Transforming companies through Value Creation not Value Destruction: The Balancing Act


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sell the idea.”

Talk about putting me in my place, Jim! But Jim is absolutely right, and if companies do even bits and pieces of value creation like some innovation, like some social work, like some customer value creation. They will be ahead of the game. The CEO has a balancing act on being accepted by the customers and by the investors!

So, maybe we should start with what not to do. Avoid destroying Value. Keep looking over your shoulder and keep ahead of competition. Avoid becoming complacent, and continue to add value to your employees, customers and partners.

It is easy to be destroying value even when you are creating profits. You can be running your company into the ground, by not renewing assets.

For example, the 16 oz. plastishield glass bottle, selling 10 billion units for soft drinks and suddenly disappeared. You could like Enron destroy value for millions of shareholders. You could be like Blockbusters and Borders (my favourite bookstore), like Blackberry, letting go. Ambassador and Fiat India, RCA, Paine Webber, Drexel Burnham Lambert Beatrice foods, General Foods, Eastern Airlines, TWA and my old favourite Pan Am, Burger Chef, Compaq, Arthur Andersen, Standard Oil, American Motors etc. are examples that were successful but eventually died. Complacency, irrelevance, not reading the signs, destroying value to some stakeholders

And don’t ignore countries that ruled the world or tried to, the British Empire, the French territories, the German war losses, Japan’s downhill ride. Ask what caused this?

So what do we learn? Nothing is forever; you can’t take the future for granted.
Failure and success do not happen overnight. More often we fail to see the signs of failure.

Failure does not mean extinction; you can bounce back by adding value.

Never ignore anything that is negative, like customer complaints or a poor response to a product.

Add Customer Value, first by measuring it an understanding why customers but and by adding value. Karl Slym, President of Tata Motors got 357 ideas just by talking to TCS employees, many of whom were his customers. So innovation is what you must do and it adds value. And talking of TCS, they were named among the most innovative companies, the most green company, the best CEO of the year, best mobile learning program etc…all indicators of value creation.

On the other hand, Stock Guru wrote:

-In the name of Power (a power company) one man made a sucker of the entire Indian population. A case study for future generations. Collected record amount of money from the public & the stock has become worthless. Marketing professionals & a greedy promoter made a sucker of the entire investor community. Destroyed Value!

Today the rules are changing, the customer economy is taking over and so should you.

So what do we do? Gregg Gordon in The CEO’s Balancing act wrote

The CEO, however, has the objective of achieving two goals. The first is success in their customer markets. The second is success in capital markets.

Two goals

What makes these two goals particularly difficult is that to be judged successful CEOs must achieve both goals simultaneously. To achieve the first goal, the CEO must deliver more customer value than their competitors through better products, services and effective use of their channels. As a measuring stick, most of us would gauge success in the customer market by a company’s revenue or profit. The capital market, on the other hand, comprises investors that make up hedge funds, pension funds, mutual funds, private equity and banks. These investors are only interested in determining the correct valuation of a company to ensure they make wise investment.

For the capital market, absolute profits are very important, but that’s not enough. Investors want to understand how a company earned that profit. That’s because the size of the profit doesn’t provide any indication about how much effort it took to earn. For example, two companies may be generating the same amount of profit at the end of the year on the same revenue but are valued very differently. The reason for this may be that one is competing through low-cost production and has high levels of debt due to automated factories. The second may be competing on high levels of service. It may have no debt but high labour costs. Even though the revenues and profits are the same, investors will value these companies differently, which in turn influences the behaviour of their respective CEOs.

What’s surprising, though, is that with all the metrics a company puts in place to measure the fiscal and operational health, very few are able to overtly measure and improve their employees’ innovative ability, and the true customer value they are creating.

Republished with author's permission from original post.

Gautam Mahajan
Gautam Mahajan, President of Customer Value Foundation is the leading global leader in Customer Value Management. Mr Mahajan worked for a Fortune 50 company in the USA for 17 years and had hand-on experience in consulting, training of leaders, professionals, managers and CEOs from numerous MNCs and local conglomerates like Tata, Birla and Godrej groups. He is also the author of widely acclaimed books "Customer Value Investment: Formula for Sustained Business Success" and "Total Customer Value Management: Transforming Business Thinking." He is Founder Editor of the Journal of Creating Value ( and runs the global conference on Creating Value (


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