Balanced focus on Value addition and Value creation

In most of the small, emerging organizations, the business head is comfortable in dealing with day to day routine management activities and some extent, in improving one side of the business, that is on value addition or effectiveness improvement initiatives. Nothing wrong in developing in operational capabilities, however in this process, the other side of the business, that is on value creation activities get back seat.

Value creation activities include customer pipeline development, new product development, or improving NPD activities, working on strategic initiatives.

As long as the existing customer gives sales order and business also grows along with a few customers, there is no problem for the business head and his organization. The real problem starts when the current customer slows down in their business due to the economic cycle or reduces the share of the business; the business head feels the impact directly in terms of low sales turnover, profitability and cashflow challenges.

It is always prudent and proactiveness to focus equally on value addition and value creation for both survival and sustainable growth of the business.

The balanced approach calls for the mindset to come out of the comfort zone of the business head during good times.

Paradigm shift on the purpose of the organization

      When we ask the question to  senior people in the organization, the most of them responds as “making  profits”. Of course it is one of the objectives and vital for survival. If CEO also thinks in the same direction, somehow the organization can fulfill  the  objective. But the sustainability becomes vulnerable. Hence, the CEO needs to redefine his definition of running an organization as “To Enhance the value to all stakeholders.” 

This paradigm shift in thinking process will guide the CEO and his team towards Process Excellence and stakeholder’s centric in whatever they do..

The stakeholders can be customers, employees, suppliers, financial institutions, Government, and statutory regulation bodies, and so forth. Each stakeholder is expecting a different value of the organization.

For example,

The Customer is expecting value from the organization in terms of  best product with superior quality and best price etc.

The Employee is expecting value in terms of pleasant / safe working environment, good pay and career growth and learning experience etc.

The Vendor  is expecting value in terms of regular schedules / order inflow, regular payment and cordial relationship etc.

The Financial institutions are expecting value in terms of credit worthiness and repayment of loans etc.

The Government /Statutory bodies are  expecting regular revenues from taxes, employment opportunities and cordial industrial relationship, environment preserving  etc.

   Even though the value expectations of each stakeholder are different, it can be met only when the business is creating SURPLUS in the form of PROFIT

The central challenge for CEO or business owners is to generate profit in a sustainable manner irrespective of outside factors like competition, macroeconomic condition, supply demand balance etc and enhance the value of all stakeholders.