Value realisation
Chapter 3 - Corporate futuring
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Welcome to the Value realisation page
What is Value realisation about?
For some, the famous question, who was first, the chicken or the egg, has no defined answer. But evolution theory can shed some light on this problem. For example, early tiny organisms created more significant organisms to duplicate themselves more easily. For this goal, they created a replicator (more copies), which is, in the end, far easier than duplication (one copy).
| "The chicken is the strategy of an egg to create more eggs" (1). |
The sole duplication of an egg into another egg is costly. An egg's replication (multiplication) by its chicken is less expensive. A chicken lays many eggs, while the duplication only produces one extra egg.
- Duplication occurs in an autonomous organism.
- Replication in natural, socially and culturally organised settings.
How long can this replication cycle of egg, chicken, eggs continue? In nature, this question has a simple answer: as long as the environment supports the replication.
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Business value
The same applies in business.
"The organisation is the strategy of resources to create more resources".
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Value input
The initial step is the input of a value of any kind. This value is the basis of the organisation's development to create more value. Let us look at some examples.
- A micro organisation (one person).
- Usually, this person tries to keep the monetary contribution as limited as possible. But, they invest a lot of their personality in the company to build up a status as a person in the environment in which they live.
- A cooperative organisation.
- The initial value is to balance earning an income with satisfaction in life and work. The aim is to guarantee payment and the pleasure of living and working for a more extended period. The solution is a working method in which collaboration is the main focus.
- A listed organisation.
- Large shareholders expect a greater return than inflation on their initially invested capital. As a result, the CEO is held accountable quarterly for increasing the market value of the money raised.
- The shift from shareholder value to stakeholder value.
- When an organisation claims to generate more stakeholder value, this is only possible if de shareholders bring valuable resources related to the stakeholders into the organisation at the front. This is often done by enforcing the ESG standards.
- Participatory entrepreneurship.
- Participatory entrepreneurship does not only start with financial participation. It starts with sustainably involving employees in the ins and outs of the company. In this manner, every employee can partially fulfil their mission within the company context. The organisation has to allow that kind of match. The result is the emergence of lasting feelings of shared ownership.
You surely can think of other examples.
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The causal order of value realisation
Let's assume that the market wants less white but more brown eggs from now on. What is your chance of success if you encourage your white hens (your organisation) to lay brown eggs? First, you will have to introduce brown eggs, which will produce brown chickens, which will produce a lot of brown eggs.
Of course, any comparison is flawed—also this one. Chickens don't populate your organisation, but people who have more opportunities to learn, evolve, grow, etc. But even then, you cannot expect your organisation to deliver a different output with an unchanged input. Change of output starts with changing the input, not the organisation. The input can change the organisation, which in his turn can change the output.
Be aware that the input is not only about tangible but also intangible resources. You can't expect an operational excellence output when the intangible input is only permeated by customer intimacy thoughts (and vice-versa).
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Moderation through business capabilities
Only at the very beginning, your enterprise is a blank slate. However, in normal circumstances, input resources and organisation are loosely coupled through the business capabilities.
| In a seminal article, Barney (1991) divides resources and capabilities into three broad categories: physical, human and organizational. Subsequent research has distinguished more finely between resources and capabilities (Amit and Schoemaker, 1993).
Core resources and capabilities
Complementary resources and capabilities
Specialized resources and capabilities
Generalized resources and capabilities
(2) |
This means that many resources are entangled in the organisation, and difficult to loosen them from the current situation in the organisation.
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Value replication
Within the organisation, value replication takes place. Replication is not duplication. As an example of duplication in economics, we refer to the barter journey. You start with an egg and try to exchange it for more value. By replication, we mean a set process that ensures that resources are continuously converted into value.
Three questions appear:
- What (sort of) resources are involved here, capital, raw materials, knowledge, innovation, motivation, work, etc.?
- How can we organise so resources can replicate?
- How long can we keep this up?
Replication has 'constraints', that, at the same time, will bring success:
- Firstly, relationship, you need a rooster and a hen for replication—a very healthy situation with so now and then a little hick-up.
- Secondly, adaptability to the environment.
- Thirthly, a sort of method to be able to decide.
| Sources | |
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| (1) | Behave - Robert Sapolsky - Penguin Random House - 2017 |
| (2) | The birth of capabilities: market entry and the importance of pre-history - Constance E. Helfat |
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