Have You Got the Winning ‘Ambition-Doubt’ Combo?
What is on the 2024 leadership agenda?
After a year of cost-cutting and efficiency, leaders are starting to focus on value creation and innovation. But what about your organization, is it ready?
In times of market uncertainty and slowing growth, the focus turns to cost-cutting, consolidation and efficiency. But, has value creation gone out the window? That is a question being asked by a growing number of leaders.
While 2023 was the Year of Efficiency, there are signs that 2024 could be the Year of Value Creation. In business conversations normally dominated by issues of consolidation, cuts and efficiency, there is increasing talk of innovation and growth. The result is often a more energizing, customer-focused and forward-looking conversation.
Pause for a moment to reflect:
- When the leaders of your organization come together, what are they talking about?
- Is the conversation dominated by issues of consolidation, cuts and efficiency?
- What percentage of the conversation is focused on value creation, innovation and growth?
- Moreover, how do levels of energy and engagement vary as a result?
In our conversations with leaders, six reasons emerge for putting value creation back on the corporate agenda:
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1. Value is the ultimate source of shareholder value
Maximizing shareholder returns is naturally the central goal. However, the surest route to this is to maximize value creation not just for shareholders, but for customers, staff and the broader society too.
As many leaders point out, value creation has to be an essential part of the organization’s mission statement. It is:
- The primary source of sustained performance and growth in organizations, industries and even societies.
- The ultimate driver of profitability and the root source of competitive advantage.
Mark Zuckerberg famously described 2023 as a year of efficiency and it certainly has lived up to that name.
This insight emerged from strategic conversations with business leaders on the requirements of delivering today's performance & tomorrow's transformation. It is part of our most exciting research yet:
2. Cuts won’t deliver long-term performance
Cuts alone won’t deliver long-term performance. In some cases, cuts may actually hinder longer-term performance.
Short-term decisions can have long-term consequences, short-term savings can have long-term costs. Short term financial expediency can detract from strategy.
Leaders need to balance the short term with the longer term – they need to deliver performance today, while also meeting the need for transformation tomorrow.
However, one of the areas that gets cut in the drive for efficiency is future-focused ‘business unusual’ investments such as new products, processes and so on.
Pause for a moment to reflect on how have you added value over the past 3-6 months for your (a) customers (b) staff and (c) stakeholders.
3. Creating Customer Value is Key
Cost-cutting and efficiency drives tend to be short term focused and spreadsheet driven. Moreover, they tend to be internally rather externally focused.
Meanwhile, the ultimate source of competitive advantage and sustained long-term performance is creating value for the customer. This customer-centric thinking is reflected in the following remarks:
What does value creation mean for your customers and stakeholders?
Ask the internet (or AI chatbot) and here are all the things that value creation could mean – use this list to create your own definition.
- Unlocking Potential – creating an environment where staff can realize more and more of their full potential.
- Job Creation: Providing employment opportunities and skills training.
- Inclusivity: Ensuring that benefits reach marginalized or underrepresented groups. Providing for quality and diversity.
- Social Impact: Addressing societal issues such as poverty, healthcare, and education.
- Environmental Sustainability: Initiatives to combat climate change, protect natural resources, and promote eco-friendly practices.
- Ethical Conduct: Promoting fairness, equality, and justice within society.
- Cultural Development: Enhancing arts, heritage, and community identity.
- Innovation: Contributing to societal advancement through technology, products, or methodologies that improve quality of life.
- Public Welfare: Creating public goods and services that benefit a broad section of the community.
- Civic Engagement: Encouraging participation in governance and community decisions.
- Education: Improving access to quality education and information.
4. Efficiency will only take you so far
‘Do more with less’ has been a constant refrain for the past 12-16 months, with widespread cuts to budgets and resources. But as one of our colleagues points out: ‘At some point, that stops being effective – you run out of areas to cut. It is simply not sustainable’.
There must be more to efficiency than simply cost-cutting. Organizations must also innovate to drive performance and efficiency sustainably. They must innovate in terms of ways of working and tackle the factors that are really draining executive productivity. The importance of this is clear from our data showing that less than 50% of work is considered by executives to add value.
Many organizations have kept their ambitions regarding what is to be achieved, that is despite significant cuts to resources. They have assumed that people will make it happen regardless. However, those key people that the organization relies on to make stuff happen – are already very busy – juggling multiple priorities and projects.
Some strategic projects and initiatives are being starved of time and resources – they are taking place ‘at the side of the desk’. This is one example of how short-term savings, can have unintended longer-term consequences.
There must be more to efficiency than simply cost-cutting.
5. Executive Engagement Is Suffering
There has been a lot of talk about engagement – even a crisis of disengagement. But could cost-cutting and consolidation be partly to blame? Fatigue is setting in, with executives growing wary of endless rounds of consolidation and restructuring.
Few people see cost-cutting and consolidation as meaningful or value adding work. People want to work on exciting projects and initiatives, typically these are the ones that add value. With the focus on short-term cost savings, many of these have been stalled or scrapped.
Leaders using Pitstop Analytics TM have visibility of the time and resources spent on value adding versus non-valuating work across different projects and teams.
The graph here is a benchmark comparison with executives typically spending up to 39% of their time on work that they consider to be non-value adding.
6. Traditional Strategies May NOT be Working
As if there were not enough reasons to put value creation back at the top of the business agenda. Here is one more: The traditional strategies may NOT be working as intended.
After a year of efficiency and consolidation drives, the results are mixed. For example:
- Two thirds of organizations (66%) have implemented consolidation drives, 83% of executives say there is still a proliferation of projects and initiatives. In a form of ‘project whack-a-mole’, some organizations have magically ended up with more projects today, than before the consolidation started.
- While efficiency drives have been almost universal, the levels of efficiency remain at just 67% (on average). There is growing evidence of the need for a rethink of productivity and efficiency in the context of knowledge workers and the executive suite, in particular.
After a year of efficiency and consolidation drives, the results are mixed.
We are working with our clients to make 2024 the year of value creation. Also, to ensure that efforts at consolidation and efficiency can realize their intended goals. Why not talk to us
SOLUTIONS & SERVICES: Here are some of the ways that our research & insights are put to work by our clients: