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For over five years, I have been talking about the potential for organisations to create value everyday using collaboration. Through the Value Maturity Model, and its application in the Collaboration Value Canvas, I have discussed repeatedly the importance of an understanding of value to users and to the organisation.
Until now, I have left the definition of value entirely to the imaginations of readers. One reason for resisting defining value was to avoid an immediate reduction of value to an ROI calculation, which is both notoriously ambiguous and beside the point. The role of value in this discussion is not to justify investment accounting. The role of value is to shape the adoption actions, the use cases and the norms of the community that an organisation is seeking to create. The second reason for my reluctance is that value means something different to almost every organisation at every time. How an organisation and its people need to create additional value is highly dependent on their context.
In this post, I want to share my key drivers of value creation, which I find useful tools for anyone seeking to guide collaboration adoption in a wide range of contexts. Ability to leverage the drivers of collaboration will help you to identify the opportunities for value creation from collaboration, shape use cases and communicate to individual users about value in a simple way. To explain the path to these drivers, we must talk about what value and break it down to everyday topics of business conversation.
Understanding What We Mean by Value
Value is in economics is a measure of the benefit to be gained from any activity. Vibrant and sustainable organisations create a surplus of value, using their resources in a strategic way to create more benefits than the value of their intial resources. Value add is the difference between the benefits generated and the resources consumed. The goal of most strategy is to sustain and increase the value added by an organisation.
At an individual level employees also want to experience purpose and meaning in their work. They want to deliver greater benefits to themselves and others than simply the time value of their work.
Value can be monetary but it can also come in wider non-economic forms. Therefore as we think about value for individuals and organisations we need to keep in mind:
- Economic value add – the dollars and cents; and
- Non-Economic Value – any other meaningful sources of value (i.e. meaningful in the eye of the beholder)
If we break down how both economic value add is created and non-economic value we will find some common drivers. If you are short of time or not interested in the background to my approach, you can skip to the answer in the section entitled Four Drivers of Value Creation below.
Economic Value Added
Economic value add can be defined for an organisation as the excess of the net operating profit after tax of an organisation over its cost of capital. An organisation deploys financial capital in its operating activities, that capital has a cost and the activities need to generate more operating profit to be sustaining.
A value driver tree enables us to break these concepts down to more everyday topics of business strategy, activity and conversation in green in the table below. Sales, Cost of Sales, Other Organisational Costs, investment in assets and working capital are key elements of how much economic value added a business creates. If the adoption activities in your organisation are not changing these sources of value in some way, then they are unlikely to be creating economic value, especially after the cost of adoption is taken into account.
Non Economic Value
We can similarly breakdown some major categories of non-economic value, such as Social, Environmental, Governance and Generational value considerations. Because non-economic value is ‘in the eye of the beholder’ to some extent, this list is inevitably a partial one. There are likely more categories that are omitted, such is the richness of human life as expressed by individuals in organisational communities.
Economists will argue that some or all of these can be captured in or flow through to economic value, but the average person sees many of these sources of value as richer for lacking a direct monetary equation. Many of the sources of value in green are key elements of creating an organisation or living a life that is rich in human potential.
The green categories of non-economic value listed below are those most commonly discussed in any project of adoption of collaboration. These may be the starting points for any project. Non-economic value add is usually critical in the ultimate user and organisation success of any collaboration project. There is however a danger if this value is defined only in terms of these Capitalised nouns and they are not translated into specific measures of success and intiatives that users and the organisation can embrace. Projects that set out after the mystery of ‘Culture’ or ‘Engagement’ without further support or without considering other categories of value, especially economic value, will likely fail because users rightly question their point.
The Four Sources of Collaboration Value
At the beginning of my career in financial services we had a simple mental model, derived from the Cohen Brown Sales framework, of how we delivered value to customers from the vast array of products and services that a large diversified financial services organisation offered in banking and wealth management. That model was “Save Money, Make Money, Save Time or Protect Money”. Reducing the complexity to these four options guided bankers and other advisors through a great deal of complexity.
As similar guiding structure can be used for value creation generally. When we look at how collaboration can deliver value to each of the green elements of value in both economic and non-economic value we find that value is created by four key drivers. In simplest terms those drivers are:
- More: Growth – how can we have a bigger impact? how can we help more people? Many organisations want to grow in customer relationships, in scale of operations or in other ways.
- Better: Effectiveness – how can we ensure we do the most we can do? how do we do more of the right things? The literature of Lean has enriched our understanding of the value of effectiveness in economic value but effectiveness is also a concept that works for non-economic values too.
- Faster: Velocity – how can we take less time to do our work and to get to our goals? Time is a valuable and expiring resource. Let’s use it as well as we can and remove the traditional work frustrations of delay and waiting.
- Safer: Protect – how can we avoid risks and better manage consequences? Risk is a part of any life or organisation. We can however improve our management of risk.
As you can see in the tables above, I have highlighted in amber, how each of these drivers commonly creates value for the elements of value in driver. For example costs and working capital can create value if they are used more effectively or with greater velocity.
Here’s a little more detail on what these drivers each mean in organisational terms:
One of the advantages of framing adoption conversations in these terms, is that it helps make the value of activities clear to users and senior leaders in simple terms. The key benefits that they are likely to see are:
- Individual and Organisational Growth
- Increased Individual and Organisational Effectiveness
- Improved Velocity in activity, opportunity and leverage of potential, both in an employee and organisational view
- An environment where individuals and the organisation have better Protection against risks
We Create Value Because We Are Human
If we are to make work more human and more rewarding through shared leverage of human potential in collaboration, then these key drivers should guide our projects and guide our value conversations with stakeholders. We should set our metrics and our use cases around these drivers so that we have the widest impact on value creation. If we need to increase value creation we can come back to these drivers to search for a way forward for users and the organisation.
Every organisation and every user needs to define the value of collaboration to see effective adoption. Understanding value is critical for anyone seeking to accelerate adoption of collaboration in organisations. The four drivers of value can help us to keep conversations and the actions focused on how collaboration can have its greatest impact on value.
Appendix: Recapping All Value Creation Together
When an entrepreneur dreams up a new product opportunity and launches their start-up, they are surrounded with advice on the steps to follow:
- Define the customer problem or job to be done
- Develop a minimum viable product as a solution
- Prove product-market fit by winning customer support
- Validate scalability, unit economics, etc…
While these steps are relevant and useful, they can create an unduly linear view of the path to success.
Success is never a simple straight line.
Discussing start-up and new product success in this way creates the impression that the path to market looks a little like this:
A relatively direct relationship between product and market might work for some simple product solutions, particularly those involved in offering a new product direct to consumers. However, lean start-up has reminded us that success takes loops of learning and iteration to find that match between product and market.
Help customers embrace change (despite resistance).
When you start to work on more complex solutions that involve systemic change or large changes in buyer behaviour, buyers can acknowledge the need and the value of the solution but still offer resistance. These buyers cannot simply buy the product. They must also decide to embrace disruptive change to long established ways of working. Disruptive business-to-business products require changes to systems, processes or jobs and have other implications for their target customers. Strong institutional forces will exist that are opposed to change. To realise the benefits, the customer needs to be prepared for a wider and more significant change.
Declining systems give way to new ways of working.
The Berkana Institute has a theory of change in large scale systems highlighting resistance will prevent straight-line adoption of new change. If the change threatens the current way things work, you won’t get direct adoption. Change under this approach may happen when the current system declines, giving way to a better system that will replace it. That new, better system is developed outside the current system as a small group of innovators name the need for change, connect in networks, nourish the new change and bring it forward as a new approach.
Disruption brings change and creates new markets.
The Berkana Two Loops model of change gives us a new way to look at the path for disruptive products that bring about major changes in organisational systems. If we consider the introduction of cloud computing technologies as the introduction of an alternative systemic approach to technology, we can map it against this model.
- At first, traditional technology organisations saw cloud services as a threat to their traditional model and particularly the end-to-end control of infrastructure.
- Cloud services grew with new and innovative organisations, in grey market IT and at the edges of organisations. This gave the new cloud services time to clarify the problems and use cases, develop the new approaches and connect the first customers. The communities of early customers helped the solutions to mature and foster the underpinning systems of delivery, management and support. Communities of practice grew up around these technologies and created a range of tools and processes that helped cloud computing become enterprise-ready.
- Eventually, a wide range of organisations are prepared to ‘leap the chasm’, seeing potential to migrate to these new cloud systems and embrace a very different way of working.
This approach of creating a new market for a new solution is why we commonly see disruptive technologies suddenly race into prominence. They have been long fostered by the communities of early innovators and have built the networks of partners, ecosystems and systems to propel rapid growth. They are examples of ‘seven-year overnight successes’.
Build a strong ‘ecosystem of relationships’ to bring about change.
At LanternPay, we have seen this scenario playing out. We have had strong support from our work with innovative early customers in plan management in the NDIS and in government payments with the Transport Accident Commission of Victoria and Lifetime Support Authority of South Australia. These relationships have helped us to develop strong growth in provider partnerships. Importantly, we have focused all along on the potential of an ecosystem of relationships to accelerate innovative change well beyond payments in our target systems of health care, aged care and disability. This approach has delivered us a rapidly growing pipeline of new payer relationships, a growing suite of integrations and a product roadmap across all our target markets. Each element helps make the change decision for a provider or a payer that much easier to make.
Simon Terry is consultant, speaker and start-up advisor who focuses on developing the strategy, leadership and collaboration to deliver complex innovation in organisations. He also puts these skills into practice delivering growth strategy for LanternPay, a claim payment platform for health care, aged care, disability and government payments.
As the end of November approaches, that time has come again when we must consider whether we have the right initiatives in place for ourselves and our organisations as we get ready for 2017. How are you transforming the capabilities and work practices in your organisation to make sure that your teams are more effective in their work?
Why is Work Changing?
The way we work is fundamentally changing under the influence of five main drivers:
- Pervasive Global connection: As internet connectivity has gone mobile, we now have the ability to connect with, to converse with and to see the whole system of our stakeholders any time anywhere.
- Automation: Digital technology has enabled us to automate simple tasks and string together increasingly complex processes and systems.
- Data and Analytics: As digital connection and digital automation expands so does our ability to gather data and analyse that data to provide insight and run complex algorithmic processes.
- Changing Consumer Expectations: As consumers are exposed to the potential of digital through consumer technology and consumer services, the businesses must meet disruptive and exacting standards for convenience, service, value and speed.
- Accelerating Pace of Change: Disruption, greater responsiveness to change and ever-shortening cycles of feedback are the new norm for business and our work practices must adapt to enable our businesses to keep up.
We have already seen great change in digital transformation.
Further dramatic changes in the nature of work are here but ‘not yet widely distributed’ to borrow the phrase of William Gibson..
2017 Future of Work Recommendations
With these pressures on the way we work, every business should have a focus on how it is changing the way its people work and the practices that will support ongoing transformation of work. Here are my recommendations on what work you should have on your backlog for the new year:
These five are in place in your organisation today. However, they may not be well understood, managed or serving your purpose. As you look to 2017 it is always worthwhile to ensure that the foundations are sound and well aligned.
Purpose: Be clear on your personal purpose. Look for that purpose in the work you do. Clarify the shared purpose in your organisation. Don’t impose a purpose designed around the leadership table. Discover the purpose through the stories and the work that bring your organisation together.
Strategic Value: What value are you trying to create to fulfil your purpose? What kinds of value matter most to your stakeholders? When do they know you are creating value? What measures tell you that you are achieving your goals?
Networks: To compete in the network era, your organisation must be networked. How are you bringing people together to connect, to share, to solve problems and to respond to the networks around your organisation? The technology matters less than the connection, the behaviours and the shared purpose. Are you clear on the strategic value of your communities, are they well supported with sponsorship, investment and community management so as to accelerate their value creation?
Culture: Move beyond words on a poster. Move beyond generic platitudes. Move beyond an agglomeration of individual team cultures. What specific values are shared across your organisation? Why do these help fulfil your purpose? How do those values translate to expectations about behaviours in and across your teams? Is the culture in your organisation effective for your purpose and the value you are seeking to create? How do you personal role model the behaviours you expect from others?
Employee Experience: Are you working somewhere that values the employee experience and is adapting it to changing work and changing roles in the organisation? How have you aligned your employee experience to your desired customer experience? Does your workplace create rich value for employees and enable them to express their potential in fulfilment of purpose? Does your employee experience work as well for the one-hour temporary contract worker as the long term employee? Does it work equally well for all levels of the hierarchy and all corners of your network?
Personal Effectiveness: Four Key Future of Work Practices
These four personal practices are enablers of the future of work. They enable an individual employee to deliver greater value in their work by responding to the opportunities and information in their environment. Agile and adaptive they empower employees to continuously improve and innovate.
Working Out Loud: Sharing work in progress in a purposeful way with relevant communities will accelerate learning, sharing and feedback cycles. Start working out loud now.
Personal Knowledge Management: Learn how to turn the personal information flood into effective sense making, learning and sharing. A critical skill to make sense of complexity and to leverage networks for learning.
Adaptive Leadership: Enabling the rebel and the change agent to lead more effectively in any system. Improving understanding, influence and the increasing the breadth of leadership techniques to create collective change in any system.
Experimentation: Move beyond the limits of your expertise. Learn by doing. Resolve uncertainty through action. Shorten cycles of decision making and feedback to increase personal effectiveness.
Organisational Effectiveness: Scaling & Accelerating Change
Organisations are made up individuals. These four practices of organisational effectiveness scale and accelerate the personal practices through a focus on design of systems for connection, learning and adaptation.
Open Collaborative Management: Middle managers are often those who find a change to digital ways of working most threatening and disrupting. Open up the work of management. Move management from planning, allocation and control to facilitation, alignment and coaching. Shorten cycles and improve the performance value of feedback. Foster the role of managers as network navigators and brokers. Management can be a critical point of leverage in achieving more open, more collaborative and more effective work.
Scalable Capability Development: Turn each employee’s learning into a contribution to scalable system for delivering strategic value. Create Big Learning systems that scale learning around strategic capabilities for the organisation’s success. Coordinate your learning agenda as an agile change program. Curate the capability building of your teams, leveraging learning from peer communities and leverage social learning to bring 70:20:10 and a performance-oriented approach to learning to life at scale and in the workplace.
Effective Networked Organisations: Take advantage of the networks in and around your organisation to rethink your business model and organisational design choices. Break the centralised/decentralised binary and move beyond hierarchy. Enable autonomy, foster alignment and improve effectiveness for purpose. Skill your teams to achieve effectiveness in the wirearchy. You don’t need to purchase a new management system. You need to adapt your approach to managing knowledge, trust, credibility and results to your purpose, culture and community.
Agile Innovation & Change: Adapt to the changing needs of the environment and stakeholders to deliver new value. Accelerate innovation and change through new approaches and by putting in place the systemic support for employee-led innovation, change and transformation to a more responsive organisation.
Simon Terry provides consulting, advice, speaking and thought leadership to global clients through his own consulting practice, and as a Charter Member of Change Agents Worldwide, a network of progressive and passionate professionals, specializing in Future of Work technologies and practices. The focus of Simon’s practice is assisting organizations to transform innovation, collaboration, learning and leadership.