Last week, I read an article in the Globe & Mail that asked: “how much value am I creating for my organization?” So the natural extension of that question is “how much value is the organization collectively creating for themselves and for clients, customers and shareholders?” The answer depends on which metrics the organization is tracking to define collective value.
Traditionally, value is measured financially by revenue and margin growth, and cost savings, which are outcome or ‘lag’ metrics. This approach puts value in a single bucket. Value must be created for and delivered to customers, so that value can be captured by the organization. This expands the definition of value to include specific metrics for cultural, operational and relational value, as well as financial value. The result is a better assessment of where value is being lost or found. The collective value generated drives the traction achieved by the organization. It is a 360 view of traction.
The question of collective value for any organization can be placed under the 360 lens to connect value and traction to help organizations find and fix the gaps.
This expands the tracking of value beyond financial lag metrics to cultural, relational and operational lead metrics and demonstrates how they work together to build value and traction.
So, the question of collective value requires a broad reach across the organization to include three key drivers of value. Let’s take a look.
While operational value is usually focused on cost reduction – a focus on operational innovation can increase operational value by enhancing the organization’s value proposition. This is important as the value proposition is the promise that customers and clients use to connect their expectations of value from the organization to the reality and ROI of the value received. An enhanced value proposition, that delivers competitive traction, requires innovative operational delivery – not just efficient operations.
Relational value is the engine for revenue generation via the customer or client experience with the organization. Relational value works collaboratively with operational value. Relational and operational value enhance the experience the customer or client has with the organization to the point of building not only engagement but also advocacy. The power of advocacy is retained revenue growth through upsell and cross-sell, plus new business at a reduced cost of acquisition. Shareholder engagement is another key relational metric on the investor relations side – that builds greater tolerance among shareholders during stock price fluctuations.
And finally, cultural value –the internal purpose– driven, working environment where employees are engaged by the purpose of the organization because they see the value proposition as authentic and even inspiring. They see the alignment between what the organization says externally and what it does internally. This builds internal engagement, which becomes advocacy for the organization. Employees who advocate on behalf of the organization are much more credible to customers, clients and prospects, than claims made by the marketing or corporate affairs departments.
Why does this help to measure collective value? Tracking these four types of value metrics ensures a 360 view of the leading cultural, relational and operational measures that serve as the guideposts of the organization, and the financial lag measures that are the goalposts of the organization. This broader definition of value generates more opportunities to understand where value is being lost, regained or achieved. The result is greater clarity, better resource allocation and more prioritization of actions that influence traction for the organization.