FOR CEOs 167

Converting Call Centers from AGGRAVATION

Making the Journey Easy and Meaningful Creates Value 174Customer-value Marketing Critical as Airline

Industry and Telcos Need to Improve Use of New Channels 180

Two Out of Three Consumers Switched Companies in 2011 182Value Creation Implementation Ideas: Avoid Value Destruction 183

Examples of Extra Steps Executives Can Take (Of Course,

This Depends on Your Role in the Organization) 184

Examples of Value Destruction That Can Be Avoided 185

From Executive Think to Customer Think 192

9 HOW CEOs CAN USE VALUE CREATION TO

The Last Mile of Pricing Is NOT Selling but Buying 196

If You Want to Raise Prices, Tell a Better Story 1985% More in Price at Retail for Good Customer Experience 201

81% of Shoppers Willing to Pay More for Better

10 CEOs LEARN FROM VALUE CREATION

At the Michener Center, University of Texas, Austin 210

11 CONCLUSION: HOW CEOs DRIVE THEIR

COMPANIES TO BECOME LEADERS THROUGH

VALUE CREATION AND INCREASE PROFITS

Getting CEOs to Become More Customeric: Are We

Departmental Tasks and Priorities 221Steps in Value Creation Implementation:

Why is a Customer Department Needed? 236

How will the Customer Department Function? 237

Excellence Is Being Great At the Things Your

The Customer of the Future and Your Future AP-13Why Training Does Not Create Great Leaders? AP-18

Short Guide to Customer Value Creation: Definitions

from the Book Customer Value Investment:

Formula for Sustained Business Success AP-20

Perspectives On Value Creation

Value Creation: Executing proactive, conscious, inspired and

imagi-native actions that Create better gains or benefits for Customers and all stakeholders, including enhanced returns on investment

To empower every person and every organization on the planet to achieve more1

Phil Kotler: The role of Marketing is to Create Customer Value

and Capture Value Create a Customer Strategy Peter Drucker: There is only one valid definition of business purpose:

to create a Customer Value is created for Customers, and wealth is generated for owners

Financial people believe businesses make money

In reality, businesses make products for Customers Money is a result earned by products delivering Value that Customers are willing to purchase.

Jagdish Sheth: The distinctive difference between the 1985 and the

2004 American Marketing Association definitions of marketing is the lack of exchange In the new defini- tion, a focus on creating and delivering Value through Customer relationships replaces the historical focus

on the exchange paradigm

Satya Nadella

on Microsoft

new vision:

The world is changing Today management gurus are espousing

Customer Value and Value Creation Are you?

Satya Nadella, CEO of Microsoft, has crafted a new vision for his company to change for the future through Value Creation by empowering every person and every organization on the planet to achieve more! You need this kind of thinking to win in the future.This book is to inspire CEOs and executives aiming to reach the top, and those on the top to remain there for a longer time Even small business leaders and entrepreneurs will find the ideas

in this book easy to implement and mostly inexpensive, because

it means mostly adapting the right mind-set The book focuses

on why you should Create Value and how Creating Value can give you and your company longevity, sustained success and higher profits than other businesses, innovating and grasping opportunities before others do Growing the Customer asset effec-tively requires a culture of Creating Value for the Customer before you can extract Value This book changes managerial thinking

to focus on Value Creation for other stakeholders (read ees, Customers, partners, unions, and society) to improve share-holder wealth significantly This book makes Value Creation a distinct management practice1 as opposed to the old profit and company-focused ideas taught by many B schools Do remember,

employ-as you do all this, that Customers Create Value for your companies.Keep in mind, companies turn toward the Customer, just as sunflowers face toward the sun They do so to get sustenance and absorb what the Customer has to give The connection does

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 This will give you an enormous advantage in building your company’s ability

to achieve profitable and long-lasting growth.” Available at: enceforbusiness.com/management/Tr-Z/Value-Creation.html#ixzz3lWinmKPL (accessed January 7, 2016).

http://www.refer-not often go beyond this Are companies really like sunflowers,

or is there more to the relationships between the Customer and companies?

Unfortunately, the crucial role of the company toward the Customer remains static It has not moved far in the last 100 years, except to track the Customer more closely (CRM2), understand his transactional ratings better (CSat3), know whether he likes companies (NPS4), improve multichannel contact (call centers and multime-dia), and install better systems and processes I suspect that much

of this expenditure is justified from the cost-cutting or efficiency perspective, rather than true Value Creation for Customers

The Customer is central to the company’s needs and should

be treated as such, and not as a taken for granted asset5 that does not need to be maintained unlike other capital assets, such as machinery, buildings, furniture, etc

CEOs understand that their manufacturing managers must have a plan for maintaining their machinery, both routine and emergency Maintenance of Customers is relegated to CRM and loyalty programs Maintenance is not handled well, nor seen as a core task

This book is for CEOs and managers to help them create more Value for the Customer and other stakeholders and thereby for the company It advocates using the Customer asset effectively The focus of Value Creation is not just on innovation but implementation The book also indicates what factors prevent true Value Creation and what destroy it The book will help CEOs get out of the present mind-set as Customers become stronger

and companies, more fragile How attractive your company is to Customers can make or break a company when measured through

a Customer Value Index, and shared with marketplace and Customers Such a public Customer Value Index will make companies work harder to Create Value

This is a main effect and strategic book, and does not go into contextual or moderating variances between companies depending

on external factors, the environment, the economic state of the company, and so on

This book is for CEOs who have been Creating Value, partly consciously and sometimes unconsciously, probably much more instinctively And somewhere they have destroyed Value unwit-tingly or unknowingly This book is a wake-up call, because the deliberate creation of Value and the mindful avoidance of Value destruction can put you and your company in another league—the league of next forward-looking practices and increased success All this through a focus on helping your employees and partners to create more Value knowingly and conscientiously for Customers! You need to move your employees’ current functional thinking (as taught in business schools) to Creating Value They will become better employees and create more Value for not only the Customer but your partners, society, and also for you, your company, and its investors as they move from functional thinking to Value Creation Value Creation is also about making decisions with flexibility and managing dilemmas.6 We do not spend time on the dilemmas faced by CEOs; however, by concentrating on Value Creation for Customers and not giving away Value to Customers, dilemmas are minimized

Have to Choose Upper Saddle River, NJ: Wharton School Publishing.

Mahajan’s Five Laws of Value Creation are given below:

1 The 1st Law: Value Creation is a basic requirement or a sity for the advancement of human activity, progress, and creativity Value Creation is important in all fields, education and academics, society and government, social work, inno-vation, entrepreneurship, and business It impacts humanity

neces-It is essential for executives and leaders

2 The 2nd Law: Value Creation is proactively exceeding what

is basically expected of you or your job It is going beyond your functional and routine roles to Creating Value in your ecosystem Value Creation can be planned or spontaneous, and in both functional and emotional thinking

3 The 3rd Law: Value Creation impacts all stakeholders, you, your colleagues, your employees, your partners (supply chain, delivery chain, unions), and society to create resounding Value for the Customer and, thereby, for the shareholder

4 The 4th Law: Value Creation leverages a person’s or an nization’s potential, learning, and creativity while making it meaningful and worthwhile for people to belong and perform, both physically and emotionally

orga-5 The 5th Law: Value Creation must exceed Value destruction

or reduce negative Value and be done conscientiously

Table P.1: Functional versus Value Creation Management

Functional Management

Value Creation Management

Purpose

of a

company

for employees, partners, society and Customers The company has a higher purpose than just profits

man-aging functions

Outsource functional tasks Focus on strategy and Value Creation Become the Chief Employee Value Creator

strategy

Formulate shareholder strategy and Customer strategy before building an agile and adaptable business strategy

profits

Focus on Value Creation for Customer, understanding the Customer Value added matrix on how much Value your company creates versus competition Price justification Use what is important

to a Customer to focus on improvement/ communications tasks.

cost plus,

competitive, etc.

Understand what the Customer Values and the relative importance and then base price on this Get a price for every aspect

of the Value you create.

exist-on Value Creatiexist-on, and electives in Value Creation to replace present general man- agement electives.

Only CEOs can assess what their real role is For success, management gurus state that leaders must set the right priorities (and I would say that one of the high up in importance is a real Customer priority), hire the right people, and then be able to estab-lish a relationship with people Yet another role is to ensure that your company survives for the long term and so does he Notice that the average life of a company was 28 years in 1974, while in

2008 it was about 12 years (see Figure 1.4 on page 20) And a CEO ran a company for an average of 10 years in 2008, whereas today, the CEO lasts for only about 2 years—a result of short-term focus and inadequate attention to the Customer Mckinsey reports that the number of companies dropping out of the top three rank-ings in their industry increased from 2% in 1960 to 14% in 2008 What’s more, market leadership is proving to be an increasingly dubious prize: The once strong correlation between profitability and industry share is now almost non-existent in some sectors

“According to our calculation,” says Mckinsey,7 “the probability that the market share leader being also the profitability leader declined from 34% in 1950 to just 7% in 2007.”

Customer rewards to companies that add more Value include:

1 A 1% increase in satisfaction/Value typically increases share price by 4.6% (based on a 10-year University of Michigan study).8

2 A 5% increase in Value increases return on investment (ROI)

by 7.5–10%

3 Market share follows Customer Value created Companies with over 40% market share tend to have 30% more ROI than companies with 10% market share (PIMS9 data over 1,000 American companies)

Advantage.” Harvard Business Review Available at: https://hbr.org/2011/07/

adaptability-the-new-competitive-advantage

January “Customer Satisfaction and Stock Prices: High Returns, Low Risk.”

Journal of Marketing, 70(1): 3–14.

4 PIMS data also show that the top quartile of Value Creating companies for Customers had 30% more ROI than the ROI

of those companies creating the least amount of Value

5 Share of wallet increases significantly with increase of Customer Value

Companies, likewise, have to Create Value for their employees and Customers, partners and unions, and become firms of endearment and great at creating happiness (as exemplified by Zappos, the clothing and shoe company led by Tony Hsieh, whose philosophy

is to have a human face and deliver happiness) They then create inordinate Value for their shareholder and investors They attract the best talent and retain the high Value Customers Such compa-nies are termed as firms of endearment (see the book of like name

by Raj Sisodia, David Wolfe and Jagdish Sheth)10 and have radically new rules for business Firms of Endearment created a 1,026% return over a 10-year period, eight times more than the S&P return

in that period And in 5 years they returned 128% versus the S&P return of 13%, all by focusing on the Customer and endear-ing themselves to their employees and partners Such a focus on Customers leads to higher profits And therefore, companies need

a Chief Value Creator (the CEO), a Chief Employee Value Creator (Chief of HRD), and a Chief Customer Value Creator (generally the COO)

Value Creation11 in the past was thought of as Creating Value for the shareholder,12 the investor, or the company Today the intended

How World-Class Companies Profit from Passion and Purpose Wharton School

Publishing.

of Value is at the heart of integrated thinking” talking about integrated ments for financial and non-financial parts

companies that grow and earn a return on capital that exceeds their cost of capital, Create Value.” He suggests “A shareholder focus doesn’t provide an answer Stakeholders’ focus does.” Available at: http://www.ft.lk/article/446617/ Shareholder-capitalism-needs-to-be-redefined (accessed February 4, 2016).

recipients of Value Creation are your employees, Customers, ners, labor unions, society and, thereby, the shareholder or investor.This book gives the CEO what he wants to know about Value Creation and success, and how to balance the elements of Value Creation.

part-It tells you why the intended recipients of Value Creation are important to the CEO’s success, and to the well-being, prosperity, and longevity of the corporation It shows you how to Create Value and how it relates to success It helps you take the steps toward changing an entrenched mind-set and become flexible and creative

Value creating companies tend to be long-term and long- lasting companies They have capital self-actualization or display conscious capitalism, create emotional bonds, and understand that love is a killer differentiator Share of wallet is replaced by heart share

CEOs are painfully aware that their business, employees, and Customers will undergo a sea change Product and market expectations will change in the new digital world Competition will become more intense and Customers will demand their right-ful role as sustainers of your company Therefore, the future will require agility, adaptiveness, and ambidextrousness (3As) and the ability (the 4th A) of CEOs to Create Value Some CEOs may find

it convenient not to focus on Customer relations, particularly with pressures to innovate and deliver new products fast and through e-commerce opportunities But these CEOs will still need the 4As

to be winners

What prevents companies from being more focused on Customers?13 Is it because that is the way we always did business (if not broke, why fix it)? Is it the way we were taught to manage busi-nesses and Customers? Or were the Customers passive and less demanding? Or was the competition less intense? Or did compe-tition do what we do? Or is it because of President Eisenhower’s14

Wind” in Chapter 11.

whether these are professional or personal.

differentiation between urgent and important work (we tend to prioritize urgent work and, therefore, feel we are doing the right things)? Or is it that short-term focus on improving the bottom line has deluded managers to expect long-term sustenance from the Customer, come what will? (Value Creation will improve both short-term and long-term profit, once it takes hold as a corporate culture.)

It also could be that major global think tanks and B schools continue to focus on process and system improvements, while

also looking at non-financial parameters One example is The Value Creation Journey.15

The book is divided into sections that are of interest to CEOs, and it also points out that Value Creation impacts all aspects of our business life The book shows that if the Value Creation mind-set change materializes in a company, competitors will find it dif-ficult to emulate and catch up, unlike products whose lead times are becoming low The book is like a Swiss army knife with tools that the CEOs can utilize: what they could look at and why, and Value Creation for Customers, employees, partners, society, and thereby for the organization

How do CEOs ensure they remain ahead of competition? How

do CEOs make certain Customers, employees, and investors want

to stay with them? The stakeholders want more Value Creation from the CEO This book is a collection of chapters that tells you how to Create Value and become enduring and successful business leaders Read about Value Creation and its benefits to you and your company and stakeholders in the chapters that help CEOs become business heroes

You can read any essay when you have a couple of minutes

Urgent activities demand immediate attention, and are usually associated with achieving someone else’s goals They are often the ones we concentrate on and they demand attention because the consequences of not dealing with them are immediate.”

York: PWC.

Benefits of Value Creation

Value Creation is the next big management practice

Getting your entire ecosystem to resonate with you and your company ensures business leadership, longevity, and long-term success Value Creation helps you and your executives to do this at little cost, improving your Customer Value Index score indicating that your Customers can reward you with loyalty and market share!

Using Customer power and ratings ensure disruptive and continued success Value Creation changes mind-sets of people (employees and Customers) for conquering the future The brand is being replaced by the informal Customer score on the net The Value Creation Index score will reflect Customer sentiment and your future

Recognizing the role of an executive (and the company, which is made up of people) is to Create Value (and prevent destruction of Value) for himself, his employees, his partners, and society and thereby create long-term and sustainable shareholder wealth

For the executive and worker

Becoming educated on the latest management ideas of Value Creation leading to self-improvement and to superior perfor-mance and Value Creation for other employees, the depart-ment, and the company will help executives transform their role from just being good and efficient functional administra-tors to becoming conscious and inspired Value Creators

For the CEO

Value Creation is a strategic and practical guide for CEO success and leadership style It refocuses on important work and not just on urgent work and shows the CEO how focusing

Figure P.1: Value Creation Positively Impacts Your Stakeholders

• Becoming educated on the latest management ideas

of Value Creation leading to Self Improvement and to superior performance and Value Creation for other employees, the department and the company and avoiding Value Destruction.

Employees

• Increase Value to Customers, increasing loyalty, market share, and the Customer asset Create Value for the Customer before you extract Value.

Customers

• Creating Value for your partners (supply and delivery chain and unions) will increase Value for you, as they become more loyal to you and go the extra mile to benefit you.

Partners

• Value Creation is a strategic and practical guide for CEO success and leadership style: refocuses on important work and not just on urgent work Shows the CEO how focusing on Value Creation is a natural business practice, and it does not add to costs but to success and profits decision-making can be made by understanding what creates more Value, and helps in managing dilemmas CEO

• Creating Value for society and having Values that resonate with the Customer will make you a preferred employer and company of choice for the Customer, and they will reward you with more business and/or higher prices Values Create Value.

Society

• Value will be created for the company, it will get longevity and long-term success, and increased ROI Value Creating companies will get a higher Customer Value Index, and become more desirable to your Customers and non-Customers.

Company

• Shareholder wealth will increase in the short and long term Their company will be more respected and profits and share price will go up A 1% increase in Customer Value will increase share price 4.6%.

Shareholder

on Value Creation is a natural business practice that does not add to costs but to success and profits Decisions and dilem-mas can be managed through Value Creation.

For the partners

Value Creation for partners (supply and delivery chain and unions) will make them loyal and go the extra mile for you

For society

Creating Value for society and having Values that resonate with employees and Customers will make you a preferred employer and company of choice for the Customer, and they will reward you with more business and/or higher prices Values Create Value

For the company

Improved performance from executives (as discussed earlier).Instituting the Value Creation culture will ensure that Value Creation precedes extraction of Value for the company from the executives

Value Creation refocuses management thinking on Creating Value for the employees, Customers, partners in delivery and supply chains, unions and their people, and society which in turn grows shareholder wealth

The Book Layout

The major part of this book is about why Value Creation is important, how it impacts the thinking of CEOs in the short term versus long term, and how you can add Value to Customers, employees, and build Value Creation in various departments We talk about Creating Value in training, in leadership, and in making the Customer your partner and ambassador Our suggestion to the CEO is to change the focus of departments such as HR and IT to become Customer focused and become line managers We dwell upon reducing the focus of executives on routine and functional tasks and concentrate on important Value Creation jobs instead, that is, “outsource” routine work We discuss future, self-tuning companies and why they should have agility, adaptation, and ambidextrousness Such companies are run by able CEOs, moving from ‘selling to Customers’ to becoming the Customers buying aide We show how your Customer Value Index can be improved through Value Creation

This book also discusses the change in market environment, the Customers and companies of the future, and the changing ecosystem

The book, early on, examines why Value Creation is important to CEOs and why embracing this management practice is a sustainability and growth necessity for them Having understood this, the book tells business leaders how they can become Value Creators for the business and the Customer, and how they can use Value Creation for the Customer for their own and their company’s good

Next, the book shows how the CEO’s and the company’s Values and ethics are important and Create Value for the Customer and, thereby, immense Value for the company From this, the CEO is given ideas on business transformation to create more Value.The logic for Creating Value for the employee and how to do

so is examined Following this are chapters that discuss how ious Chief Experience Officers (CXOs) can Create Value (HRD, Marketing, Finance, and others)

var-Value Creation is executing proactive, conscious, inspired, and imaginative actions that create better gains or benefits for Customers and all stakeholders, including enhanced ROIs.

Company Creates Value for

Employees

Customers

Partners Society

For the shareholder

Shareholder wealth will increase in the short and long term Their company will be more respected, and profits and share price will go up A 1% increase in Customer Value will increase share price by 4.6% Shareholders will put in more quality investments

More granular is how Value Creation can be increased in Customer service and in strategies to increase loyalty And then,

we come to the profit part on how to increase prices and Value to the company

We then show how Value Creation can be used in education and how it is a more universal tool usable outside of business in society

Lastly, the book helps the CEOs to drive their companies to

a leadership role and to increase profits through Value Creation Value Creation implementation steps are discussed

The appendices have interesting articles on Value Creation, and more Value Creation ideas and definitions

Background: The Evolving Ecosystem

To understand the need for Value Creation as an important management practice, we must understand the environment and the ecosystem In this section, we will look at the change

in the market environment, the evolving ecosystem including the changing Customers and the changing companies

Change in the Market Environment

Technology and disruption, digitization, emerging countries as market powerhouses, social conflict of the haves and the have-nots, religious militancy, aging and youth-ing16 (baby boomers aging, millennials entering the Customer stream), rapid changes, and unbelievable and unseen opportunities have to make CEOs rethink their businesses and their purpose On top of that, more and more CEOs are seeing the wisdom of long-term thinking versus the potential harmfulness of short-term-ness, and are crafting a purpose for the corporation Purpose is more than just profits,

higher in number than the young people.