Value is already defined as such but yet I have come across some very interesting conversations with friends, colleagues and family regarding this term. It is being used in a lot of different combinations and most of them we hear very frequently during our day to day life. From ethic values to financial values there is this whole breadth of different value we look upon, measure us and we try to match or exceed these values.
Related to Business the combinations of value I hear most often are Customer Value and Shareholder Value. There was not direct definition of customer value on Wikipedia, I chose the Customer Perceived Value Definition as probably the best option. In an ideal world the Shareholder Value should be aligned. Yet the definition on Wikipedia for Shareholder Value points to “..implies that the ultimate measure of a company’s success is the extent to which it enriches shareholders”. This can be either dividend or ever increasing stock price.
Investors measure a lot of different parameters and it will depend on the market of the company, the size, the maturity of the company or the market it is focusing on etc which measurement will be the most important one in order to evaluate the shareholder value. I remember in 2000 it was market cap for the .com companies what really counted. No matter if those companies made money… Yet there was a strong link as well to the customer perceived value. Companies wanted to be associated to those “.com” and thus the perceived customer value was also very high. As we all know it came to a very rapid end already in 2001. Even though I was directly impacted by this “brutal stop” I still think it was good.
I remember a book a read in the early 90’s : “The Customer-Driven Company: Moving from Talk to Action“. It was very compelled by the stories of companies who put the customers in their centre of action and focus. It should be logical but just think about how many times you feel not being well attended, yet you are paying them !
At the time the book was written CRM was still in very early stages but yet 20 years later there are still many companies who are not putting their customers into the centre and listen closely to their needs and concerns. The current economic situation is very unstable and this makes it for both consumers as well as for corporations very difficult to really judge what their “customer perceived value” is. In short they will become risk adverse and try to reduce their spending and look for cheaper / better options to do the same. Simple example could be Cell-Phone Providers. In a buoyant economy it was very hard for low-cost operators to gain market share. In the current market they are booming since people seek for ways to be able to talk more for less this made the prices drop dramatically. The perceived customers value of the incumbent Telco’s was dropping (after all coverage etc were proven to be pretty much in line of the low-cost vs incumbent) and the customers got he same service for much less.
The impact of this example was multiple fold but for the sake of simplicity I stay with the shareholder value and the perceived customer value. The reaction of most telco’s was to make huge staff cuts since their “traditional” market was severely reduced. This helped to increase again profits (do more with less) and pleased the shareholders. Yet it was a mere short term action. Profits were growing but yet the companies were still losing customers… (should be common knowledge but just in case… customers are after all the ones who pay the salaries). The next step is now to offer more services and bundle those (TripplePlay) etc. Yes, the margins are reduced but the customer drain has been stopped and even reversed in some cases. I have the impression that very little since most of those stocks show very little variation only and could be more linked (I did not have the time to make the analysis) to the general market behaviour.
There seems to be de-link between what is important to the customer and what he is willing to pay for (perceived value) and the shareholder value which probably will lead to some sort of rupture at given point in time.
There is this whole lot of talk around “social enterprise”. How it is important to be on the social media and to interact with your customers. I fully believe that enterprises from mom&dad shop to the largest DowJones will either adopt these new channels of communication or will feel the pressure o those competing with them for the same $ who are using them. Social Enterprise will again not only mean to have a great set of tools and implement them it will also mean that all, employees and managers, take it serious. I am seeing some very good examples on tools and also on enterprise culture in this area which are really sweet spots. It is evolving faster than I thought and I am sure that those who implemented social media / communities are seeing the value for them.
Yet there is still a certain disconnect between this perceived value (which is very high) and the shareholder value who in most cases just wants to see more and more profit. Profit is good and allows us to put money aside which can again be invested in tough times or just to keep the market leadership. Profits allow the companies to spend on R&D which creates new products which again have a high perceived customer value. So all in all a Perpetum Mobile? Could be, but it is more likely that shareholders want their share of the profit, which in turn would be normal.
The essence is that unfortunately values which should be important to all companies, their managers and employees are not the ones driving anymore. It is not the customer who is in the focus of all our efforts but our “owners”. I think this scene of the Movie Margin Call really gives a nice reflection of what the main set of value are that are driving us today.
Particularly the frase “This is just money, it is made up” impacted me the most.