Recognizing it is all about Value Creation

I am reading a lot about the concept of value creation recently, it answers everything but tells us so often nothing about how it is made up or it is truly present. It seems to have that same ‘heady vaulted position’ as innovation in that we all talk far more about the ‘promise’ of it, we want it but still are not prepared to put the real effort into it to make it happen.

So let me try and explain my thoughts on value creation. So what is behind value creation? What drives it? What will tell us this is an organization where value creation seems to well invest in, nurtured, built and protected?

So what is value creation?

Value creation is highly dynamic, it is going on all the time and can increase, decrease or transform, in different ways, when you exploit your different capitals that will be in constant change and adjusting to reflect your organization’s business activities and eventual outputs. This is when you can begin to see the value created by the use of deploying all the capitals to build new growth and what I call “stock” that along with “flow”. I loved this explaination of the two.

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Building upon four key wealth creating pillars

Wealth creation 1Most rooms we enter have four sides; they provide the structure to build upon. Presently in many of our economies, particularly in the West, we are struggling to find real growth; we are limited on our wealth-creating possibilities. Why is that? Our structures seem to be weak not strong.

We are certainly relying far too much on ‘selected’ pockets of economic activity to keep us going. Technology is clearly one of these. Yet our longer term forces for sustaining growth remain ‘fragile’, our structures remain wickedly  ‘out of kilter’ and we need to find stronger connecting frameworks that reinforce each other, so we can build further upon these to manage our business activities in new ways.

In most of our economic activities technology is playing a significant part in altering our habits, routines and thinking but it alone, is not enough. For technology to really give benefit it needs to be driven by our ability to generate wealth creating activity and that comes from integrating knowledge, gaining experience and being able to articulate this in better ways.

To achieve this, our business structures that we have in the past relied upon are in need of changing. They need different pillars to build upon.

Welcome to my four pillar room……..with a view

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Seeking out and combining the higher-value impact points for innovation.

ImpactTwo years can feel like a long time. Exactly two years ago I wrote a post called “Making the appropriate impact” discussing my nine different impact points for innovation.

I wrote at the time we can have surprisingly strong influence on impact, as we are in a highly connected world. It is through our organizing and influencing abilities we can all partly determine our innovation future.

I suggested we have nine impact points to consider:

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So what drives value creation?

Standing OutI seem to be reading a lot about the concept of value creation recently. It seems to have the same ‘heady vaulted position’ as innovation in that we all talk far more about the ‘promise’ of it. So what is behind value creation? What drives it? What will allow us to stand out as the place to invest in?

So what is value creation?

Value creation is highly dynamic, it is going on all the time and can increase, decrease or transform in different ways when you exploit your different capitals that will change and reflect your organization’s business activities and eventual outputs. This is when you can begin to see the value created by the use of deploying all the capitals.

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Are we measuring what really matters?

Time to adaptToday, it is the non-financial performance, made up of mostly the intangibles within organizations, that is accounting for upwards of 80% of present investors’ valuation of our organizations.

Yet do shareholders really have the knowledge to judge the real source of value creation inside our organizations? I think not but they should. Does Management actually?

We lack a real line of sight into the true value of our organizations.

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