It used to be a given that companies that were disciplined about resource allocation, made bigger bets, and recycled capital faster than competitors were significantly more likely to outperform other players and maximize shareholder returns. These companies made the right investments in three areas: business as usual, transformation, and net new initiatives. But the rules that companies used to rely on for value creation and performance are quickly evolving.
What’s changed? Corporate leaders are caught among three sometimes contradictory forces, all of which shape the new value agenda:
- A stakeholder economy: Leaders need to respond to the pressures that society now places on large companies to address social issues and not just run a profitable enterprise.
- A “winner takes all” competitive landscape: Value is placed on data-rich businesses with scalable tech and visionary companies with “start-up” cultures.
- Large-scale acceleration in every area of the business: The era of incremental change is over. The COVID-19 pandemic showed that decisions that took months could be made in minutes. And often, choosing speed over certainty led to better outcomes.
Now, the core sources of a company’s competitive advantage are the distinctive value it creates, how it generates that value—better and faster than peers, for example—and the granularity with which units, teams, and individuals deliver value. Increasingly, leading organizations are embracing experimentation, learning from failure, and betting on growth as they understand the value agenda.
In order to sharpen your new value agenda, three key actions are necessary:
- Redefine your investment sweet spot
Businesses’ social responsibility, actions, and investments have long been part of the conversation, but they were mostly a side effort managed through corporate social responsibility (CSR) campaigns. Profit, rather, was at the heart of decision making, and employees who earned stock were aligned with that.That’s not the case today. Social responsibility and how a company addresses, acts on, and invests in societal issues are critical in the eyes of all stakeholders, including employees who want to hold companies accountable. We’re seeing investments and business models reflect that. The new investment sweet spot is at the intersection of a company’s purpose, value as its economic core, and its culture.
- Manage value at the project level
Many organizations are flattening hierarchies and empowering networks of teams to work together to solve problems on a project basis—a shift from setting sweeping organizational priorities. Now, creating value should be managed as granularly as the project level. By giving teams transparency, clarity, direction, and autonomy, they direct their capabilities and capacity in targeted ways to create value. And leaders are freed up to reallocate capital across the project portfolio.As part of their performance and talent transformation, a consumer goods company realized they needed to flip their history of launching around 90 initiatives and seeing only a quarter of them through. They created well-defined projects to deliver the value at stake, staffed empowered teams with the right capabilities, and prioritized 20 initiatives to start. The company has since been able to complete 40 projects, successfully delivering above expectations.
- Increase your talent-to-value quotient
Accelerating the value agenda requires more dynamic ways of linking talent to value. Companies doing this are very deliberately dismantling talent models with fixed reporting hierarchies, annual review cycles, and lock-step promotions. Instead, they’re using talent marketplaces to match skills to high-value business needs in real time, reviewing how talent is allocated to projects on a quarterly basis, and reconfiguring reward systems so people get better, faster feedback. Essentially, they are resetting their talent-to-value quotient by managing human capital like they do financial capital—accelerating change and the ability to tap talent in new ways.In one example, an industrial company redesigned their most critical roles to focus on delivering value by rethinking decision rights, skills, and behaviors required in each.
Sharpening the value agenda by finding the investment sweet spot, managing value at a project level, and increasing the talent-to-value quotient will help organizations better navigate the complexities of the post-COVID world.
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This blog post is part of a series on Future of work, which explores a set of new principles, such as anti-fragility and experimentation, that are becoming increasingly critical for today’s organizations as they build more creative, adaptable, and human systems.