Creating new value is perhaps the most important behaviour for the long-term health of an enterprise. It is also the most slippery. It’s not merely a trendy rephrasing of the jargonised ‘value-added’, which is rarely more than lazy shorthand for selling you more stuff, and a long way off from the economic planning tool that Igor Ansoff intended when he coined it in the 1950s.
Ansoff saw rationality as a means of mastering turbulence in the business environment. His famous product-market matrix may have had its day but the need to master instability is now more relevant than ever. Being creative with value means making unexpected connections between things that already exist, but that aren’t currently in the core of your business model. Apple didn’t invent the mobile phone or the MP3 player, but it did make them fit for humans. It didn’t create a market for music, but it met a demand that confronted piracy head on.
Being value-creative is not necessarily about inventing new wheels. But it does involve rethinking design, working practices and business models. According to IBM’s 2010 CEO survey, 60% believed ‘Creativity trumps other leadership characteristics’. These CEOs are under tremendous pressure to perform. Economic uncertainty makes their jobs much harder at a time when investors are becoming more demanding.
According to IBM’s 2010 CEO survey, 60% believed ‘Creativity trumps other leadership characteristics.’ These CEOs are under tremendous pressure to perform. Economic uncertainty makes their jobs much harder at a time when investors are becoming more demanding.
Yet they believe creativity, not consistency, is their saviour. The limits of consistent rationality have been cruelly exposed in the meltdown on Wall Street, with its associated overreliance on quantitative techniques to measure and predict value.
But even before this catastrophe, investors were beginning to pressure large corporations to adopt a broader definition of value — from the early days of the balanced scorecard to the hyperconnected stretchable brands that cut across categories and reap new value from unfamiliar territory.
True, corporations will continue to build commercial value, and public organisations will continue to build social value. But the modern challenge is one of making the most of opportunities where commercial and social values overlap.
While Ansoff was developing product-market matrices, Peter Drucker defined marketing as ‘The whole business seen from the point of view of its final result, that is, from the customer’s point of view.’ The difference now is that the ‘customer’ is a much broader stakeholder group, including all the counter-parties with whom the firm must negotiate.