Values and Dilemmas/Decision Making
Value Imperative (VI) comes on its own when one views Value creation for some versus Value destruction for others, which are aspects of dilemmas. Trump’s presidency meant Value creation for some and Value destruction for others. VI helps resolve dilemmas, some of which are a destruction–creation payoffs and others where leaders have to distinguish between competing options, or letting go of past traditions, products, and markets.
Business Dilemmas
One important business dilemma is suggested by Cesar Hidalgo, where he says
New startups tend to create more Value than they appropriate. The dilemma they face is one of staying afloat, yet growing aggressively, of consolidating versus speed of growth.
In uncertainty, Value can be impacted but not actually forecasted. And companies are always adapting.
He says,
I see a big difference between the generation of Value and the appropriation of Value. What I see about the generation of Value is that usually it’s more about reducing the cost to a very small amount, to reducing the cost sometimes even to zero. When you reduce the cost to zero, and you make something accessible, you have generated a lot of Value. But when you reduce the cost to zero and you make something universally available, you cannot appropriate any of it. There’s a big contradiction between these two dimensions.
Thus, there is the dilemma of pricing, of giving away to secure a huge base, or to spend on advertising to make your product known while you are making losses and cannot afford the ads.
However, in startups, investors are often willing to look at the number of clicks or the number of users vs. profits. Investors, too have their own set of dilemmas. These include hold or redeem decisions.
Startup leaders have to think of the Value each of the option creates.
Alan Cornford was working on an app for this. He uses Value to decide what do you pay partners, what percentage should you give up to a specific investor? By understanding the Value created by each, you can make decisions in these dilemmas.
Winn Knight introduces an important concept, that of Value starvation, which most companies do to customers when products do not work, or when you have difficulty reaching the company at all, and in particular for solutions.
Value and Disruption
Value and disruption is treated in greater detail in Chapter 6. We mention a few points here.
We can look at the impact of disruption, let us say for driverless cars. Disruption impacts customers, companies, and society by reallocation of resources. One can look at the Value impact through a Value tree in Figure 5.1. We see many areas of Value destruction as companies and their ecosystem have to abandon some or a large part of their past thinking and reinvent themselves. At maturity the Value tree will have more light greys and fewer dark greys than as shown in Figure 5.1.
Leaders have to think about externality.1 Will it impact people who are not involved directly with the decision making? Thus taxes get impacted with the introduction of driverless cars but may not have been anticipated.
Figure 5.1 A disruption Value tree
Moving on, it is not a matter of just knowledge and awareness. It is a mindset, a VI mindset that helps us looks at the new ideas. Will the Value of the new idea increase over time? Will it overtake the Value we are providing or can provide? What should we do to embrace the better Value potential?
These are not easy questions but need to be answered.
Driverless cars can reduce the number of cars on the road. The number of parked, unused cars during a day may reduce. The sharing economy may force cars to be shared rather than be owned. There could be a great change in thinking of self-owned transportation.
Will this reduce the number of cars sold and impact the economy? Will there be a negative Value impact?
So a serious question is will there be an overall Value reduction or increase in the future. For people, there might be a great Value increase, not having to worry about buying and taking care of cars, and getting transportation without having to drive, and get more safety. This will spawn in-car service industry such as videos, audio books, messages, and mobile service providers.
Others have to figure out how to use Value change (such as for insurance, governments, and society). The overall Value increase is positive.
Value Creation and Dilemmas
All actors are faced with dilemmas. What major should a student seek, where to work or whether to start one’s own company, to discard polyester film photography for digital, bias belt tires for radials? Buyers have similar dilemmas. Using Value and Value-added techniques help.2
Ethical and Social Dilemmas
Value Imperative helps you look at dilemmas by observing opposing views or different possibilities from their Value creation and Value destruction viewpoint. There are so many examples of business, ethical, and social dilemmas.
I can relate my own personal experience.
My team and I designed the plastic bottle with a petaloid base used on Pepsi, Coke, and other carbonated drinks, and have a few patents on such bases. I also commercialized the half-liter PET bottle in 1978 in Newark, Ohio. Today, I see PET bottles around the world.
While immersed in this project we could only see the joy of success and the determination to win. We never thought about sustainability. In fact we talked about the energy required to produce bottles in one plant in a year was the same as the energy required by a Boeing 747 to fly across the United States and back.
And we talked about recycling, or getting the energy back by incinerating, or re-using the PET for lower uses such as fiber.
Were we one-sided Value creators? Because we did not know what Value creation meant, we looked at success and winning. We created Value for the customers (Coke and Pepsi) and perhaps not for the environment. We were not concerned about potential destruction of Value or not even exposed to the debate.
Should we have been part of the dilemma of the good versus the bad? Of creating Value for the company and customers or for creating Value for society and sustainability? Perhaps, we could have come to the conclusion Coke and Pepsi are bad, or they are good. That this packaging alternative is better. We would have built a better system, had we looked at VI.
I think Value creation should look at both sides and not be one sided. Decisions should then be made for the best good or Value (for whom? for the company or the society? For consumers?).
One could draw a Value tree from the company’s point of view. See Figure 5.2.
The people looking at sustainability would have a different Value tree. In both Figures 5.2 and 5.3 you can decide whether the benefits or harm are greater than the cost.
You can see an entirely different argument. Unfortunately, neither side looks at the other’s Value tree. You, the reader, can take a stab at that.
The same thing happens during a war, should we kill or let live? Or be killed? Again the question is whether Value is being created for one party or the other, or whether the avoidance of war is creating Value?
In the social scene, job creation for the poor creates Value but has to be balanced by efficiency needs from low-cost robotic manufacture. These are true dilemmas, and the solution is to look at alternatives to traditional jobs with the changing social and technological scenes.
Figure 5.2 Value tree from company viewpoint
Figure 5.3 Value destruction attribute tree
Politicians have the same dilemma. Should they do good (create Value) for the citizens or for the vote banks to get re-elected?
In conclusion, should we worry about joblessness versus efficiency/cost and the future for people?
Emerging nations have a dilemma, whether to automate or continue labor-intensive jobs.
Microsoft CEO Satya Nadella feels that automation with human touch will improve country dynamics and also new jobs will emerge. Also, we need to balance return on capital with higher level job skills, and rearrange the countries work force. It really stops being a dilemma if standard of living increases and percolates throughout.
An example is Mercedes Benz stating they are not in the electric car race because the hydrogen car they are working on will be a winner. Germany has just announced two hydrogen powered trains. Will these disrupt electric cars?
What does progress mean? More cars? New technology and obsolescence of the past. A time may come when robots may wish to obsolesce humans, or make them more efficient with fewer parts (energy and nutrition and oxygen being passed through the skin via nano-bots into blood in human beings, reducing the need for the heart, the lungs, and the intestines?
Does progress mean more cars? More consumption? More needs? Or does it mean better lives?
These are dilemmas we have to face and solve. Often, dilemmas get solved by lack of action and progress takes over.
VI helps in such thinking, especially through the seventh principle that Value creation should be greater than Value destruction. The principle of creating Value for others is to go beyond our functional thinking and impact all stakeholders. In doing all this we must keep in mind our Values.
1 https://en.wikipedia.org/wiki/Externality
2 Kordupleski, R. 2003. Mastering Customer Value Management. Pinnaflex; Mahajan, G. 2008. Customer Value Investment. Sage; Mahajan, G. 2011. Total Customer Value Management. Sage.