By Gautam Mahajan, President of Customer Value Foundation

Values and governance are often the motherhood part of corporate statements.

Management often does not realize that values indeed create value for all stakeholders and essentially increase shareholder wealth. Raj Sisodia, David Wolfe and Jag Sheth, in their book “Firms of Endearment” demonstrate the power of values and caring for enduring business success. Firms of Endearment outperformed S&P 500 indexes, 10 to 1 over a 10-year horizon and outperformed Jim Collins “Good to Great’ companies 3.1 times in this period. In fact, companies move up a Maslow like hierarchy to capital actualization or corporate actualization where the company’s values create value for employees, customers, partners and shareholders. To build your values into strength requires the implementation of Total Customer Value Management.

Total Customer Value Management helps you create value for all stakeholders, increase loyalty and referral sales, market share and profitability. It makes the company a better place to work in and increases teamwork while reducing pressure on price. It helps you focus on your value systems.

What is Value Creation? Value Creation is executing pro-active, conscious, inspired or imaginative and even normal actions that increase the overall good and well-being, and the worth of ideas, goods, services, people or institutions including society, and all stakeholders (like employees, customers, partners, shareholders and society), and value waiting to happen. 

That is why our parents teach us to be good kids and to do good. But this is soon overtaken by the goal of making a living, of being successful. 

In today’s e-age, and increasingly aware and educated Customers, companies must reinvent themselves to be leaders for the future and to co-create value. Managers have to forget conventional learning to equip themselves for their own personal and corporate sustained success.

Total CVM is about value creation for all stakeholders, and balancing them to gain competitive advantage. While the Customer has centre stage, adding value to the employees, suppliers, and associates (supply and delivery chain, including dealers and retailers) becomes important. Total CVM examines whether the old norms of business have to change, and a focus on “endearment” of the stakeholders should be espoused. It helps companies understand the true value of having real values.

We have found through various studies with Tata Fertilizers, Tata Power, Godrej and others that Values create value (apart from immediate results in reduced complaints, better team work and output, better pricing, improved loyalty and sales, market share and profits. Firms like Tata Power that emphasize environmental friendliness have higher scores on image and brand and on buying decisions. At Tata Fertilizer, a sense of belonging to the Tata family built the image and buying propensity. In both cases, price became less of an issue!

Expanding the Tata Power example, we found that about 50% of why customers preferred their power provider was its image, and 50% of the image was based on sustainability, health and environment, and the company’s efforts to reduce electricity costs. The rest was based on being trustworthy and reliable. Thus working on these issues would increase the image of the company and therefore, the preference (and the desirability to do business with) thereby increasing customer value, attractiveness to customers and price.

Thus, Values create value.

Unfortunately, Values of a company adorn the walls or the annual report. Management thinks these are nice to do statements. Companies think of Values such as being environmentally friendly and trustworthy as nice things to do, and treat Values issues as cost centres. Our value studies show that Values create value to the customer and the stakeholders, and can increase the image of the company and its own value creation.

Often customers will pay more to a trustworthy, more environmentally friendly and well governed company. This increases the bottom line, and companies should look at implementing Values as a revenue centre.

My advice to corporations is to build on your values. Also create employee, customer and other stakeholder value, and when you do so assiduously, you will find this will create value and wealth for all stakeholders. Corporate Values become really an important part of doing business and lead to corporate actualization and increased shareholder wealth.

About the author

Gautam Mahajan is an internationally acclaimed expert in Value creation, strategy, general management and globalization and is President of Customer Value Foundation. He is also Founder Editor of the Journal of Creating Value, jcv.sagepub.com. He chairs the Global Conferences on Creating Value and mentors the Creating Value Alliance, creatingvalue.co

His books are Value Creation; Total Customer Value Management; Customer Value Investment, Value Dominant Logic; Value Imperative; Creating Customer Value can Make you a Great Executive.

Featured international speaker. Clients included Alcoa, GE, GE Capital, State Farm Insurance, Wisconsin Energies, Sun Australia, Tatas, Godrej, ITC etc,

Mr. Mahajan worked in the US for 17 years with Continental Group, (then a Fortune 50 company) He is one of the inventors of the PET petaloid bottle and noise control kits. He has 18 US patents.

Mr. Mahajan is past Global President of the Indo-American Chamber of Commerce. He was Chairman, PlastIndia Committee, Vice President All India Plastics Manufacturers Association, Trustee Plastics Institute of America. He was a member of the US India think tank. Among his honours is a Fellowship from Harvard Business School and Illinois Institute of Technology. He was honoured by the Illinois Institute of Technology with its Distinguished Alumni award. He delivered the first Distinguished Engineering lecture at Illinois Institute of Technology, Chicago in May, 2012. He has chaired and given keynotes in conferences in several countries. In October 2019, he speaks in Japan, in December in the Netherlands, in February 2020 in Denmark, in March in Boston, and in June in Paris, and September in Poland.

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