Strategic Planning-Foresight

Globalization’s Unintended Consequences for Americans

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global-sourcing-man-strategy

Even in fun, you should see the obvious.  Last fall, my wife and I went on a cruise to the Caribbean.  During this seven day adventure, we visited several countries that catered to our whims as Americans. 

Yet, the impacts of globalization were obvious on the cruise ship.  Both the passengers and the cruise staff appeared to operate within their own cultural preferences when not having to succumb to the dominant culture.  

There were several occasions where there was multiple languages being spoken in the same area which provided a different backdrop to me as an American.  We were all interconnected but yet apart. 

Global forces continue to change business operations and society as a whole.  The results of globalization mean that countries, businesses, and people become interdependent.  Organizations typically pass through four stages to international commerce: The domestic stage, the international stage, the multi-national stage, and the global stage. In search of more profitability, companies send many of their business functions abroad in an attempt to obtain cheaper resources (i.e. labor) for products or services.  

Should globalization change our thinking as Americans too? In the 1960s, the United States was a megastar internationally, accounting for 66.3% of worldwide foreign direct investments. As globalization began to open barriers to the free flow of commerce, non-U.S. firms sought to increase production activities to establish a presence in major foreign markets.  

Given these changes, things started happening.  In 2009, non-U.S. firms accounted for 14.1% of the stock foreign investments with the majority of these firms based in Hong Kong, South Korea, Singapore, Taiwan, India, and China.  Charles Hill, author of International Business, notes:  “The world may be moving toward a more global economic system, but globalization is not inevitable. Countries may pull back from their recent commitment to liberal economic ideology if their experiences do not match their expectations.”

 

Of course, globalization is not all good. America was once the center of all important business transactions internationally.  However, now there is an emergence of other key global partners.  Brazil, Russia, India, and China are becoming dominate providers of products and services abroad. 

With the threat of outsourcings, many Americans are worried about job opportunities.   Richard Daft, author of Management, further argued about the impacts of globalization: “For today’s managers, the whole world is a source of business threats and opportunities.” Should U.S. parents worry about their children’s future given the declining role of the United States in the global environment? 

Today’s American students are not doing better than their parents as it relates to education.  According to the Organization for Economic Cooperation and Development (OECD), the U.S. ranks fourth worst among 29 developed countries for children obtaining a higher level of education than their parents.  

Only 21.6% of those 25 to 34 years old achieved a higher level of education than their parents in the United States. That compares to an OECD average of 36.8%.  Consequently, current and future U.S. workers will be vulnerable to the consequences of globalization.  Unfortunately, many politicians, executives, and media pundits do not have a long-term perspective about the opportunities and threats related to globalization.  They should! 

Discuss the opportunities and threats associated with globalizations and how emerging leaders can compete.

© 2013 by Daryl D. Green

Guest Blogger – Jalene Nemec

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We face unprecedented economic times in a globalized marketplace where purchasing from places as far away as China are just a click away. As a direct result companies have had to review, refocus and revamp their business scope to compete and sustain their livelihood.

Some have opted to accomplish this by changing their product line, cutting costs, slashing prices, removing excess overhead and reducing pay. All these options can prove successful and have. But there is a better solution. Improve your customer service and earn loyal customers!

Customer service by definition is to provide assistance with courtesy those who patronize a business. [1] A company that provides great customer service over their competitors creates loyal customers who will patronize their business year over year.  

The direct result of this is increased profits. Customers become loyal when they know they can trust your company to take care of their needs, even their most frivolous complaints and to do it with kindnesses.

To illustrate this, John Goodman used a simple calculation for getting customers to complain and then satisfying them. The assumption in this example is that a customer is worth at least $30 in profit over a year’s time.

The cost of handling a complaint is about $5 and at least 75% of callers are satisfied. To quantify the payoff of soliciting and handling complaints, it’s critical to know the prevalence rate of non-complainants and their loyalty, as well as the loyalty of those who complain and are not satisfied. The calculation for moving a customer with a problem from non-complainant to satisfied complainant is provided.

Payoff due to improved loyalty – Typically, moving a customer with a problem from non-complainant to complainant to a satisfied caller raises loyalty by about 30%, meaning loyalty) x (.75 satisfied) x $30 value). After covering the $5 cost of handling the complaint, one is left with $1.75 in profit and/ or an ROI of 35% ($1.75/$5 cost to handle complaint).

Over time, marketing executives have awakened to the fact that between 20% and 70% of all new customers are won by personal referrals, positive word-of-mouth. Research has also consistently shown that personal service interactions have 20 times the positive impact as advertising in fostering word-of-mouth referrals.

Payoffs due to enhanced word-of-mouth referrals: if, conservatively, one out of ten satisfied customers produce a word-of-mouth referral and one new customer worth $30 is won for every 40 who hear good things, then satisfying 10 customers adds $30 in word-of-mouth benefits, or $3 for each customer satisfied. That adds an additional $3 payoff for each satisfied customer, raising the ROI to 95%. [2]

The concept of these figures is intriguing. However they cannot come to fruition by doing nothing. Companies must be actively engaged in the task of improving and providing superior customer service.

Through my research, I determined that there were five key characteristics that lead to great customer service and ultimately increased profits. Those characteristics include: Attitude, Awareness, Accountability, Action, and Affability. Together they are my “5A-Wheel.”

Change begins with the right attitude. Before a company can change their customer service, they must establish a mission to provide quality service. Furthermore, the company should be aware of the current state of the service they provide. Change cannot be made without understanding the situation at hand. A business may question, has there been a noticeable decline in sales? If so, could it be a result of the customer service? 

The best way to kick-start change is to hold employees and managers accountable. Without effectively maintaining accountability for everyone involved, people will not see a reason to change their behavior and the business will suffer.

Holding personnel accountable is the first part of taking action. Unless a company makes a conscious decision to actively improve, change will be temporary or non-existent.

The final characteristic is affability. It seems like a minor detail, but consider some of your past consumer experiences. There were probably a few instances where an employee helped you in an “I have to” way, and there were times where you were helped in an “I want to” way.

This is the difference between attitude and affability. An employee has the right attitude if he or she understands a need to help the customer, but wanting to help the customer provides the best possible experience for everyone. 

Using these five characteristics as a guideline will help companies succeed in their customer service department. As you begin your career or start up your own business, be better than your competition and provide the customer service of yesteryear that people value, a customer service that people are loyal to.

Please share your thoughts with this guest blogger.

ABOUT THE BLOGGER

 

Jalene Nemec, MBA,  is the author of the upcoming book, Great Customer Service. She is also one of the brightest business thinkers in the world, having both extensive customer service and leadership experience.  She is a former Lincoln Memorial University MBA graduate.

REFERENCES

Entrepreneur. http://www.entrepreneur.com/encyclopedia/printthis/82148.html. 2011. (accessed   16 March 2011).

Goodman, John. “Manage Complaints to Enhance Loyalty.” Quality Progress, (2006).

[1] Entrepreneur.com

[2] Manage Complaints to Enhance Loyalty by John Goodman

Disruptive Technology in Our Future

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In life, sometimes it is the simple things that count despite modern technology.  In the next few months, I will be able to see 3-4 of my books published.  Traditionally, it takes most large publishing houses 12-18 months before their books are published. 

As an independent publisher, I learned that the speed of products to the market place is a good way to beat a large competitor.  In fact, my success relates to a simple website called Elance.com, a freelance website that allow customers to solicit work from a variety of outsourcing services which include programmers, designers, office support, translators, marketers, researchers and many other disciplines. 

Elance.com allows a business to post a job opening and invites freelance workers who believe they have the requisite skills for the job to make a bid. The company charges a $10 fee to each business to post a job and also takes a small portion of what gets paid to contractors. 

 Through this website, I have found some of the most talented individuals from across the world. For these services, it is a buyer’s market.  Some people would argue that it is all about buying cheap labor for profitability.  

In this scenario, developed countries appear to be exploiting underdeveloped countries.  This is not always true.  I have paid more in the past for the best talent.  With that said, potential employers see a website that attracts over 500,000 talented freelancers.  For the freelancer, there is an opportunity to bid on 48,000 jobs, worth $480K. Therefore, a differentiate strategy can defeat a low cost  strategy on a global playing field.  

Technology must be a management tool that is used strategically.  Clayton Christensen, author of The Innovator’s Dilemma, provides a framework for understanding the interrelationship between technology changes and a business success. Christensen demonstrates how successful companies have been overtaken by small disruptive technologies. 

The cell phone, undermining the profitability of the established communication networks such as AT&T, further showcases the impacts of disruptive technology.  Sadly, more executives are unwilling to think strategically due to the wrath of their investors and financial pundits.  

For example, Amazon’s revenue grew in 2012 but the details were lacking.  Amazon.com’s revenue rose to 17.4 billion (35% increase) in the fourth quarter.  However, it fell short of Wall Street predictions. 

According to VentureBeat, Amazon sold as many as 6 million Kindle Fires and its older tablet prototype . Given this reality, the Fire would move ahead of Android tablets from Sansung and Motorola, making it only second to Apple’s iPad. Analysts were concerned that the $199 Fire would make a profit.  Additionally, Amazon.com is spending capital on clouding technology.  

Maximizing profits on Fire as an industry leading tablet is a near- term strategy. However, CEO Jeff Bezos appears to have disappointed Wall Street with a long-term perspective instead of sacrificing shareholders with profits in the near term. 

Innovators take note of disruptive change as positive turbulence in the market.  John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, explain, “Understanding the nature of competitively important resources allows managers to identify resources or capabilities that should be further developed to play an important role in the company’s future strategies.” Therefore, organizations which do not understand the importance of making sustainable growth by being more efficient will not be successful over the long-term. 

 Discuss your professional and personal experiences with disruptive technology.

© 2012 by Daryl D. Green                                                       

 

Guest Blogger – Serendipity

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Horace Walpole coined the word serendipity in 1754 after reading the Three Princes of Serendip. The princes “were always making discoveries, by accident and sagacity, of things they were not in quest of.” Today, we have tools at our disposal that allow us to manage serendipity or, at least, place ourselves strategically so that serendipity is possible.

 

What is serendipity? The traditionally accepted definition of serendipity is “the occurrence and development of events by chance in a happy or beneficial way.” Well then, if events are by chance, how is it possible to place ourselves in a position in which serendipity is likely?

 

In their book, The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion, Hagel, Brown, and Davison relate the value of social networking. They specifically mention Facebook, LinkedIn, and Twitter as points of connection to friends and friends of friends. Through these connections we discover others’ have and can share tacit knowledge that we may benefit from.

Through the same connection, others can grow from connecting with us gaining our tacit knowledge. It not a contest to see how many friends we have in our network, rather it is about how we manage our network of friends.

 

Imagine a chance reading of friends’ Facebook wall posts that result in an opportunity to connect with another with whom we share an interest. In this situation, we’ve experienced a “chance event in a happy and beneficial way.” What is the likelihood of this event happening had we not had a Facebook profile, not been linked to our friend, and not been able to read that wall post?

 

Serendipity allows chance meetings for planting seeds of learning and growing if we manage opportunities for chance meetings. Wisdom of the East tells the story of a man, “I have nothing to teach and so much to learn.” In reply, “Oh dear! Haven’t we all something to teach and something to learn?”

 

We are not Princes of Serendip making discoveries by accident. We can create opportunities for serendipitous events to evolve. Do not wait for opportunities to come, seek them, manage them, and benefit from them. Grow in learning; grow in teaching.

Please share your comments on this topic.  

ABOUT THE BLOGGER

 

Dr. Paul Hoffman holds a Doctor of Strategic Leadership from Regent University, a Master of Arts in Leadership and Bachelor of Science in Organizational Communication from Bellevue University. Doctor Hoffman is an adjunct professor at Bellevue University and Metropolitan Community College in Communications Arts, English, and Communication and Humanities.

Before his teaching role, Dr. Hoffman was a graduate enrollment counselor at Bellevue University and enrollment representative to the University’s Quality Council. Dr. Hoffman came to the academic arena after ten years in retail management. During this period he managed in speciality mall stores, and multimillion dollar warehouse style stores. Dr. Hoffman owned a small business and was an insurance agent for a fraternal insurance provider.

 

Dr. Hoffman was a U.S. Air Force active duty noncommissioned officer retiring in 1990 as a Master Sergeant. During over 21 years of active duty, Dr. Hoffman was a Security Police sentry assigned to guard aircraft, missiles, and nuclear weapons on alert and in storage. For three years he held the speciality of Military Training Instructor while supervising an installation correctional custody facility. In the concluding seven-plus years, Dr. Hoffman worked as an installation human relations and equal opportunity treatment NCO and finally as Superintendent of Social Actions overseeing both human relations and substance abuse prevention activities for an installation.

 

Military assignments saw Dr. Hoffman stationed at major Air Force Bases of the Strategic Air Command, U.S. Air Force Europe, and Pacific Air Force. During the Vietnam era, Dr. Hoffman had one assignment in support of major air operations over Vietnam. Dr. Hoffman is married to Su Yun and they have two adult children. Son, Leslie Donald, is the oldest formerly a Captain in the U.S. Marine Corps. Les has two combat tours in Iraq. Daughter, Theresa Ann, was a member of the U.S. Peace Corps serving on the island of Carricaou, the Grenades; her Peace Corps specialty was Community Health focusing on AIDS awareness and prevention and presently studying to become a physical therapy assistant.

 

Launching Ahead toward an Unknown Future

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When I was a Regent University doctorate student, I often wrote my assignments toward publication.  As I took my courses, I always tried to write on similar themes to reduce my research time and make me more efficient.  I would look at the environment thinking what topics would be growing issues. Yet, many of my peers were only looking at the near term (getting a passing grade to move on). 

 

 One article, “The Evolution of Leadership,” produced unintended consequences.  While in graduate school, I had this article published and forgot about it.  One day a tutor in the university’s writing center mentioned she recognized my name. The tutor stated that students were quoting me in their academic papers. Once we graduated, many of my classmates did not want to revisit past assignments for publication. 

 

I soon learned the consequences of looking ahead.  With over 6,000 views and picked up by more than 30 websites and publishers, my article, ‘The Evolution of Leadership, is now being used as a reference globally. That is the power of looking beyond the current situation.

 

With the economic crisis, many people have lost their courage and do not want to seek opportunities in emerging markets or new ventures.  Countries near and abroad are having financial problems.  Europe needs to double the size of its bailout to $1.3 trillion to shore up its banking system and stop the spread of its debt.  Americans watch their earnings decline as the cost of food and gas spirals upward. 

 

 Some people look to the government for help while other individuals leverage the goodwill of businesses to provide trickle down offerings from capitalism.  According to the Economic Policy Institute, 1.8 million of the United States 73 million hourly workers earned the financial wage in 2010; many workers are in the retail, restaurant, and hospital sectors.

 

Taking with a visionary stance to look beyond today’s pressing issues is a utilized by highly successful people.  Noted trend watcher Henrik Vejlgaard argues that it is possible for individuals to spot emerging trends and take advantage of them.

Vejlgaard explains, “Although the world is changing all the time and this flux may eventually affect the patterns behind the trend process, these patterns are deeply rooted in human behavior….By investigating the people who have started trends in the past, where trends frequently start, how trends emerge and grown, and why trends happen, we can define some rules for spotting trends.

 

Failure is always a possibility of leaping while others stay on the shore.  However, the biggest risk is doing nothing.  Charles Schwab, author of New Guide to Financial Independence, understands how to take risk in unchartered waters.  He started investing in 1957, and he became a pioneer in the discount brokerage business in 1974. 

 

He notes, “I’ve heard it said that people are motivated by hope of reward or fear of punishment….Truth be told, we’re all investors.  Each day we invest time and energy and intelligence in our children and our work. Investing for our future is just another aspect of it, but a critical one.” Therefore, any success should be couched with some common sense and calculated risks.

 

Discuss an emerging trend and how you or your organization can capitalize on this trend. 

 

© 2012 by Daryl D. Green                                    

 

 

 

 

 

 

 

Globalization Upon Us

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American children sing “We are the world,” but the world does not listen. Children in Iran burn American flags. Children in Iraq throw stones at American soldiers. Children in China write hateful essays about the “evil” American ways. American politicians attempt to spin how third world countries embrace Western ways while the terrorist alert is heightened to acknowledge another international threat. Increased globalization has elevated the risk at the domestic and international levels for US government military and civilian personnel.

According to the Forrester Research, approximately 3.3 million U.S. jobs and $136 billion in wages could be moved overseas to countries like India and China by 2015. Therefore, many organizations will need to change their strategies in order to meet the international challenges ahead.

Let’s look into the future. Many developing countries will continue to grow strongly over the next decade. In fact, these countries steadily shift to consumer-led growth instead of export-led growth.  The dollar spirals downward and foreign currency goes upward.  China and India have added millions to their labor force creating products as well as outsourcing their services abroad at a fraction of what American workers can provide. 

These upstart countries are positioning themselves to become the next Super Power.  For example, China passed Japan as the world’s second-largest economy. According to the World Bank estimates, China could surpass the US by 2020. China’s gross domestic product (GDP) spreads across 1.3 billion people ($3,600 per person) while the US GDP covers a smaller population ($42,000 per person). Yet, China will continue to fuel the world’s economy due to its thirst for raw materials and products in order to meet its own demand.

Globalization continues to transform our organizations.  Today, many American businesses have a global focus.  The S&P 500 companies now generate 46% of their profits outside the US. In fact, some of the largest companies are higher.  For example, Coca-Cola has become a very successful brand abroad, with operations in 206 countries.  Over 80% of the company’s revenue comes from abroad.  Coca-Cola CEO Muhtar Kent explains, “We are a global company that happens to be headquartered in Atlanta. 

Do the math!  American businesses are headed offshore for increased profitability.  Companies gain from this foreign exodus the benefits of accessing more lucrative markets, new technologies, easy credit, and quality, cheap labor. When American businesses cut jobs, it has impacted the standard of living for today’s families.

Columnist Fareed Zakaria highlights the dilemma: “Capital and technology are mobile; labor isn’t….And this is a country with one of the highest wages in the world, because it is one of the richest countries in the world. That makes it difficult for the American middle-class worker to benefit from technology and global growth in the same way that countries do.” 

Economist pundits and political opportunists paint globalization as the best thing since sliced bread yet hide the realities of global competition from the general public. The forecasted outlook for the full-time worker is bleak. Clearly, technology and outsourcing are making the contingent (temporary) and other forms of flexible labor (independent contractors, on-call workers, temporary help agency, part-time, and contract workers) a reality for future employment opportunities.

As a matter of fact, Charles Handy theorized that unemployed or spare workers would create their own new work in the future. Business executives express little moral remorse as they keep American workers at bay.  Therefore, a different type of U.S. business model will need to be developed for global competition in the near future.

How do US organizations compete globally with the realities of outsourcing and create an American labor force that is clearly energized and motivated in the process?  What will happen to the quality of life for the middle class as global averages impact American wages?

 © 2011 by Daryl D. Green

 

The Baby Boomer Bow

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The clock keeps on ticking as many Baby Boomers consider retirement.  If many retire, it will leave a huge void in leadership for most organizations. With the rocky rollercoaster ride of the stock market, Baby Boomers don’t enjoy life as much because of the decrease in their disposable income. Some individuals have the extra burden of caring for parents, children, and even grandparents.  

These realities of life keep Baby Boomers working well beyond their anticipated retirement. Andy Hines, the director of Customer Projects at the Social Technologies, predicts that Baby Boomers will refine the meaning of retirement and notes, “U.S. Baby Boomers are choosing post-work lifestyles that don’t resemble the stereotype of the quaint, restful senior citizen.” In fact, Baby Boomers are the top leaders of most organizations and will find it difficult to separate themselves from their positions of power and influence.

Other observers believe that Baby Boomers will leave graciously and pass the baton to the next generation of leaders. I have my own doubts about the outcome. Columnist Daniel Kadlec wrote a USA Today article, “‘Me Generation’” becomes ‘We Generation,’” about the virtue of this Baby Boomer transformation. A Department of Labor report, “Futurework: Trends and Challenges for the Work in the 21st Century,” reveals that this rapid demographic shift will impact the future dynamics of organizations.

 Yet, many seasoned experts, who are primarily Baby Boomers, downplay the impact of the younger generation. This observation goes to the heart of the “Me Generation.” Based on my past career experience, many of these individuals will struggle to relinquish power and influence over their organizations. Therefore, we must wait to see if this generation follows through on these claims.

Are Baby Boomers now transformed into “We Generation” leaders? Clearly, the storyline is incomplete because we do not understand how Baby Boomers will respond to these future changes. Unlike hard science, futurism provides a window of many possibilities. Some people paint a smooth transition of power for the Baby Boomer generation. Others don’t! What if Baby Boom managers refuse to relinquish their positions and neglect the development of future leaders?  Therefore,  many different scenarios will continue to play out in various settings and industries.

 

Will organizations be able to cope with a massive exodus of Baby Boomers? Can Baby Boomers leave authority and title behind since these things so easily defined many of them?

 © 2011 by Daryl D. Green

Impending Danger

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The start of a new year brings new hopes and aspirations. Sadly, it could signal another year of the same mindset.  With a new U.S. Congress in place, many taxpayers see the same old partisan politics. Yet, the serious conditions of our nations require shared vision and cooperation.  Our nation reached a notorious milestone with the government debt at all-time high of $14 trillion. 

If a visitor from outer space came to America, the alien would probably discern that most citizens believe that the US government system is ineffective, the employees incompetent, and the system broken. Clearly, our federal government possesses significant structural weaknesses and problems. However, the federal government workforce is highly competent and talented. Yet, my experience demonstrates that the dearth of good leadership is the biggest problem in the federal government.

I should know much about this situation. I have worked in the federal government over 20 years.  In fact, I have conducted extensive research on organizational effectiveness in the public sector.  Dr. Gary Roberts (Interim Dean of the School of Government) and I have spent several years on the issues facing the government sector. Some of this research was captured in our new book, Impending Danger.  The book analyzes the current problems in the federal system and explains why a new paradigm, in leadership and structure, is necessary.

With growing discontent with government officials and the intrusion of big government into personal affairs, Americans are demanding something different. Therefore, government leaders must recognize that many Americans are unsatisfied with the status quo. This outright anger and outrage speaks to individuals not getting their voices heard by political leaders. This revelation may signal a significant flaw in elected and appointed federal leadership.

What market drivers will change how the federal government operates and how do you infuse a different type of leadership beyond partisan politics?

© 2011 by Daryl D. Green

 

Sustainability for the Future

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Do we really want to pry into the future? Some people do not want to consider it.  In the 1970s, Alvin Toffler, author of Future Shock, wrote, “Citizens of the world’s richest and most technological advanced nations, many of them will find it increasingly painful to keep up with the incessant demand for change that characterizes our time. For them, the future will have arrived too soon.”

Clearly, the future is a highway with varying lanes, but do humans have the capacity to accept unhappy endings? In general, it is my position that humans are incapable of accepting unhappy endings. In fact, futurist Edward Cornish argues that it is easier for people to sustain a long-term perspective when they have a clear vision.  In this discussion, we will look at how organizations can create sustainable existence in the future.

Futurists utilize many techniques to anticipate the future. For example, strategic foresight can provide an avenue where organizations can strategically analyze short, mid-range, and long-term planning. Thus, it’s a glance into the future. This concept is easily seen on the Big Screen.

 

Hollywood blockbusters are the chronology of happy endings. People want to believe that all stories have positive endings. This concept is derived from childlike innocence of Americans. Unfortunately, the future may include unpleasant outcomes. Life doesn’t always provide a nice story. For example, globalization can provide many job opportunities, but the outcome isn’t always positive. In fact, the future prediction for the full-time worker is bleak. It is evident that technology and outsourcing are now making the part-time worker a reality of today, not tomorrow.

In fact, Charles Handy theorized that unemployed or spare workers will create their own new work in the future. Therefore, individuals will control their own destiny and become entrepreneurs. However, this runs counter to our American culture. Grandma taught us “go work for a good company and get a good job with benefits.” 

In fact, Bruce Sterling, author of Tomorrow Now, further argues that simple, predictable, and solvable jobs will go to the poorly educated and unprepared or to intelligent machines. However, high-paying jobs will go to the highly prepared, teachable, and creative individuals. In the future, good jobs will be the apex of human difficulty. Technology and understanding of complex systems will require a well-grounded person. However, futurist James Canton argues that American youth, our future workers, will be unprepared in math/science and may be locked out of future opportunities.

Based on many observations, organizations and individuals don’t want to hear negative scenarios for future generations. This reality reaffirms that people don’t want to think negatively about their future. Therefore, they often operate in denial or ignore the future.

Clearly, organizational leaders need to develop a strategy to deal with negative consequences. Many people don’t have the patience to look beyond short-term gains. Therefore, effective leaders need to know how to deal with the possibilities of negative futures.

How do organizations effectively navigate their operations for sustainability in the future?

© 2010 by Daryl D. Green 

The Value Creation Machine

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On Tuesday (November 4, 2010), political chatter was all the rage as Republicans gained control over the House, sending a clear message to President Obama that the political landscape had shifted.  The Democrats now occupy the US Presidency and Senate while the Republicans dominate the House of Republications. 

Most experts wonder if Congress will ever get anything done.  As a result of not passing a budget bill in 1995, the federal government was shutdown.  With President Bill Clinton and Speaker Newt Gingrich at the helm, the shutdown was fueled by political fighting.  Sadly, many people look to the government for all of the answers when their own ingenuity would work. 

Yes, the government has an important role to play. I don’t believe that market forces are always the answer to societal problems…the market is not driven by morals or ethics.  In fact, find a cheap labor force across the globe and some businesses will abandon their own creed of “America First.” 

Individuals need to take control of their lives by developing strategies to produce results.  If we are to equip people for the future as scholars, we need to make sure they understand that the future will belong to the aggressor, not the passive in the new economy. During this discussion, we will explore how companies develop value for their customers and how it contributes toward wealth building.

 In uncertain times, it’s virtually impossible to navigate the market without fully engaging customers.  Any operations that fail that economic maxim of the 21st century will fail. Management guru Brian Tracy argues that the duty of businesses is to create and keep customers: “The two most important words to keep in mind in developing a successful customer base are positioning and differentiation.”

Of course, it was possible several decades ago to create products and services without knowing the customer and later convince them to buy.  Many companies during the Industrial Revolution built their success due to scarcity of commodity, limited competition, and uneducated buyers. This is not the case today.

Today’s operations must be value conscious as it relates to the market. Alvin Toffler and Heidi Toffler, authors of Revolutionary Wealth,  research how tomorrow’s wealth will be created, and who will get it and the wealth method. Customer value is defined as the ‘difference between what a customer gets from a product, and what he or she has to give in order to get it.’  They argue, “Today’s wealth revolution will unlock countless opportunities and new life trajectories, not only for creative business entrepreneurs but for social, cultural and educational entrepreneurs as well.”

Daniel Spulber, author of Economics and Management of Competitive Strategy, further suggests that value creation is strategic:  “Managers must pay close attention to value creation because it is the source of the company’s potential profits. The company generates value by providing products to customers, which it produces both by purchasing inputs from suppliers and supplying some of its own.” 

Spulber further outlines a value-driven strategy in three ways:  (a) to attract customers away from competitors, the company must provide sufficient customer value as compared to rival companies, (b) to attract key suppliers away from competitors, the company must offer sufficient supplier value, and (c) to attract investment capital in competition with other market investment opportunities, the company must increase the value of the firm for its investors.

Therefore, effectively managing the attribute of value creation will provide businesses with a competitive advantage.

Briefly explain how value creation has shifted from the Industrial Revolution to the Knowledge Economy and what attributes will be associated with wealth creation in the distant future?

© 2010 by Daryl D. Green