Value creation might be the current management buzzword, but it comes with a huge dollop of reality bytes.
Value creation might be the current management buzzword, but it comes with a huge dollop of reality bytes. Firms that are not taking a closer look at their value creation processes would do well to sit up and take notice.
Introduction
Operating in the knowledge economy is distinctly different from the product economy, as firms are finding out.
Changes in technology, markets and regulation have made geographical boundaries more or less redundant. The good news is that firms have a wide and deep consumer pool to fight for. The only caveat being that firms need to constantly have their ear to the ground to create value for their consumers, shareholders, partners and employees.
While many firms around the world are ostensibly engaged in the process of creating value, only a handful really have systems and processes in place for long-term value creation.
In other words, they all understand that they have to create value for customers, investors and employees. But these three sets of stakeholders are so linked that creating value for one in isolation would at best be a short-term victory.
Industry best practices
Companies around the world are waking up to the fact that competitiveness and market leadership will follow innovation of value creation processes.
- HDFC, India’s market leader in home loans, has transformed its key processes over the last few years to serve customers better. Through six sigma initiatives, HDFC achieved a dramatic reduction in processing time for housing loans. Besides, HDFC offers different options such as step-up repayment facility and flexible loan installment plan to cater to a wide range of customers. HDFC provides a host of value-added services like legal and technical consultancy to hone the competitive edge. The net result is heightened value and satisfaction for the customer, employee and investor alike.
- Bharti Cellular offers a number of value-added services to its Airtel pre-paid customers to contend with the growing competition. The challenge was to ensure almost real-time delivery of all the services. Bharti responded by implementing the personal access communication system, a software-based customer care solution. PACS enabled Bharti to cut its pre-paid call-centre handling costs by 15%, and significantly increased customer retention. With the software, Bharti streamlined workflow processes and increased operational efficiency. Other gains included reduction in call handling time and speedy processing of service requests.
- Motorola is another firm that consistently creates customer and shareholder value. It introduced the Razr V3, the world’s slimmest mobile phone, when it was all but beaten by Korean competitors. To create this success, Motorola’s management had to radically change the way its internal innovation processes functioned. In a departure from its complicated process, where regional heads weighed in with their suggestions, the Razr development team was removed from the company’s regular development process and given the freedom to develop the product they believed in.
Conclusion
As speed enablers like information technology and telecommunication shorten time-to-market as well as shelf life of products, services and people, firms stand to gain if they develop long-term, win-win relationships with employees, customers and investors based on mutual trust for mutual benefit. It is not simply an option; it is the only viable path to sustainable value creation.
Suresh Lulla is the managing director of Qimpro Consultants, founder of the BestPrax Club, and chairman of the IMC Quality Awards Committee. In 2005, he was awarded the Distinguished Alumnus Award by the Indian Institute of Technology, Bombay, in recognition of his outstanding achievements in Management Consultancy.
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