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Abstract: In an era of heightened global competition, organizational success can no longer rely solely on efficiency, quality, and customer retention. This article makes the case for prioritizing value creation as the new guiding principle, emphasizing the need to generate value not only for shareholders but across all stakeholders—including employees, customers, communities, and the environment. We explore the shift from shareholder-centric models to stakeholder value frameworks, backed by research and practical examples. Key strategies for operationalizing this agenda include aligning business goals with social impact, fostering inclusive cultures, and implementing holistic performance metrics. Case studies of companies like Danone, 3M, and Adobe illustrate how stakeholder-driven approaches unlock sustainable growth, innovation, and social good. Ultimately, organizations that adopt value creation as their north star will be best positioned to achieve both long-term profitability and meaningful impact.
For over a decade now, organizational leaders have largely focused their change agendas on efficiency, quality, and customer retention as the key metrics for success. While important, such measures are increasingly seen as table stakes in today's hypercompetitive global marketplace. The next wave of the change agenda must center around maximizing value creation - not just for shareholders, but for all stakeholders.
Today we will make the research-backed case for why value creation should be the new north star, explore specific ways for organizations to operationalize this agenda, and provide examples of companies leading the way. Ultimately, a focus on value creation will be what defines the most impactful and sustainable organizations going forward.
Defining Value Creation
From Shareholder Value to Stakeholder Value
The predominant mantra of the late 20th century was that the sole purpose of an organization is to maximize returns for its shareholders (Friedman, 1970). However, mounting research shows this narrow view is short-sighted and sub-optimal for long-term success. Value is best created not just by catering to shareholders, but by strategically serving the full set of stakeholders - employees, customers, partners, communities, and society overall (Porter & Kramer, 2011; Freeman et al., 2020). An emphasis on stakeholders leads organizations to make wiser investments, build trust, advance societal good, and mitigate risks - all of which then translates to superior returns over the long run.
Dimensions of Created Value
There are multiple dimensions to the value an organization can create for its stakeholders:
Economic value through financial returns, job creation, tax contributions, etc.
Product value by designing offerings that genuinely improve customers' lives.
Social value via commitments to fairness, diversity & inclusion, environmental sustainability.
Developmental value for employees through meaningful work, learning & growth opportunities.
Community value through local partnerships, charitable programs, and advocacy on issues.
High-impact organizations intentionally craft strategies and measure success across all these value dimensions - not just the bottom line (Laszlo et al., 2014; Kiron et al., 2020). A balanced, stakeholder-focused approach to value creation is what will define leading organizations in the coming decades.
Operationalizing Value Creation
Crafting the Right Strategy
For an organization to truly maximize value creation, it must start by crafting the proper strategic foundation and priorities. Some keys include:
Aligning the vision, mission and goals around creating shared value, not just profits.
Conducting deep stakeholder analyses to understand needs, then build strategies to directly address them.
Embedding value creation metrics into planning, reporting and incentive structures.
Pursuing diversity in leadership, suppliers and markets to reach underserved groups.
For example, when Danone redesigned its strategy around nutrition, health and sustainability, it unlocked new growth while profoundly enhancing life quality worldwide (Laszlo & Brown, 2014). A purpose-driven strategy is the first step.
Ensuring the Right Culture
With the right strategy in place, the next priority is cultivating an internal culture where all employees are empowered and motivated to deliver superior value. Key elements include:
Fostering a shared sense of purpose and pride in positively impacting stakeholders.
Implementing practices like job crafting, learning agility and continual feedback that energize employees.
Building diversity, equity and inclusion into all talent processes and policies to spark creativity and engagement.
Encouraging innovation from all levels to continually expand the forms of value provided.
For instance, Adobe transformed its culture by putting "creativity for all" at the forefront, unlocking exponential growth while also enriching communities globally (Adobe, 2021). Culture is the ultimate driver of value-focused execution.
Measuring the Right Metrics
For an organization serious about value creation as its core agenda, it must move beyond traditional financial metrics alone and institute balanced scorecards encompassing both leading and lagging indicators across all stakeholder dimensions. Some examples include:
Customer loyalty, lifetime value, net promoter scores, and solved social issues.
Employee engagement, development, promotion and retention rates.
Diversity stats, community impact measures, and environmental footprint reductions.
Innovation metrics like patents obtained, products/services with societal benefits.
For instance, 3M measures not just profits but also items such as sustainability solutions commercialized and lives improved to truly understand its value impacts (3M, 2021). Holistic metrics are required to steer long-term value optimization.
Value Creation in Action
Danone - Pioneering Shared Value in Food
Danone is a global leader in operationalizing value creation. Embracing "One Person, One Voice, One Share" ownership structure ensures stakeholder well-being is prioritized. Its "Essential Dairy and Plant-Based" strategy generates billions in revenues while profoundly improving nutrition for millions worldwide.
Programs like partnerships with 50,000 smallholder farmers enhance rural livelihoods and food security. Employees are empowered through initiatives like "One Worker, One Vote" representation and on-site childcare. And partnerships with NGOs deliver sustainable water access programs.
Overall, Danone's strategy boosts five key impact areas - health, local communities, environment, economic opportunity, and governance quality (Danone, 2021). Its living proof that a fully balanced, stakeholder-driven model leads to sustained outperformance in all domains.
3M - Innovating Solutions for Global Challenges
Under its credo of solving problems and enriching lives, 3M has built a culture where employees are highly motivated to develop technology benefitting humanity across sectors like healthcare, transportation and consumer goods.
Programs like the $1 billion investment fund for sustainability solutions exemplify how 3M translates societal issues into commercial opportunities. Significant resources also support community engagement globally, like the 3Mgives employee volunteer platform.
As a result, 3M continually debuts innovations addressing massive problems like energy efficiency, clean water access and disease prevention - unlocking new markets while positively impacting billions. This stakeholder-centric innovation engine has fueled 3M's consistent growth for over a century (3M, 2021).
Adobe - A Digital Leader Uplifting Creative Communities
Adobe transformed from a software firm into a platform economy juggernaut by embedding a culture of democratizing creativity. It views empowering creativity worldwide as a human right and social good.
Strategic acquisitions like Mediabrowser expand accessibility. Projects like partnerships with NGOs provide access and learning to underprivileged youth. Significant philanthropy supports arts education. Employees donate thousands of creativity hours via programs like Adobe Science Day.
This stakeholder-centric strategy has unlocked exponential growth through new user segments and recurring subscription models. Simultaneously, it has elevated creative skills and expressions for communities globally (Adobe, 2021). Adobe is defining what holistic value creation looks like in technology.
Conclusion
The research and examples presented showcase how focusing strategy, culture and measurement around maximizing value creation across all stakeholders can be the surest path towards sustainability and leadership in today's dynamic business environments. Short-term profits alone can no longer be the sole priority - a broader agenda centered on shared prosperity is what will define the most meaningful and impactful organizations going forward. Leading with purpose and for people is the surest way to also lead in performance over the long run. Now more than ever before, value creation must be the new north star guiding change efforts at all organizations dedicated to both business and humanity.
References
Adobe, Inc. (2021). Creativity for all: 2020 citizenship report. https://www.adobe.com/content/dam/www/us/en/social/pdfs/adobe-corporate-citizenship-report-2020.pdf
3M Company. (2021). 2020 sustainability report. https://www.3m.com/3M/en_US/sustainability-report/assets/reports/3Msustainabilityreport.pdf
Danone. (2021). 2020 integrated annual report. https://www.danone.com/content/dam/danone-corp/danone-com/about-us-impact/publications/reports/annual-reports/2020/danone-integrated-annual-report-2020-en.pdf
Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & Colle, S. de. (2020). Stakeholder theory: The state of the art. Cambridge University Press.
Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine.
Kiron, D., Kruschwitz, N., Reeves, M., & Fuisz-Kehrbach, S. (2020). The corporate sustainability ratings jungle. MIT Sloan Management Review, 62(1), 1–7.
Laszlo, C., Laszlo, K.C. and Johnsen, C.S. (2009), Evolving Value Perspectives: A New Narrative for Business, Journal of Business Ethics, 87 (2009), S3-S4.
Laszlo, C., & Zhexembayeva, N. (2011). Embedded sustainability: The next big competitive advantage. Stanford University Press.
Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1), 62–77.
Additional Reading
Westover, J. H. (2024). Optimizing Organizations: Reinvention through People, Adapted Mindsets, and the Dynamics of Change. HCI Academic Press. doi.org/10.70175/hclpress.2024.3
Westover, J. H. (2024). Reinventing Leadership: People-Centered Strategies for Empowering Organizational Change. HCI Academic Press. doi.org/10.70175/hclpress.2024.4
Westover, J. H. (2024). Cultivating Engagement: Mastering Inclusive Leadership, Culture Change, and Data-Informed Decision Making. HCI Academic Press. doi.org/10.70175/hclpress.2024.5
Westover, J. H. (2024). Energizing Innovation: Inspiring Peak Performance through Talent, Culture, and Growth. HCI Academic Press. doi.org/10.70175/hclpress.2024.6
Westover, J. H. (2024). Championing Performance: Aligning Organizational and Employee Trust, Purpose, and Well-Being. HCI Academic Press. doi.org/10.70175/hclpress.2024.7
Citation: Westover, J. H. (2024). Workforce Evolution: Strategies for Adapting to Changing Human Capital Needs. HCI Academic Press. doi.org/10.70175/hclpress.2024.8
Westover, J. H. (2024). Navigating Change: Keys to Organizational Agility, Innovation, and Impact. HCI Academic Press. doi.org/10.70175/hclpress.2024.11
Westover, J. H. (2024). Inspiring Purpose: Leading People and Unlocking Human Capacity in the Workplace. HCI Academic Press. doi.org/10.70175/hclpress.2024.12
Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Chair/Professor, Organizational Leadership (UVU); OD Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.
Suggested Citation: Westover, J. H. (2024). Rethinking Success: A Stakeholder Approach to Maximize Long-Term Impact and Performance. Human Capital Leadership Review, 14(3). doi.org/10.70175/hclreview.2020.14.3.13
