When everyone in your organisation knows how his/her work contributes to the success of the business, you will have a higher likelihood of having an effective and efficient organisation: associates doing the right thing with the least use of scarce resources (time, money, and energy). In order to achieve this, executives need to simplify their communication about strategy and visualise how the business creates value. A proven visual for that purpose is the value creation cycle. This simple visual narrative creates strategic-to-operational alignment between all players in your organisation and helps people and teams focus their energy on the key value creation activities.
By Guy De Herde
Does busy-ness equal business?
All surveys of employee engagement or organisational health of the last 20 years are unequivocal: the workload keeps increasing, as does (perceived) bureaucracy. What does not increase to a similar degree is productivity! From start up over scale up to mature business, our organisations are infected by the busy-ness virus. If this doesn’t sound good, it is because it isn’t good: not for your associates, nor for your business. So why is busy-ness still so prevailing?
Kafka in the office
The companies I worked for, as well as most that we are supporting, all suffer from project overload. Balance Score Cards at the total business level that hold 30+ KPIs are not an exception. In the same surveys, and at the coffee machine, the associates consistently blame the executive team for “not making enough choices”. The executive team is indeed to blame.
There is in many cases an unhealthy dynamic at play in executive teams that results in non-value-adding complexity: strong personalities that are very convinced of their plans, territorial focus, the individual ambition to be the best, and a CEO who wants to keep his players (and egos) happy by saying yes to all their great ideas.
As one of my old bosses would say, the result is a to-do list for people and teams “that would choke a horse”. In a situation like this, it is increasingly unclear to people how what they do actually contributes to the success of the business or the achievement of the strategy. The result is a workforce that is ever less engaged and motivated.
That’s a poignant picture of the reality. It’s also ironic, since the same executive team will subsequently increase pressure on the teams when — in the course of the year — costs become too high, 20 quality issues arise, and sales targets are not hit. Kafka is never far away ...
Get the biggest ‘Bang for your Buck’
David Packard, co-founder of Hewlett-Packard, once said: “There are more businesses that die from indigestion than from starvation”. He made a case for focus over busy-ness. It’s the executive team’s responsibility to bring focus and stop the organisational centrifugal forces at play. How? The answer is so evident, it feels pedantic just writing it down: The only criterium to make choices is value creation. It is strategy and business model logic that defines the way in which the business creates value.
Everyone in the business should know how the business creates value. Once people know and understand this, they can make choices on whether what they do contributes to value creation. That’s very empowering and energising, as nobody wants to be working on stuff that does not add value — would you?
In reality, you would be surprised by the number of business leaders who do not communicate the essence of their business model nor the strategy with their people. And if they do, the presentations are often so complex that people walk away confused and overwhelmed, rather than with insight, understanding, belief, commitment, and readiness for energetic action. No man can hold more than 7 pieces of info in his mind at any one time (exceptions for women who can hold 8 — this is no joke).
Can you imagine the money that is wasted in your organisation (salaries, assets, tools, management time) when people work in an unfocused way. Can you imagine the unstoppable force of your organisation when all your people’s energy and talents would be funnelled into those activities — and only those — that accelerate the value creation of your business?
Business leaders that are very clear on how they create value communicate this in a simple way to their associates and use it to make and justify decisions, indeed have a track record of much more growth at less costs, and with a much more engaged workforce. They get a higher ROI out of every euro invested.
The Flying Dutchman, thanks to its value creation flywheel
We’ve worked with a fast-growing e-commerce business, with growth figures between 20-40% year-on-year. Staff levels are growing even faster: a typical situation for many businesses scaling up, and/or a dream for many others. For the leadership, it was extremely important to quickly on-board these new associates and protect the “business model” and the business’ success formula, whilst all this new top talent from outside joins the company with their own experiences and opinions on how work should be done.
The solution: a simple but comprehensive diagram that depicts the virtuous value creation cycle of their business. It’s called a Virtuous Value Creation Cycle, as the better your organisation becomes at executing the cycle’s activities/ capabilities, the more value you will create.
This “simple” picture is the summary of 3 critical inputs: your strategy, your business model, and your differentiating capabilities. The leaders started to use this flywheel in all of their communication and for decision-making purposes. The story to the associates goes like this:
“In the e-commerce world, we do not “have” customers. We need to merit them every day. Competition is fierce (Amazon, e-Bay, to name just a few) and only one click away. Key is to be top-of-mind. We’ve created a great brand that people like and which sets us apart. In the wilderness of the web, this is essential.
With more people knowing and being positively inclined to our brand, traffic will increase when we are accessible everywhere where the “potential customer” wants us. Not every visit means business, so converting each visit into (more) sales is a key: making sure the visitor finds any product he/she wants, relevant info, alternatives, fast (free) delivery, easy (free) return process, and so on.
More conversion of more visitors means more sales, which in turn increases our scale which is key to lower operating costs and increasing our margins. It also strengthens our negotiation power so that we can invest in an improved technology infrastructure, more “shops” where visitors can find even more, in expanding our offer — selling at lower prices — in better logistics, in better consumer experiences, in brand communication and so on.”
As a result, newcomers understand the strategy from their first week in the business, teams and individuals assess if and how they contribute to the flywheel, and leadership teams use it for making resource allocation decisions. The whole organisation has a clear and similar understanding on how the business makes money and creates value. If you as an individual, a team or a function cannot explain how your actions, projects or policies directly improve any lever in the flywheel or build any core capability underneath it, then why are you doing it?
This Virtuous Value Creation Cycle schematically creates clarity, alignment, a shared language, and common criteria for decision- making, whilst accelerating your value creation. When guided by this ’compass’, busy-ness means business!