Is the crisis really back or not? For some, it increasingly seems that Stock Exchanges’ agitation (leave aside ethics and rationale) is cut off from the reality of those who really work and create value. And for others, suffices to study some leading indicators to be entitled to be seriously concerned again…

In the recent months, I met with executives actively preparing to fight a possible downturn. I was fascinated to see how the work of several neuroscientists was evidenced in our discussions: When new thinking is required, most of us though seem to tap into our unconscious “brain warehouse” instead of truly re-inventing ourselves and our organization. Most of the measures we were considering in our informal discussions sounded like “more of the same”.

When listening, some themes were constantly coming back: pleading our cause with the government, lobbying, cost cutting, simplifying processes or product line etc… All of these certainly make sense. But prior to taking such decisions, walking around the VC² matrix (Value Capture/Value Creation) from our friend Nick van Heck and Professor Paul Verdin may be a useful thing to do for Boards and other executive teams.

The discussions and words heard inside an organization when it is preparing to migrate from one quadrant to another are fascinating:

• From Nightmare towards Heaven: The organization is waking up brutally (most of the time) to the fact that, although what it offers is very much appreciated by customers, it bleeds profusely. As the orthodoxy, so far, has been about “Nothing is too good/expensive to serve the customer”, about art for art’s sake, innovation, virtuality, social networks, generation Y and creativity… words such as efficiency, bottom-line, cash flow and other down to Earth statements are obscene. When the organization moves towards the realization that the wall it has been headed for in the past few month is now weeks away, the ambiance is strongly tainted by a “mourning process”: some creative folks choose to leave and offer their real talents elsewhere, some extravaganza is being reined in, there is a true impression that “the party is over” and that those managers do not understand what it is like to be an artist… And some times it is true… But this is less the case of most businesses by the end of 2011.
• From Heaven towards Dream (Illusion): This is the most dangerous and pernicious transition: whereas the previous one is usually brutal and enforced by shareholders whistle blowing the end of the game, the move from Heaven (where finally the organization has found the right balance between driving the market through its incredible capacity to guess what the customers don’t even know they want and deliver it (see Apple to date) as well as providing superior returns to its shareholders. Financial returns are easier to track but they clearly are a lagging indicator… Success, as we know is a double edge sword and it is sometimes accompanied by too much self assurance which rapidly turns into complacency. The language we hear at this point is defensive (against whistle blowers or those customers who dare to complain or threaten to leave), attention drifts from surprising the customer to internal focus. There is a lot of self congratulation and the mood is upbeat. Warrior and military languages are sometimes used… The frog starts to boil and it is happy!
• From Dream (Illusion) towards Hell: Now the organization… feels the heat. There seems to be a wind of panic starting. But most of the measures proposed are defensive (Value Capture). Management goes after the symptoms (low Value Capture) instead of the cause (low Value Creation in the eyes of the market). So the words we hear are about cost cutting, demanding governmental support (and business executives are at least as creative as apparatchiks are to burden business with rules, bureaucracy and taxes), M&A (forgetting that, as Nick van Heck suggests, when one small empty pipeline of innovation acquires another smaller empty pipeline, the result is a big… empty pipeline)… Rarely do we hear at that moment the other discussions that would be needed: How do we regain customers’ attention? How do we create market needs? How do we know better than our customers what they (or their own customers) unconscious needs are??? This is the critical moment most of us may be in… There is a financial crisis around, for sure. But there is a slow but perceptible shift in what customers and society as a whole are expecting to get… Those of us focusing exclusively on Value Capture will miss the Boat and will not re-invent themselves on time…
• From Hell towards Heaven: There are companies who succeed to get out of Hell. When Lego was there, years ago Jorgen Knudstorp and his team worked relentlessly on both axis: restoring financial health AND reigniting the fire in customers and employees heart. But working only on the cost cutting axis (Value Capture) will only bring you back temporarily into the delusion box of Dream… Sooner or later, having failed to reconnect with your customers, you will get back to Hell…

I hope these reflections will help you support your reflection on both Value Capture and Value Creation. An obsessive focus on preventing the financial boat to sink (at the expenses of many other healthy businesses) and loosing sight of the necessity to courageously re-invent ourselves are probable reasons why we are now faced with a new storm. Let us at least make sure we prepare ourselves better this time…

On my way to… Buenos-Aires to work for a large British company having solid interests in… Brazil. I love the globalized world:)  Have a good week all and thanks again to Paul and Nick for this useful matrix!

Didier

Is the crisis really back or not? For some, it increasingly seems that Stock Exchanges’ agitation (leave aside ethics and rationale) is cut off from the reality of those who really work and create value. And for others, suffices to study some leading indicators to be entitled to be seriously concerned again…

In the recent months, I met with executives actively preparing to fight a possible downturn. I was fascinated to see how the work of several neuroscientists was evidenced in our discussions: When new thinking is required, most of us though seem to tap into our unconscious “brain warehouse” instead of truly re-inventing ourselves and our organization. Most of the measures we were considering in our informal discussions sounded like “more of the same”.

When listening, some themes were constantly coming back: pleading our cause with the government, lobbying, cost cutting, simplifying processes or product line etc… All of these certainly make sense. But prior to taking such decisions, walking around the VC² matrix (Value Capture/Value Creation) from our friend Nick van Heck and Professor Paul Verdin may be a useful thing to do for Boards and other executive teams.

The discussions and words heard inside an organization when it is preparing to migrate from one quadrant to another are fascinating:

• From Nightmare towards Heaven: The organization is waking up brutally (most of the time) to the fact that, although what it offers is very much appreciated by customers, it bleeds profusely. As the orthodoxy, so far, has been about “Nothing is too good/expensive to serve the customer”, about art for art’s sake, innovation, virtuality, social networks, generation Y and creativity… words such as efficiency, bottom-line, cash flow and other down to Earth statements are obscene. When the organization moves towards the realization that the wall it has been headed for in the past few month is now weeks away, the ambiance is strongly tainted by a “mourning process”: some creative folks choose to leave and offer their real talents elsewhere, some extravaganza is being reined in, there is a true impression that “the party is over” and that those managers do not understand what it is like to be an artist… And some times it is true… But this is less the case of most businesses by the end of 2011.
• From Heaven towards Dream (Illusion): This is the most dangerous and pernicious transition: whereas the previous one is usually brutal and enforced by shareholders whistle blowing the end of the game, the move from Heaven (where finally the organization has found the right balance between driving the market through its incredible capacity to guess what the customers don’t even know they want and deliver it (see Apple to date) as well as providing superior returns to its shareholders. Financial returns are easier to track but they clearly are a lagging indicator… Success, as we know is a double edge sword and it is sometimes accompanied by too much self assurance which rapidly turns into complacency. The language we hear at this point is defensive (against whistle blowers or those customers who dare to complain or threaten to leave), attention drifts from surprising the customer to internal focus. There is a lot of self congratulation and the mood is upbeat. Warrior and military languages are sometimes used… The frog starts to boil and it is happy!
• From Dream (Illusion) towards Hell: Now the organization… feels the heat. There seems to be a wind of panic starting. But most of the measures proposed are defensive (Value Capture). Management goes after the symptoms (low Value Capture) instead of the cause (low Value Creation in the eyes of the market). So the words we hear are about cost cutting, demanding governmental support (and business executives are at least as creative as apparatchiks are to burden business with rules, bureaucracy and taxes), M&A (forgetting that, as Nick van Heck suggests, when one small empty pipeline of innovation acquires another smaller empty pipeline, the result is a big… empty pipeline)… Rarely do we hear at that moment the other discussions that would be needed: How do we regain customers’ attention? How do we create market needs? How do we know better than our customers what they (or their own customers) unconscious needs are??? This is the critical moment most of us may be in… There is a financial crisis around, for sure. But there is a slow but perceptible shift in what customers and society as a whole are expecting to get… Those of us focusing exclusively on Value Capture will miss the Boat and will not re-invent themselves on time…
• From Hell towards Heaven: There are companies who succeed to get out of Hell. When Lego was there, years ago Jorgen Knudstorp and his team worked relentlessly on both axis: restoring financial health AND reigniting the fire in customers and employees heart. But working only on the cost cutting axis (Value Capture) will only bring you back temporarily into the delusion box of Dream… Sooner or later, having failed to reconnect with your customers, you will get back to Hell…

I hope these reflections will help you support your reflection on both Value Capture and Value Creation. An obsessive focus on preventing the financial boat to sink (at the expenses of many other healthy businesses) and loosing sight of the necessity to courageously re-invent ourselves are probable reasons why we are now faced with a new storm. Let us at least make sure we prepare ourselves better this time…

On my way to… Buenos-Aires to work for a large British company having solid interests in… Brazil. I love the globalized world:)  Have a good week all and thanks again to Paul and Nick for this useful matrix!

Didier