Value is the intrinsic economic and intangible potential that resides within the inner recess of an institution, with a multiplier effect on outcomes. It is a reflection of the perceived and anticipated economic potential that an enterprise carries within itself as a result of proven performance and promise of excellence.
Value is the intangible asset as part of the institution brand equity that creates strong positive traction with stakeholders. It acts as the gravity pull that binds the stakeholder community through natural stickiness.
In business advantage terms, value reflects the choice exercised by clients, interest and commitment exhibited by employees, inspired inputs of partners, premium assigned by shareholders and invite to the high table by policy makers and regulators. Value represents that part of the cash flow cycle wherein it directly supports and impacts the quality of margins and therefore long term profitability of an enterprise.
At a fundamental level, Value Creation is the established bespoke approach or methodology that unlocks the true potential of an enterprise. True Potential of an enterprise are the undiscovered, intangible intellectual pools that offer untapped economic opportunities for exponential value creation.
Basic principles of Enduring Value Creation
Value Creation adds significant depth to the principles of Enduring Enterprise Architecture. For institutions to keep building value in a purposeful manner, it is imperative to have an institution design that creates, protects and maximises institutional value.
Leadership and institutions have had a long continuous struggle in setting their priorities right. There has been this perennial debate around the virtues of the long term orientation vis-à-vis short term dispensation. At a fundamental level, the difference lies between differed gratification and instant gratification – a syndrome that has come about to describe all major issues in our life.
There are significant differences between the principles of Value Creation and Valuation. While the former articulates the broad methodology and process that is leveraged to create enduring value, the latter is an indicator of a ‘point in time’ enterprise value. The objectives for looking at one principle vis-à-vis the other are completely different and need different calibration metrics.
At Institution Design group, it has been our constant endeavour to navigate the conversation from the immediacy of valuation models to the long term value creation principles. It is our considered worldview that leadership are better served when they retain extraordinary focus and discipline on the outcome measures rather than outputs which are subject to vagaries of several events.
Based on our extensive engagements, research and discussions across leadership levels and companies, we have been able to draw significant differences in the approach, objectives and principles that separate the two elements.